suggestion
 

In accounting we should first consult the material means theory in detail and then solve the questions you feel tht everything is going to be easy.

auditing tips
 

salam
for auditing paper what strategy should i use either material should be quantity oriented or quality
regards
real management is developing people through work(aga Hasan Abedi)

[QUOTE=muhammadalihamid;177070]salam
for auditing paper what strategy should i use either material should be quantity oriented or quality
regards
real management is developing people through work(aga Hasan Abedi)[/QUOTE]

I think Book of Khawja Amjad Saeed sufficiently covers the syllabus.

book for preparation of accounting
 

dear friends, here is a book very helpful for the preparation of accounting paper. the book stuff is very unique and easy 4 preparation. name of the book is FINANCIAL STATEMENTS ANALYSIS BY CHARLES H. GIBSON. ITS price is 220 in market. :vic:vic:vic

[QUOTE=zahid iqbal kasal;185098]dear friends, here is a book very helpful for the preparation of accounting paper. the book stuff is very unique and easy 4 preparation. name of the book is FINANCIAL STATEMENTS ANALYSIS BY CHARLES H. GIBSON. ITS price is 220 in market. :vic:vic:vic[/QUOTE]

Yes, it is a good book but don't assume this book a sufficient source for all the topics of CSS accounting paper. You have to go through some additional books as well.

Can u please post Links for Cost Accounting E-Book?? Especially by Matz and Usry.
I'll be very thankful to....

kindly upload Accounting and Auditing paper 2010
Best Ragards and thanx alot.

I am student of CA and also interested in government job as CA is not progressing well. I opted Accounting and Audit as my subject in CSS as I already had some knlowledge of exposure of Accounting. I found that if you are prepared technically for the Accounts paper, you are likely to get high marks. I am sharing you an accountancy website from where me and my seniors take help in CA matters.

Somebody was asking about Cost Accounting Book in this topic. I remember, when I was intending to prepare Cost Accounting, I was very much concerned about its theory. I was very good in numerical portion and was able to secure good marks in it. But theory was the only portion that used to disturb me as I was not very good in it.

Audit and Accounts is no more as attactive as it was before two years.

[QUOTE=comsdev;281727]I am student of CA and also interested in government job as CA is not progressing well. I opted Accounting and Audit as my subject in CSS as I already had some knlowledge of exposure of Accounting. I found that if you are prepared technically for the Accounts paper, you are likely to get high marks. I am sharing you an accountancy website from where me and my seniors take help in CA matters. I hope you will like it.
[url=http://www.ias-plus.com/]IAS – Plus | Welcome to the World of Accounting[/url]

Somebody was asking about Cost Accounting Book in this topic. I remember, when I was intending to prepare Cost Accounting, I was very much concerned about its theory. I was very good in numerical portion and was able to secure good marks in it. But theory was the only portion that used to disturb me as I was not very good in it. This should not be the case with you as now you can download notes of Cost Accounting Theory from this website.

[url=http://uptodatearticles.com/2010/10/cost-accounting-theory/]Cost Accounting Theory | Articles[/url][/QUOTE]
i dont agree with u that C.A is not progressing well.Getting a professional degree in any field is a thing to desire for and rewarding at the same time.em an ACMA n serving in public sector as a guzztd but non CSP officer n i feel that the environment is changing in public sector as well as they r hiring professional degree holders as a preference over the jack of all but master of none.Efforts have been made to convert the accrual basis of accounting to modified cash basis of accounting.SAP is being implimented over here n things have improved very much by the involvement of professionals as consultants in Audit n Accounts group.I also chose this group as a prefrnce over DMG or otha groups as i belive in professionalism n growth in the relevant n right direction no matter u r serve in public or Pvt Sector

[QUOTE=shakeel shaikh;77105]process costing & standard costing are the 2 main components of cost accounting i believe there is nothing that could be skipped in these 2..u better study them in detail...... and im surprised what can be left unstudied in partnership accounting as we almost cover everything in previous studies like bcom etc.... so brother u better study these topics in detail[/QUOTE]
asslamalekum........can u tell me how i can downloading vu hand outs of risk manhgemrnt pl tell me

