Small Business Accounting

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Rules for Auditing Public Companies

The standard of professional conduct for the audit of all publicly traded companies comes from the Public Company Accounting Oversight Board (PCAOB). The Audit Standards Board [more…]

Adhering to Generally Accepted Accounting Principles and Standards

Generally accepted accounting principles (GAAP) define acceptable practices in the preparation of financial statements in the United States. Keep in mind that when you’re wearing your auditor hat, you [more…]

How to Research a New Auditing Client

Here’s something every auditor should remember: Just because a client comes to you and wants you to audit its financial statements, you don’t have to accept the engagement. After all, you’re not selling [more…]

How to Establish Independence with Auditing Clients

When deciding whether to accept an auditing engagement, you must judge your independence and objectivity. If your audit firm lacks independence or objectivity, you can’t accept the engagement. Independence [more…]

How to Check for Conflict of Interest with New Auditing Clients

As an auditor, to make sure you don’t have any conflict-of-interest problems, you have to look at any third-party transactions your potential client may have been part of. If your potential client has [more…]

Auditing Basics: How to Assess a Potential Client’s Reliability

You have to judge a client’s accounting competence and integrity before accepting an auditing engagement. If the client lacks accounting skills and integrity, you should seriously consider not accepting [more…]

Auditing Basics: Assessing What Services Your Potential Client Requires

If a potential auditing client’s records appear reliable and your firm can provide an impartial audit, you still need to make sure you can perform all the tasks the client needs. You also have to figure [more…]

Auditing Basics: How to Prepare an Engagement Letter

When taking a new client, an auditor creates an engagement letter to solidify audit arrangements between the audit firm and the client. The letter serves as the contract, detailing the duties and obligations [more…]

How to Prepare Working Papers for an Audit

Part of your job as a staff associate in an auditing firm is to document your findings in working papers (also known as workpapers) and schedules. Workpapers summarize your audit actions, such as planning [more…]

Using the Audit Risk Model

When you audit a company, your main goal is to provide assurance to the users of the company’s financial statements that those documents are free of material misstatement [more…]

How to Assess Inherent Risk in an Audit

Auditors must determine risks when working with clients. One type of risk to be aware of is inherent risk. While assessing this level of risk, you ignore whether the client has internal controls in place [more…]

How to Assess Control Risk When Performing an Audit

During your risk-assessment procedures before you begin an audit, you interview members of the company and observe how they do their jobs to make your assessment of control risk. Company management is [more…]

How to Assess Detection Risk in an Audit

Detection risk occurs when you don’t use the right audit procedures or you don’t use them correctly. You assess inherent and control risk and then solve your audit risk equation by assigning detection [more…]

How to Follow Risk Assessment Procedures in an Audit

When performing an audit, you use risk assessment procedures to assess the risk that material misstatement exists. This step is very important because the whole point of a financial statement audit is [more…]

How to Determine What Is Material in an Audit

Auditors refer to financial statement information that’s not 100 percent correct as a misstatement. You’ll probably never see a set of financial statements that’s completely accurate. But misstatements [more…]

Auditing Basics: How to Distinguish Between Errors and Fraud

When you find misstatements as you perform an audit, you’re responsible for making an assessment. You alone must determine whether the misstatement represents an error or fraud. Errors aren’t deliberate [more…]

How to Recognize the Triangle of Fraud

You’ll hear auditors referring to the triangle of fraud. That’s because in most fraudulent acts, three circumstances lead to the commission of fraud: the incentive to commit fraud, the opportunity to carry [more…]

How to Tailor Your Audit to a Low-Risk Situation

After completing your risk assessment procedures and deciding if any misstatements are material, you need to evaluate your findings. You must decide if you can use normal audit procedures [more…]

How to Document Audit Risk Results

As you do your investigative work getting to know your audit client, following your risk assessment procedures, and assessing the risk of material misstatement, you must extensively document everything [more…]

Assessing Financial Statement Presentation and Disclosure

As an auditor you have to assess management’s financial statement presentation and disclosure. The financial statements (income statement, balance sheet, and statement of cash flows) and notes to the financial [more…]

Monitoring Classes of Transactions

When you are performing an audit, you are responsible for assessing management assertions about classes of transactions. Five management assertions are related to classes of transactions. Four of them [more…]

What to Look for When You Analyze Account Balances

As an auditor you have to analyze your client’s account balances. Management assertions address the correctness of balance sheet account balances at year-end. These account balances include the company’s [more…]

How to Assess Audit Evidence

Audit evidence documents give you the substantiation for your professional audit opinion. When performing an audit, you must assess the nature, competence, sufficiency, and evaluation of the audit evidence [more…]

Applying Professional Judgment When Performing an Audit

In addition to being thorough and unbiased when evaluating audit evidence, you also want to apply professional judgment by adopting an attitude of professional skepticism. When exercising professional [more…]

How to Brainstorm with Audit Team Members

When you are performing an audit, it’s a good idea to discuss how your client may be perpetrating fraud with your team members. Brainstorming is a very useful tool, as one member of the team may have an [more…]

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