Audit Planning Audit Planning Acct 6348 Advance Audit Research Role of an Audit • It provides assurance that management has presented a “true and fair” view of a company’s financial performance...

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Audit Planning
Audit Planning
Acct 6348 Advance Audit Research
Role of an Audit
• It provides assurance that management has
presented a “true and fair” view of a
company’s financial performance
Source: PWC – Understanding a financial statement audit – January 2013
Purpose of an Audit
• To evaluate the income statement, balance sheet
and disclosures produced by management
• To express an opinion on whether the subject
matter is fairly presented
– Unqualified
– Qualified
– Adverse
– Disclaimer of Opinion
Source: PWC – Understanding a financial statement audit – January 2013
Unqualified Opinion – Para 1
• We have audited the accompanying balance sheet of
XYZ Company as of December 31, 20XX, and the
elated statements of income, retained earnings, and
cash flows for the year then ended. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an
opinion on these financial statements based on our
audit.
Memorize
Unqualified Opinion – Para 2
• We conducted our audit in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and
perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis
for our opinion.
Memorize
Unqualified Opinion – Para 3
• In our opinion, the financial statements refe
ed to
above present fairly, in all material respects, the
financial position of XYZ Company as of December 31,
20XX, and the results of its operations and its cash
flows for the year then ended in conformity with
accounting principles generally accepted in the United
States of America.
Memorize
Coca-Cola Example
Source: Coca-Cola 10k
The Audit Process
• Five phases:
1. Planning (AS 2101)
2. Risk Assessment (AS1101, AS 2110)
3. Audit strategy and plan (AS 2101, AS 2105)
4. Gathering Evidence (AS 1105, AS 2810)
5. Finalization
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
Audit Standards
The Audit Process
• Initial planning activities include formal:
– acceptance of the client by the audit firm,
– verifying compliance with independence requirements,
– building the audit team and performing other procedures
to determine the nature,
– timing and extent of procedures to be performed in order
to conduct the audit in an effective manner.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Risk assessment includes:
– Auditors use their knowledge of the business, the industry
and the environment in which the company operates to
identify and assess the risks that could lead to a material
misstatement in the financial statements.
– Those risks often involve a high degree of judgement and
equire a significant level of knowledge and experience by
the auditor, particularly on large and complex
engagements.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Risk assessment includes:
– This requires a good understanding of the business and its
isks, which is typically built up over a number of years as
part of the audit firm’s and auditor's knowledge.
– It also means that the auditors need to be well informed
about the industry and wider environment in which the
company operates, and about what its competitors,
customers, suppliers and—where relevant—regulators are
doing.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
• Audit strategy and plan includes:
– Once the risks have been assessed, auditors develop an
overall audit strategy and a detailed audit plan to address
the risks of material misstatement in the financial
statements.
– Among other things, this includes designing a testing
approach to various financial statement items, deciding
whether and how much to rely on the company’s internal
controls, developing a detailed timetable, and allocating
tasks to the audit team members.
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
• Audit strategy and plan includes:
– The audit strategy and plan is continually reassessed
throughout the audit and adjusted to respond to new
information obtained about the business and its
environment.
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Gathering evidence includes:
– Auditors apply professional scepticism and judgement
when gathering and evaluating evidence through a
combination of testing the company’s internal controls,
tracing the amounts and disclosures included in the
financial statements to the company’s supporting books
and records, and obtaining external third party
documentation.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Gathering evidence includes:
– This includes testing management’s material
epresentations and the assumptions they used in
preparing their financial statements.
– Independent confirmation may be sought for certain
material balances such as cash.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Gathering evidence includes:
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
The Audit Process
• Finalization includes:
– The auditors exercise professional judgement and form
their overall conclusion, based on the tests they have
ca
ied out, the evidence they have obtained and the
other work they have done. This conclusion forms the
asis of the audit opinion.
Planning Risk Assessment
Audit
strategy
Gathering
evidence Finalization
XXXXXXXXXX
Source: PWC – Understanding a financial statement audit – January 2013
Role of an Audit
• It provides assurance that management has
presented a “true and fair” view of a
company’s financial performance
PCAOB
Standards Re-organization
January 2016
PCAOB Standards Re-organization
Source: pcaobus. org
PCAOB Standards Re-organization
Source: pcaobus. org
PCAOB Standards Re-organization
Source: pcaobus. org
PCAOB Standards Re-organization
Source: pcaobus. org
    Audit Planning
    Role of an Audit
    Purpose of an Audit
    Unqualified Opinion – Para 1
    Unqualified Opinion – Para 2
    Unqualified Opinion – Para 3
    Coca-Cola Example
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    The Audit Process
    Role of an Audit
    PCAOB �Standards Re-organization�January 2016
    PCAOB Standards Re-organization
    PCAOB Standards Re-organization
    PCAOB Standards Re-organization
    PCAOB Standards Re-organization