[QUOTE=rabishawaal;287904]i dont agree with u that C.A is not progressing well.Getting a professional degree in any field is a thing to desire for and rewarding at the same time.em an ACMA n serving in public sector as a guzztd but non CSP officer n i feel that the environment is changing in public sector as well as they r hiring professional degree holders as a preference over the jack of all but master of none.Efforts have been made to convert the accrual basis of accounting to modified cash basis of accounting.SAP is being implimented over here n things have improved very much by the involvement of professionals as consultants in Audit n Accounts group.I also chose this group as a prefrnce over DMG or otha groups as i belive in professionalism n growth in the relevant n right direction no matter u r serve in public or Pvt Sector[/QUOTE]

My brother he might not have talked about the CA profession. He might have talked about his personal CA.... like if he might be taking it hard for himself to do... so enjoy ACMA sb...

pls check this
 

Asslam o alaikum and pls share notes of accouting and auditing

thanks and best regards

Dear Friends,

It is to inform all of you that score of accounting has been marvelous in CE-2011 contrary to one of the most difficult papers.

Marking has been highly lenient and everyone is much surprised about their marks in this paper. No idea what will happen now. But what has become a proven fact that ds paper is a full of surprises.

Stay Blessed.

[QUOTE=ziabacha;4908]Dear,
Thanks for your worthy suggestions. If you can please give some tips regarding statistics; its course material/books etc.

Good luck
zia[/QUOTE]
Statistics ki preparation k lye Sher M. Choudhary and Shahid Kamal ki bechlors level ki donon books buy kar lo and selected topic ki tyari kar lo. If you could get deeper level of knowledge in statistics, you may even get more than 90 marks. stay blessed

Seniors, please solve my problem regarding adjusting entries...
i am expert in making adjusting entries, but i through out my academic career studied meigs and meigs. adjusting entries in meigs and meigs and that of M.A Ghani ( in final accounts is different).

I am confused about the entries of both of these books.

e.g... we have paid rent in advance(as per meigs and meigs) at the time of financial statments, our entries would be this:

Rent expence(dr)................... Rs. 1000
Prepaid Rent(cr).................................Rs. 1000.

However, as per M.A ghani( in final accouts) our entries would be this:

Prepaid Rent A/c(dr)......................Rs. 1000
To Rent A/c(cr).............................Rs. 1000
Please guide in this regard. There are many other entries of the same kind.
Edit/Delete Message

[QUOTE=seher bano;534879]Seniors, please solve my problem regarding adjusting entries...
i am expert in making adjusting entries, but i through out my academic career studied meigs and meigs. adjusting entries in meigs and meigs and that of M.A Ghani ( in final accounts is different).

I am confused about the entries of both of these books.

e.g... we have paid rent in advance(as per meigs and meigs) at the time of financial statments, our entries would be this:

Rent expence(dr)................... Rs. 1000
Prepaid Rent(cr).................................Rs. 1000.

However, as per M.A ghani( in final accouts) our entries would be this:

Prepaid Rent A/c(dr)......................Rs. 1000
To Rent A/c(cr).............................Rs. 1000
Please guide in this regard. There are many other entries of the same kind.
Edit/Delete Message[/QUOTE]

First entry is for the opening of new period while second was made during the closing of the period....
for example: when we close the period and we have some amount of rent is extra then it will be c/f for new period. so the entry will be

Prepaid rent account (dr)................xxx
rent expense/rent a/c (cr)..............xxx

in the same way for the new period the entries will be reverse as

Rent expense/rent a/c (dr)..............xxx
prepaid rent a/c (cr).......................xxx

If im wrong then plz correct it..............

[QUOTE=DDAY;535204]First entry is for the opening of new period while second was made during the closing of the period....
for example: when we close the period and we have some amount of rent is extra then it will be c/f for new period. so the entry will be

Prepaid rent account (dr)................xxx
rent expense/rent a/c (cr)..............xxx

in the same way for the new period the entries will be reverse as

Rent expense/rent a/c (dr)..............xxx
prepaid rent a/c (cr).......................xxx

If im wrong then plz correct it..............[/QUOTE]
Thanks for your response, but you are partly right. As i have asked two question. firstly, the difference of adjustments entries in meigs and meigs and that of M.A Ghani. Secondly, the logic of dr. and cr. of these entries.

