auditing principle and objective

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Audit Objectives

GROUP MEMBERS :

NOOR AMANINA ZAKARIA RATNA DEWI A/P PALANIAPPAN

MOO ZIOW CHENG YONG YUE LING YEO SHU CHIN

KANIMOLI A/P SEGARAN

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Objective of Conducting an Audit of Financial Statements

The PRIMARY objective of the auditis to express an opinion on the

financial statements.

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Objectives of an Audit of Financial Statements

Present Fairly1

2 In all Material Respects

3Financial Position, Results of

Operations, & Cash Flows

4 In Conformity with GAAP

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Transaction-RelatedAudit Objectives

Existence

Completeness

Accuracy

Recordedtransactions exist.

Existing transactionsare recorded.

Recorded transactionsare stated at thecorrect amount.

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Transaction-RelatedAudit Objectives

Classification

Timing

Posting andsummarization

Transactions areproperly classified.

Transactions are recordedon the correct dates.

Transactions are includedin the master files and

are correctly summarized.

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General Balance-RelatedAudit Objectives

Existence

Completeness

Accuracy

Amountsincluded exist.

Existing amountsare included.

Amounts includedare stated at thecorrect amounts.

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General Balance-RelatedAudit Objectives

Classification

Cutoff

Detail tie-in

Amounts areproperly classified.

Transactions are recordedin the proper period.

Account balances agreewith master file amounts,

and with the general ledger.

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General Balance-RelatedAudit Objectives

Realizablevalue

Rights andobligations

Presentationand

disclosure

Assets are included atestimated realizable value.

Assets must be owned.

Account balances anddisclosures are presentedin financial statements.

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Four Phases of an Audit

Phase I

Phase II

Phase III

Phase IV

Plan and designan audit approach.

Perform tests ofcontrols and

substantive testsof transactions.

Perform analyticalprocedures andtests of detailsof balances.

Complete theaudit and issuean audit report.

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SECONDARY OBJECTIVE

The SECONDARY objective of the auditis to report the financial condition

of the business.

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ERRORS & FRAUDS

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Detection and prevention of Errors

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Detection and prevention of Errors

ERRORS OF PRINCIPLE: While recording a transaction, the fundamental

principles of accounting is not properly observed, these types of errors could occur. Over valuation of closing stock or incorrect allocation of expenditure or receipt

between capital and revenue are some of the examples of such errors. Such errors will not affect the trial balance but will affect the Profit and Loss account. It may occur

due to lack of knowledge of sound principles of accounting or can be committed deliberately to falsify

the accounts. To detect such errors, the auditor has to do a careful examination of the books of account.

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DETECTION & PREVENTION OF FRAUDS

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