Documentos de Académico
Documentos de Profesional
Documentos de Cultura
Auditors should
only perform audits that they can
complete with professional
competence.
consider the reputation risk that
comes with selecting and accepting
clients.
recognize that a variety of risks are
associated with clients.
Overview of Client
Acceptance
Do we want this client?
Can we effectively perform this audit?
Research the client
Do we still want the audit?
Present proposal
Did we win the engagement?
Complete preliminary engagement
procedures
Steps Before the Audit
Begins
Auditor proposal and client acceptance,
OR client continuance
THEN
Confirm and communicate
auditor independence
In writing and before the engagement starts if
it is the first year of auditing a public company
Establish understanding of terms
of the engagement
Guidance in Professional
Literature
First GAAS states that the audit is to
be performed only by those having
technical proficiency as an auditor
Auditors Quality Control Standards
provide guidance.
COSO Treadway Commission
Internal Control Framework provides
guidance.
Independence standards apply
Opportunity for a New
Client
The audit firm receives a Request for Proposal (RFP)
Do we want this client?
General reputation
Willingness to be associated with the company
Management integrity
Can we effectively perform this audit?
Client needs
Sufficient knowledge
Personnel with appropriate experience and skills
Ability to provide appropriate supervision and review
Firm independence
the firm has to have ability to do the audit by the time
the engagement beginsnot at the time of proposing
Investigating the Potential
Client
Influences the Auditor Considers:
Regulation
Documentation
Cash reserves
Collateral quality
Multiple regulators
Loans and collateral
Collectibility
Valuation
Service
Revenue recognition: Payment may occur in advance. When is
revenue earned?
Unearned service account
A liability account, so concern for completeness assertion;
relates to proper revenue recognition
Payroll expenses
Large dollar amount; probably material
Year end accruals: payroll, vacation, sick leave, other
benefits
Engagement management systems: Interface between payroll
and engagement management system for accumulating job
costs and billing functions; possibly sophisticated IT
Unbilled service revenue: Accrued correctly at year end?
Valuation of AR
Real Estate Development and
Construction
Land and construction as inventory
Construction in process: proper capture of
inputs, proper valuation (FMV), allocation of
common costs
Percentage of completion
Estimates are long term; matching relies on
estimates because costs AND revenues are
estimated
Estimates are used for
Percentage of completion
Fair market value
Allocation of common costs
Hospitality
As used here, a hybrid. Includes lodging,
restaurants, entertainment venues
Hotels, important issues
Debt on the property
Are reported sales correct? Can audit using
analytical procedures based on capacity, room
rate and rate of occupancy.
Expenses
Biggest risks: Can the debt on the property be
paid on time? How sensitive is the entity to
changes in the price it can collect for room sales
or occupancy rate?
Hospitality continued