[QUOTE=seher bano;535221]Thanks for your response, but you are partly right. As i have asked two question. firstly, the difference of adjustments entries in meigs and meigs and that of M.A Ghani. Secondly, the logic of dr. and cr. of these entries.[/QUOTE]

As logic i have explained in my first reply........... i did this by using petiwala book of B.com so i dont have any idea of meigs & meigs but it is similar in M.A Ghani's book Principle of Accounting page#206..

[QUOTE=DDAY;535227]As logic i have explained in my first reply........... i did this by using petiwala book of B.com so i dont have any idea of meigs & meigs but it is similar in M.A Ghani's book Principle of Accounting page#206..[/QUOTE]

OK i will discuss after having a look.

Koi mujhey bata sakta hai k closing entries trading and profit & Loss account, Balance sheet sey pehley banai jaati hain ya phir baad mein??? Agar pehly to closing entries k balances adjusted honge ya jo question me given hon gey???please answers.

[QUOTE=DDAY;535204]First entry is for the opening of new period while second was made during the closing of the period....
for example: when we close the period and we have some amount of rent is extra then it will be c/f for new period. so the entry will be

Prepaid rent account (dr)................xxx
rent expense/rent a/c (cr)..............xxx

in the same way for the new period the entries will be reverse as

Rent expense/rent a/c (dr)..............xxx
prepaid rent a/c (cr).......................xxx

If im wrong then plz correct it..............[/QUOTE]

dear in my view expense account kbhi Cr nh hota..
preepaid rent ki entries is trha hngi
Dr Prepaid rent account
Cr cash
aur jaise jaise rent utilize hota jaega hum usko prepaid se nika k expense me dalte jain just like below
Dr rent expense
Cr prepaid account
aur in the end agar hum ne rent advance more than year ka pay kia hai tou wo balance sheet me Dr side show hoga. ku k prepaid amount humara asset hai..
me jaldi is pe ek example post krnga ta k sab clear hojae..

[QUOTE=seher bano;535407]Koi mujhey bata sakta hai k closing entries trading and profit & Loss account, Balance sheet sey pehley banai jaati hain ya phir baad mein??? Agar pehly to closing entries k balances adjusted honge ya jo question me given hon gey???please answers.[/QUOTE]

ji closing entries pehle hi banai jati hain tbi tou TPL aur B.S me year end balance aate hain.. aur second bat jo ap ne pochi hai wo Question dekh k hi pata chale ga k closing balance wohi aainge ya unko adjust krna hoga..

[QUOTE=Rohail Khan;535578]dear in my view expense account kbhi Cr nh hota..
preepaid rent ki entries is trha hngi
Dr Prepaid rent account
Cr cash
aur jaise jaise rent utilize hota jaega hum usko prepaid se nika k expense me dalte jain just like below
Dr rent expense
Cr prepaid account
aur in the end agar hum ne rent advance more than year ka pay kia hai tou wo balance sheet me Dr side show hoga. ku k prepaid amount humara asset hai..
me jaldi is pe ek example post krnga ta k sab clear hojae..[/QUOTE]

Thanks for you consideration, but you are partly right in this case. you are talking about meigs and meigs adjusting entires. However, the case is most opposite in M.A Ghani adjusting entries. that is why i am very confused.

[QUOTE=seher bano;535597]Thanks for you consideration, but you are partly right in this case. you are talking about meigs and meigs adjusting entires. However, the case is most opposite in M.A Ghani adjusting entries. that is why i am very confused.[/QUOTE]

dear sehar,
na mene meigs and meigs parha hai na M.a Ghani..
so mujhe dono ka nh pata.. ap M.a Ghani me jo entries hain wo detail me post karain ta k pata chala k kaise opposite hain.. aur meigs and meigs ki bhi..

