Audit Responsibilities and Objectives L6 Professor Helen L Brown

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Lecture 6: Audit Responsibilities and Objectives • Professor Helen L. Brown • The objective of conducting an audit of financial statements is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly in all material respects, in accordance with applicable financial accounting framework. • The Professor then goes over the five steps to develop audit objectives. • ----(1) Understand objectives and responsibilities for audit. • ----(2) Divide financial statements into cycles. • ----(3) Know management assertions about financial statements. • ----(4) Know general audit objectives for classes of transactions accounts and disclosures. • ----(5) Know SPECIFIC audit objectives for classes of transactions, accounts, and disclosures. • The responsibilities of management and auditors are both covered. Management is responsible for the financial statements and for internal control. The CEO and CFO of public companies to certify the quarterly and annual financial statements submitted to the SEC. Auditors are responsible for distinguishing between material and immaterial misstatements, reasonable assurance, distinguishing honest errors from intentional fraud, and maintaining professional skepticism. • According to auditing standards, reasonable assurance is a high level assurance. Financial statement users should have a high degree of confidence in the financial statements. Reasonable assurance is not an absolute level of assurance, though. There is always at least some risk that the audited financial statements may include some material misstatements. The auditor obtains sufficient appropriate evidence about material management assertions in the financial statements. • Management assertions are covered next. They are directly related to GAAP and they are the criteria that management uses to record and disclose accounting information in financial statements. Management makes assertions about classes of transactions and events for the period under audit, about account balances at the end of the period, and about presentation and disclosure. The auditor obtains a combination of assurances by auditing classes of transactions and ending balances in accounts, including presentation and disclosures. • Transaction-related objectives of auditors are closely related to management assertions. They usually have a framework to accumulate sufficient appropriate audit evidence. The objectives themselves never really vary, but the evidence many vary depending on the circumstances presented for each audit (for example, there are general-transaction related audits, balance related audits, and presentation related audits). • -----QUICK NAVIGATION----- • Purpose of an Audit 1:30 • Steps to develop Audit Objectives 2:23 • Responsibilities of Managers and Auditors 7:41 • Reasonable Assurance 13:13 • Management Assertions 15:20 • Auditor's Transaction-Related Audit Objectives 20:38 • Examples 21:54 • -----(classes of transactions, account balances, presentation disclosure) • Balance-related Audit Objectives Problem: 36:37 • To receive additional updates regarding our library please subscribe to our mailing list using the following link: • http://rbx.business.rutgers.edu/subsc... • We've just uploaded brand-new auditing videos on our channel! • Check them out here: • Auditing: Prof. Helen Brown-Liburd (F... • Make sure to check out our latest content. Don't forget to like, subscribe, and hit the bell icon to stay updated with all our future uploads. Thanks for watching!

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