SUMMARY

CHAPTER 6 AUDIT RESPONSIBILITIES AND OBJECTIVES

SUPPORTING LECTURER:
MUHAMMAD AGUNG PRABOWO,PhD

MEMBER OF THE GROUP:

AHMAD SHOFWAN

F0313006

ANDRE EKO WIBOWO

F0313007

MIFTAHUL JANNAH

F0313059

RENNYTA DYAH P

F0313077

FACULTY OF ECONOMIC AND BUSSINESS

SEBELAS MARET UNIVERSITY
2015

AUDIT RESPONSIBILITIES AND OBJECTIVES

The purpose of an audit 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 the applicable financial accounting framework.

Managements Responsibilities
The responsibility for adopting sound accounting policies, maintaining adequate internal
control, and making fair representations in the financial statements rests with management.
Because they operate the business daily, a companys management knows more about the
companys transactions and related assets, liabilities, and equity.
Auditors Responsibilities
Auditing standards state:
The overall objectives of the auditor are:
(a) To obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, thereby enabling the auditor to
express an opinion whether the financial statements are prepared, in all material respects, in
accordance with an applicable financial reporting framework; and

(b) To report on the financial statements, and communicate as required by auditing standards,
in
accordance with the auditors findings.
Material Versus Immaterial Misstatements
-

usually considered material if the combined uncorrected errors and fraud in the
financial statements would likely have changed or influenced the decisions of a
reasonable person using the statements. auditors are responsible for obtaining
reasonable assurance that this materiality threshold has been satisfied.

Reasonable Assurance
-

Assurance is a measure of the level of certainty that the auditor has obtained at the
completion of the audit. Auditing standards indicate reasonable assurance is a
high, but not absolute, level of assurance that the financial statements are free of
material misstatements.

Errors Versus Fraud

-

An error is an unintentional misstatement of the financial statements, whereas

fraud is intentional. For fraud, there is a distinction between misappropriation of
assets, often called defalcation or employee fraud, and fraudulent financial
reporting, often called management fraud.

Professional Skepticism
-

Professional skepticism is an attitude that includes a questioning mind and a

critical assessment of audit evidence.

Fraud Resulting from Fraudulent Financial Reporting Versus Misappropriation of Assets

-

Fraudulent financial reporting harms users by providing them incorrect financial

statement information for their decision making. When assets are misappropriated,
stockholders, creditors, and others are harmed because assets are no longer
available to their rightful owners.

Auditors Responsibilities for Discovering Illegal Acts

-

Direct-Effect Illegal Acts

Indirect-Effect Illegal Acts

Evidence Accumulation When There Is No Reason to Believe Indirect-Effect Illegal Acts

Exist
Evidence Accumulation and Other Actions When There Is Reason to Believe Direct- or
Indirect-Effect Illegal Acts May Exist
Actions When the Auditor Knows of an Illegal Act

- consider the effects on the financial statements, including the adequacy of disclosures.
- The auditor should also consider the effect of such illegal acts on the CPA firms relation
ship with management.
Financial Statement Cycles
-

Cycle Approach to Segmenting an Audit

The logic of using the cycle approach is that it ties to the way transactions are
recorded in journals and summarized in the general ledger and financial
statements.

SETTING AUDIT OBJECTIVES

audit objectives refers to transaction-related, balance-related, and presentation and
disclosure-related audit objectives.
MANAGEMENT ASSERTION
-

Management assertions are implied or expressed representations by management

about classes of transactions and the related accounts and disclosures in the
financial statements
International auditing standards and U.S. GAAS classify assertions into three
categories:
1. Assertions about classes of transactions and events for the period under audit
2. Assertions about account balances at period end
3. Assertions about presentation and disclosure

TRANSACTION-RELATED AUDIT OBJECTIVES

BALANCE-RELATED AUDIT OBJECTIVES

PRESENTATION AND DISCLOSURE-RELATED AUDIT OBJECTIVES

The presentation and disclosure-related audit objectives are identical to the
management assertions for presentation and disclosure discussed previously. The same
concepts that apply to balance-related audit objectives apply equally to presentation and
disclosure audit objectives.
HOW AUDIT OBJECTIVES ARE MET
1.
2.
3.
4.

- four phases of the audit process.

Plan and Design an Audit Approach (Phase I)
Perform Tests of Controls and Substantive Tests of Transactions (Phase II)
Perform Analytical Procedures and Tests of Details of Balances (Phase III)
Complete the Audit and Issue an Audit Report (Phase IV)