[QUOTE=green2;77099]Dear All,

Anybody can plz tell me that
1.do v need to prepare process costing in full detAils including FIFO and WEIGHTED avg method..and all other things e.g ab.loss and normal loss simultaneously...etc
2.v same question is for STANDARD Costing..mean to say all variances including SALEz variance or only MAT,LAB,FOH variance will b sufficient
3.in advance ACC same question is for PARTNERSHIP acc..how much details we need to cover for the said topic????

Kindly answer me if anybody have it.

Regards,

Saeed[/QUOTE]
Yes these topics are most important. So if you want to score high then you will have to cover these topics.

[QUOTE=Rohail Khan;535578]dear in my view expense account kbhi Cr nh hota..
preepaid rent ki entries is trha hngi
Dr Prepaid rent account
Cr cash
aur jaise jaise rent utilize hota jaega hum usko prepaid se nika k expense me dalte jain just like below
Dr rent expense
Cr prepaid account
aur in the end agar hum ne rent advance more than year ka pay kia hai tou wo balance sheet me Dr side show hoga. ku k prepaid amount humara asset hai..
me jaldi is pe ek example post krnga ta k sab clear hojae..[/QUOTE]

Thank you so much for pointing out my mistake..... you are right...
All expenses are debits because they reduce owner’s equity

[QUOTE=Rohail Khan;535607]dear sehar,
na mene meigs and meigs parha hai na M.a Ghani..
so mujhe dono ka nh pata.. ap M.a Ghani me jo entries hain wo detail me post karain ta k pata chala k kaise opposite hain.. aur meigs and meigs ki bhi..[/QUOTE]

[url]http://www.4shared.com/office/95FjoTBJ/Chapter_5___Preparation_of_Fin.html[/url]

Please have a look to above mentioned link...there is every adjusting entry of P/L Account which is making me confused.

[QUOTE=seher bano;535844][url]http://www.4shared.com/office/95FjoTBJ/Chapter_5___Preparation_of_Fin.html[/url]

Please have a look to above mentioned link...there is every adjusting entry of P/L Account which is making me confused.[/QUOTE]

hmmm now i got your point. wo adjust is lie kr rha hai ku k TPL ko true and fair view dene k lie..
lets suppose ap ne 2 years ka rent pay kia hai advance me. agr wo at the year end adjust nh karainge tou usi ek year me 2 years ka rent exp include hojaega jo hamare profit ko kam kr dega.. let supose humara GP hai 50000. 60000 of 2 years respectively.
2 years ka rent hai suppose 24000.. means ek year ka 12000.
ab agr hum without adjusting year one me sara rent dal dain tou senario aisa hoga k
year 1
GP=50000
rent= 24000
NP=26000.
aur
year 2
GP=60000
rent exp=0
NP=60000.
adjustment na krne se hum year 1 k profit underestimate kr rhe hain aur year 2 k profits ovr estimate..
so adjustment k bad humara 2 years ka TPL kuch is tarha show hoga
year 1
GP=50000
rent= 12000
NP=38000.
aur
year 2
GP=60000
rent exp=12000
NP=48000.

hope mene apki problem ko sahi identify kia ho..
agr nh tou let me know.
regards,
Rohail

[QUOTE=Rohail Khan;535876]hmmm now i got your point. wo adjust is lie kr rha hai ku k TPL ko true and fair view dene k lie..
lets suppose ap ne 2 years ka rent pay kia hai advance me. agr wo at the year end adjust nh karainge tou usi ek year me 2 years ka rent exp include hojaega jo hamare profit ko kam kr dega.. let supose humara GP hai 50000. 60000 of 2 years respectively.
2 years ka rent hai suppose 24000.. means ek year ka 12000.
ab agr hum without adjusting year one me sara rent dal dain tou senario aisa hoga k
year 1
GP=50000
rent= 24000
NP=26000.
aur
year 2
GP=60000
rent exp=0
NP=60000.
adjustment na krne se hum year 1 k profit underestimate kr rhe hain aur year 2 k profits ovr estimate..
so adjustment k bad humara 2 years ka TPL kuch is tarha show hoga
year 1
GP=50000
rent= 12000
NP=38000.
aur
year 2
GP=60000
rent exp=12000
NP=48000.

hope mene apki problem ko sahi identify kia ho..
agr nh tou let me know.
regards,
Rohail[/QUOTE]

Ok Thank you...If I have got any problem, will let you know.

can anybody work on past papers with me in Model Town Library, Lahore.... i confused about answers ......kindly contact at my email address in public profile...

