audit lesson 1

Five Management Assertions

Listed in the lesson as: existence and occurrence; completeness; valuation, accuracy, allocation; rights & obligations; presentation and disclosure

Assurance Services vs. Non-Assurance Services

Assurance aims to improve/verify information, adds objectivity to the information (independence is required); Non-Assurance does not aim to improve information so independence is not mandatory

Attest Services vs. Non-Attest Services

Attest: A report providing an opinion on some assertions of a responsible party; Non-attest: no report on assertions of a responsible party is required

Management Assertion: Existence and Occurrence

Assets or liabilities of the company actually exist at a given time, and recorded transactions have actually occured during a given time.

Management Assertion: Completeness

All transactions and accounts that should be presented in the financial statements are included.

Management Assertion: Valuation, Accuracy, Allocation

Asset, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts.

Management Assertion: Rights and Obligations

The company holds or controls rights to the assets, and liabilities are obligations of the company at a given date.

Management Assertion: Presentation and Disclosure

The components of the financial statements are properly presented, clearly described, and appropriate.

Assertion: Cut-off

The company recorded the transactions in the appropriate period.

Practical Audit Approach for FS

By referring to more detailed set of assertions, grouped by the types of financial information: assertions for account balances, classes of transactions, and disclosures.

Definition of Material Misstatement

Information that deviates so significant from the truth that it would affect the decision making of a reasonable person

Best Time to Leave an Accounting Firm

After making senior; After making manager

Internships at Audit Firms

Interns get paid and fun events

Internship Purpose: Accept Offer

Serve as a way for firms to convince interns that they should accept offer

Internship Purpose: Recruit Young Talent

Convince young talent to go to their firm

Internship Purpose: Learn About Firm and Audit Work

Designed to help students learn about the firm and audit work

Technology in Audit

Will never replace auditor judgment

AI Use in Audit: Contract Reading Software

Used in the contract reading software

AI Use in Audit: Training Required

You need to train AI

AI Use in Audit: Mechanical Tasks

Helps with the boring mechanical task in auditing

Blockchain in Audit: Prevents Transaction Changes

Prevents fraudulent changing of a transaction after its been recorded

Blockchain in Audit: Does Not Prevent All Fraud

Will not prevent fraud in all aspects

Blockchain in Audit: Does Not Eliminate Audits

Will not stop the need for audits

Blockchain in Audit: Assertions Still Need Testing

Still need to test all assertions

Audit Firm Organization: Partnership Hierarchy

Hierarchy within the partnership

New Partners in Firm Hierarchy

New partners are at the pretty low end of the totem pole amongst all partners

Partner Career Growth

Partners have many different paths for personal growth

Senior Managers on Large Audit Clients

May not be promoted into the firm to become a partner

Big Four Career Path

Big four firms are viewed as “good” for auditors who eventually leave to go elsewhere

Big Four Specialization

You can specialize narrowly

Smaller Firm Experience

Provide the best experience to start your own business because you experience many more different facets of the auditing business