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Q1 Distinguish between management's and the auditor's responsibilities for the financial statements being audited.

SOLUTION: Management's responsibilities: Adopting sound accounting policies. Maintaining adequate internal control. Preparing the financial statement. Keeping adequate accounting records. making appropriate estimations .

Auditor's responsibilities Give an opinion about the integrity of financial statements. Plan and perform audit procedures. Collecting audit evidences about the amounts in the financial statements. Evaluate the risks of material errors in financial statements Whether they resulting from fraud or error. Making sure that the policies & the estimations followed by the management are suitable. Evaluate the final presentation of financial statement


what auditor would do in these situations? a- when there is reason to believe direct or indirect effect illegal acts may exist. b- when the auditor knows of illegal act. SOLUTION a the auditor inquire of management at level above those likely to be involved in the potential illegal acts. the auditor should consult with the client's legal counsel or other specialist who is knowledgeable about the potential illegal acts the auditor should collect additional evidence to determine weather there actually is illegal act . b consider the effects on the financial statements including the adequacy of disclosure. if the disclosure relative to illegal act is in adequate the auditor should modify the audit report. the auditor should communicate with the audit committee to make sure that they


Mention the main points related to management assertions?

SOLUTION 1- ASSERTIONS ABOUT CLASSES OF TRANSACTIONS occurrence completeness accuracy classification Cut off 2- ASSERTIONS ABOUT ACCOUNT BALANCES existence completeness Valuation &allocation Rights &obligations

3- ASSERTIONS ABOUT PRESENTATION & DISCLOSURE occurrence completeness Accuracy & valuation Classification & understandability


Mention the main points related to audit objectives? Explain with short sentences. SOLUTION

1- Transaction- related audit objectives Existence Recorded transactions exist Completeness Existing transactions are recorded Accuracy Recorded transactions are stated at the correct amount Classification Transactions are properly classified. Timing Transactions are recorded on the correct dates Posting and summarization Transactions are included in the master files and are correctly summarized

2- Balances - related audit objectives Existence Amounts included exist Completeness Existing amounts are included Accuracy Amounts included are stated at the correct amounts.. Classification Amounts are properly classified Cutoff Transactions are recorded in the proper period Detail tie-in Account balances agree with master file amounts, and with the general ledger Realizable value Assets are included at estimated realizable value Rights and obligations Assets must be owned 3- Presentation & disclosure - related audit objectives Presentation and disclosure Account balances and disclosures are presented in financial statements