Can anyone solve this question??? (Adjusting Entries for Trading and P/L account)

On 1st January,1990, the Bad Debts Reserve appeared in the books of a firm at a figure of Rs.500. During the year Bad Debts amounted to Rs. 400 and Sundry Debtors to Rs. 15000. On 31st December 1990 a 5 per cent reserve for doubtful debts was maintained on sundry debtors. During the year 1991 Bad Debts amounted to Rs. 1000 and Sundry Debtors to Rs..20000. [B]On 31st December, 1991, the Reserve for Doubtful Debts on Sundry Debtors was increased by 5 per cent and a 2.5 per cent reserve was maintained for discount on Debtors.
[/B]
[B]Required: Give necessary Journal Entries.[/B]

[B]I am just confused about the bold statement and its entry.[/B]

thanks .. its really worthy for beginners:bow

Hello
I need Auditing notes if anyone have then please share at [email]abbass.fame@gmail.com[/email]

Fundamental Auditing Principles and Concepts

Auditing:
Auditing refers to a systematic and independent examination financial statements and underlying records (books, accounts, documents and vouchers) of an organization to ascertain whether the financial statements present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law

True and Fair View
True and fair view in auditing means that the financial statements are free from material misstatements and faithfully represent the financial performance and position of the entity.
Explanation
Although the expression of true and fair view is not strictly defined in the accounting literature, we may derive the following general conclusions as to its meaning:
True suggests that the financial statements are factually correct and have been prepared according to applicable reporting framework such as the IFRS and they do not contain any material misstatements that may mislead the users. Misstatements may result from material errors or omissions of transactions & balances in the financial statements.
Fair implies that the financial statements present the information faithfully without any element of bias and they reflect the economic substance of transactions rather than just their legal form.

Audit Assertions or Management Assertions
Management assertions or financial statement assertions are the implicit or explicit assertions that the preparer of financial statements (management) is making to its users. Financial statements include assertions related to the recognition, measurement, presentation, and disclosure of the financial information contained within such statements.[1] The role of the auditor in a financial statement audit is to obtain evidence as to whether management's assertions can be supported.[2]
The concept is primarily used in regard to the audit of a company's financial statements, where the auditors rely upon a variety of assertions regarding the business. The auditors test the validity of these assertions by conducting a number of audit tests.

Management assertions fall into the following three classifications:

Transaction-level assertions. The following five items are classified as assertions related to transactions, mostly in regard to the income statement:
•Accuracy. The assertion is that the full amounts of all transactions were recorded, without error.
•Classification. The assertion is that all transactions have been recorded within the correct accounts in the general ledger.
•Completeness. The assertion is that all business events to which the company was subjected were recorded.
•Cutoff. The assertion is that all transactions were recorded within the correct reporting period.
•Occurrence. The assertion is that recorded business transactions actually took place.

Account balance assertions. The following four items are classified as assertions related to the ending balances in accounts, and so relate primarily to the balance sheet:
•Completeness. The assertion is that all reported asset, liability, and equity balances have been fully reported.
•Existence. The assertion is that all account balances exist for assets, liabilities, and equity.
•Rights and obligations. The assertion is that the entity has the rights to the assets it owns and is obligated under its reported liabilities.
•Valuation. The assertion is that all asset, liability, and equity balances have been recorded at their proper valuations.