2020 Annual Report
DEAR STAKEHOLDERS,
Due to the devastating impact of COVID-19, 2020 was
the most challenging year in our company’s history.
While the pandemic had a severe negative impact on
our business and our financial results, we relied on our
strengths – an agile business model, a strong balance
sheet, and our talented and resourceful employees – to
successfully navigate the crisis and position the company
for an accelerated recovery. We continued investing in
our
ands and our digital capabilities while reducing
expenses in other areas, and we utilized our test-and-
eact strategy and speed-to-market capability to quickly
adjust our product mix to align with changing consumer
preferences. We also made significant progress on our
ESG initiatives. Outlined below are some of the year’s
accomplishments.
PROTECTING OUR EMPLOYEES &
THE BROADER COMMUNITY
Since the crisis began, our top priority has been
protecting the safety and well-being of our employees
and the
oader community. I’m proud of the steps
we took to safeguard the health of our employees and
our customers – including proactively closing our stores
earlier and keeping them closed longer than most of our
industry peers – and how we supported our communities
through donations of medical grade masks to hospitals,
non-medical face coverings to homeless shelters,
meals for health care workers, financial assistance for
organizations combating hunger, and more.
PRESERVING LIQUIDITY & ENHANCING
FINANCIAL FLEXIBILITY
When the severe impact of COVID-19 became clear,
we quickly implemented a number of precautionary
measures to preserve liquidity and enhance financial
flexibility, including suspending dividends and share
epurchases; cutting operating expenses, capital
expenditures, and inventory receipts; and putting in
place a new $150 million asset-based revolving credit
facility. These actions enabled us to generate strong free
cash flow through the crisis, and we ended 2020 with
$287 million in cash and short-term investments and no
debt. Based on our strong financial position at year end,
our Board of Directors approved the reinstatement of a
quarterly cash dividend of $0.15 per share beginning in
the first quarter of 2021, and we announced our plan to
esume share repurchases in future periods.
ADAPTING TO THE CHANGING MARKETPLACE
With COVID-19 driving meaningful shifts in consumer
ehavior, we took swift action to address the rapidly
changing marketplace. In terms of product, we utilized
our test-and-react strategy and industry-leading speed-
to-market capability to quickly adjust our merchandise
assortments to align with changed consumer preferences,
pivoting toward more casual and comfortable styles
while de-emphasizing dressier products. And with
espect to distribution, we significantly accelerated
our digital commerce initiatives, increasing investment
in that area even as we pulled back spending in other
parts of the business. We added high-level talent to the
organization, invested in our data science capabilities,
accelerated digital marketing spend, launched our
new Try Before You Buy payment option, rolled out
Buy Online Pick Up In Store to all U.S. full-price retail
stores, introduced new enhanced delivery and return
options, and more. Overall, our company-operated
e-commerce revenue grew nearly 50% in 2020 on
top of 58% growth in 2019, including 55% growth in
our Steve Madden e-commerce business on top of a
51% increase in XXXXXXXXXXImportantly, company-operated
e-commerce profit margins also expanded
Answered 3 days AfterApr 07, 2022

Solution

Khushboo answered on Apr 11 2022
9 Votes
Acct 6348 Advanced Audit Research
Audit Planning Assignment
Group 1
Date: April 11, 2022
Steve Madden
Group Members
Table of content
    Sr No
    Particulars
    Page no
    1.
    Assignment introduction
    3
    2.
    Initial Development or plan
    3
    3.
    Deciding audit strategy and plan
    4
    4.
    Assessment of risk and Test of Evidence
    5
    5.
    Finalization of audit opinion
    6
    6.
    References
    7
1. Assignment introduction:
The major objective of the assignment is to develop an effective audit plan for the audit of Steve Madden. The audit plan is prepared under mainly four phases:
· Initial Development or plan
· Deciding audit strategy and plan
· Assessment of risk and Test of Evidence
· Finalization of audit opinion (PCAOB 2010)
2. Initial Development or plan:
Acceptance of the audit of the client
The auditing firm will accept the client for audit engagement based on an initial risk assessment and the auditor has also verified that the client is meeting the requirements of various laws and regulations to be an independent such as an independent audit committee, meeting with independent accounting firm five times a year, discussion of internal and financial reporting matters with management representative and internal auditors. Thus, both the auditing firm and management are independent and the auditing firm can accept the client audit engagement.
Relevant standards used
The standards issued by PCAOB will be used by the firm for auditing the client and will ensure that there is reasonable assurance regarding the accuracy of financial transactions and statements. The other regulations to be used are Internal Controls and Integrated Framework (2013) issued by COSO.
Members of the audit team
The audit team will be fairly composed of various levels of experienced members which include 1 leading audit partner, 3 audit seniors, and 8 audit executives. The interim audit will be conducted for the period from 15th October to 14th November and final audit work will be completed next year in Fe
uary.
Brief introduction of the client
Steven Madden Limited is a US-based publicly traded company that is listed on Nasdaq. The company was founded in 1990 and is headquartered in Long Island City, New York, United States. The founder of the company is Steve Madden and Edward Rosenfeld is the...
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