GDB (ACC311)
Fundamental of Auditing
Covering Lecture 11-15
Topic for Discussion
“Understanding the Entity & Its Environment”
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| The complete solution under the title "ACC311 GDB No 1 Solution-Fall 2020-VU-Fundamentals of Auditing" has been presented as guidance for readers. |
Total Marks 5
Learning Objectives:
- To assess the
knowledge related to requirements to form an audit opinion
- To know why
understanding the entity and its environment is important for an auditor
- To know the
different elements of the entity and its environment which an auditor
should keep in mind to carry out audit
- To understand
how management control as a component of entity’s environment, becomes a
prime factor for carrying out audit
Situation:
Audit refers to an independent examination of an entity’s
financial statements. It allows an auditor to express his opinion whether the
financial statements are prepared, in all material respects, in accordance with
an identified and acceptable financial reporting framework (e. g. international
or local financial accounting standards and national legislations). For an
auditor, understanding the entity and its environment is significant to carry
out audit procedures which provide the basis to form such an audit opinion.
Understanding of the entity and its environment covers a broad range of tasks
for an auditor, i.e. risk assessment, sources of information,
documentation and communicating with those charged with governance and
management etc. Among them, understanding of management control is treated as
the “center of gravity” to carry out audits in all aspects. An auditor
cannot perform audit procedures smoothly without proper understanding of
management control of an entity.
Required:
Important Instructions:
- Carefully
review your GDB before submission as it cannot be replaced once it is
submitted.
- Your
discussion must be based on logical aspects of the topic requirements with
proper justification.
- There is a limit of 150 Words for discussion.
- Use the font
style “Times New Roman” and font size “12”.
- Your answer
should be relevant to the topic i.e. clear and concise.
- Do not copy or
exchange your answer with other students. Two identical / copied comments
will be marked Zero (0) and may damage your grade in the course.
- Books,
websites and other reading material may be consulted before posting your
comments; but copying or reproducing the text from books, websites and
other reading materials is strictly prohibited. Such comments will be
marked as Zero (0) even if you provide references.
- You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed.
- Obnoxious or ignorable answer should be strictly avoidod.
- You cannot
participate in the discussion after the due date via email.
- Questions /
queries related to the content of the GDB, which may be posted by the
students on MDB or via e-mail, will not be replied till the due date of
GDB is over.
- For planning
your semester activities in an organized manner, you are advised to view
schedule of upcoming Assignments, Quizzes, and GDBs in the overview tab of
the course website on VU-LMS.
Answer
Yes, understanding management control is the center
of gravity to carry out smoothly an audit in all aspects. It helps auditor
1. to
discover the types of potential
misstatements
2. focusing
on the factors that affect the risk of material misstatement
3. to
design the nature, timing, and extent of further audit procedures.
Internal control of an entity is to follow the principle
of “Check and Balance” to keep the entity’s all activities on the same track
that leads towards the destination of set goals. These activities include:
1. Reliability
of financial reporting
2. Effectiveness
and efficiency of operations-meaning optimal uses of resources on time
3. Compliance
with applicable laws and Regulations-For instance business operations are environmental
friendly
The purpose of its implementation is to address all the identified business risk that threatens the achievement of any of set
objectives.
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