Presentation and disclosure assertions. The following five items are classified as assertions related to the presentation of information within the financial statements, as well as the accompanying disclosures:
•Accuracy. The assertion is that all information disclosed is in the correct amounts, and which reflect their proper values.
•Completeness. The assertion is that all transactions that should be disclosed have been disclosed.
•Occurrence. The assertion is that disclosed transactions have indeed occurred.
•Rights and obligations. The assertion is that disclosed rights and obligations actually relate to the reporting entity.
•Understandability. The assertion is that the information included in the financial statements has been appropriately presented and is clearly understandable.
There is a fair amount of duplication in the types of assertions across the three categories; however, each assertion type is intended for a different aspect of the financial statements, with the first set related to the income statement, the second set to the balance sheet, and the third set to the accompanying disclosures.
If the auditor is unable to obtain a letter containing management assertions from the senior management of a client, the auditor is unlikely to proceed with audit activities. One reason for not proceeding with an audit is that the inability to obtain a management assertions letter could be an indicator that management has engaged in fraud in producing the financial statements.

(Auditing) CE 2016

Question No.2

Internal Control and its Objectives

As we know Internal control means policies and procedures designed, implemented and operated by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

a. Effectiveness and efficiency of operations.
b. Reliability of financial reporting.
c. Compliance with applicable laws and regulations.
The first category addresses an entity's basic business objectives, including performance and profitability goals and safeguarding of resources.

The second relates to the preparation of reliable published financial statements, including interim and condensed financial statements and selected financial data derived from such statements, such as earnings releases, reported publicly.
The third deals with complying with those laws and regulations to which the entity is subject. These distinct but overlapping categories address different needs and allow a directed focus to meet the separate needs.
As internal controls are not in use, therefore, we will perform other audit procedures to address the above mentioned control objectives.


Question No.3 Materiality
Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Determining Planning Materiality and Performance Materiality
When establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole. If, in the specific circumstances of the entity, there is one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements, the auditor shall also determine the materiality level or levels to be applied to those particular classes of transactions, account balances or disclosures. The auditor shall determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures

Question No.4 Considerations with regard to IFRS while planning and performing audit
The auditor shall obtain understanding of the entity’s selection and application of accounting policies, including the reasons for changes thereto. The auditor shall evaluate whether the entity’s accounting policies are appropriate for its business and consistent with the applicable financial reporting framework and accounting policies used in the relevant industry. The Entity’s Selection and Application of Accounting Policies
An understanding of the entity’s selection and application of accounting policies may encompass such matters as:
a.The methods the entity uses to account for significant and unusual transactions.
b.The effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
c.Changes in the entity’s accounting policies.
d.Financial reporting standards and laws and regulations that are new to the entity and when and how the entity will adopt such requirements.
The auditor shall select samples and perform substantive procedures to ensure the compliance with applicable financial reporting framework.

he Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements
Effective for audits of financial statements for periods ending after December 15, 1991, unless otherwise indicated.

.01 The auditor considers many factors in determining the nature, timing, and extent of auditing procedures to be performed in an audit of an entity's financial statements. One of the factors is the existence of an internal audit function. fn 1 This section provides the auditor with guidance on considering the work of internal auditors and on using internal auditors to provide direct assistance to the auditor in an audit performed in accordance with generally accepted auditing standards.


[The following note is effective for audits of fiscal years ending on or after November 15, 2007. See PCAOB Release 2007-005APDF. For audits of fiscal years ending before November 15, 2007, click here.]
Note: When performing an integrated audit of financial statements and internal control over financial reporting, refer to paragraphs 16-19 of PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, for discussion on using the work of others to alter the nature, timing, and extent of the work that otherwise would have been performed to test controls.

Roles of the Auditor and the Internal Auditors

.02 [The following paragraph is effective for audits of fiscal years beginning on or after December 15, 2010. See PCAOB Release No. 2010-004PDF. For audits of fiscal years beginning before December 15, 2010, click here]
One of the auditor's responsibilities in an audit conducted in accordance with generally accepted auditing standards is to obtain sufficient appropriate evidential matter to provide a reasonable basis for the opinion on the entity's financial statements. In fulfilling this responsibility, the auditor maintains independence from the entity. fn 2

.03 Internal auditors are responsible for providing analyses, evaluations, assurances, recommendations, and other information to the entity's management and board of directors or to others with equivalent authority and responsibility. To fulfill this responsibility, internal auditors maintain objectivity with respect to the activity being audited.

Auditing
 

Obtaining an Understanding of the Internal Audit Function

.04 An important responsibility of the internal audit function is to monitor the performance of an entity's controls. When obtaining an understanding of internal control, fn 3 the auditor should obtain an understanding of the internal audit function sufficient to identify those internal audit activities that are relevant to planning the audit. The extent of the procedures necessary to obtain this understanding will vary, depending on the nature of those activities.

.05 The auditor ordinarily should make inquiries of appropriate management and internal audit personnel about the internal auditors'—

Organizational status within the entity.
Application of professional standards (see paragraph .11).
Audit plan, including the nature, timing, and extent of audit work.
Access to records and whether there are limitations on the scope of their activities.
In addition, the auditor might inquire about the internal audit function's charter, mission statement, or similar directive from management or the board of directors. This inquiry will normally provide information about the goals and objectives established for the internal audit function.

.06 Certain internal audit activities may not be relevant to an audit of the entity's financial statements. For example, the internal auditors' procedures to evaluate the efficiency of certain management decision-making processes are ordinarily not relevant to a financial statement audit.

.07 Relevant activities are those that provide evidence about the design and effectiveness of controls that pertain to the entity's ability to initiate, record, process, and report financial data consistent with the assertions embodied in the financial statements or that provide direct evidence about potential misstatements of such data. The auditor may find the results of the following procedures helpful in assessing the relevancy of internal audit activities:


.08 If, after obtaining an understanding of the internal audit function, the auditor concludes that the internal auditors' activities are not relevant to the financial statement audit, the auditor does not have to give further consideration to the internal audit function unless the auditor requests direct assistance from the internal auditors as described in paragraph .27. Even if some of the internal auditors' activities are relevant to the audit, the auditor may conclude that it would not be efficient to consider further the work of the internal auditors. If the auditor decides that it would be efficient to consider how the internal auditors' work might affect the nature, timing, and extent of audit procedures, the auditor should assess the competence and objectivity of the internal audit function in light of the intended effect of the internal auditors' work on the audit.

Obtaining an Understanding of the Internal Audit Function

.04 An important responsibility of the internal audit function is to monitor the performance of an entity's controls. When obtaining an understanding of internal control, fn 3 the auditor should obtain an understanding of the internal audit function sufficient to identify those internal audit activities that are relevant to planning the audit. The extent of the procedures necessary to obtain this understanding will vary, depending on the nature of those activities.

.05 The auditor ordinarily should make inquiries of appropriate management and internal audit personnel about the internal auditors'—

Organizational status within the entity.
Application of professional standards (see paragraph .11).
Audit plan, including the nature, timing, and extent of audit work.
Access to records and whether there are limitations on the scope of their activities.
In addition, the auditor might inquire about the internal audit function's charter, mission statement, or similar directive from management or the board of directors. This inquiry will normally provide information about the goals and objectives established for the internal audit function.

.06 Certain internal audit activities may not be relevant to an audit of the entity's financial statements. For example, the internal auditors' procedures to evaluate the efficiency of certain management decision-making processes are ordinarily not relevant to a financial statement audit.

.07 Relevant activities are those that provide evidence about the design and effectiveness of controls that pertain to the entity's ability to initiate, record, process, and report financial data consistent with the assertions embodied in the financial statements or that provide direct evidence about potential misstatements of such data. The auditor may find the results of the following procedures helpful in assessing the relevancy of internal audit activities:


.08 If, after obtaining an understanding of the internal audit function, the auditor concludes that the internal auditors' activities are not relevant to the financial statement audit, the auditor does not have to give further consideration to the internal audit function unless the auditor requests direct assistance from the internal auditors as described in paragraph .27. Even if some of the internal auditors' activities are relevant to the audit, the auditor may conclude that it would not be efficient to consider further the work of the internal auditors. If the auditor decides that it would be efficient to consider how the internal auditors' work might affect the nature, timing, and extent of audit procedures, the auditor should assess the competence and objectivity of the internal audit function in light of the intended effect of the internal auditors' work on the audit.