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This posting addresses reasons for an integrated audit.

The CEO of your company has recently met with the auditors to discuss the scope of the year's audit. The CEO has asked you to make a presentation at the next board of directors meeting to discuss the reason that public accounting firms perform an integrated audit. Include the following in the presentation:

1) Discuss the reason for an integrated audit.
2) Present a recent failure of a corporate governance in the US. What action did the public think was necessary to improve the quality of corporate governance in this example?
3) Present a definition of auditing and corporate governance to help in the understanding of an integrated audit.

Solution Preview

1) The purpose of the integrated audit is to combine the company's regular financial statement audit along with an internal control audit over financial reporting. By combining the two audits together, it allows auditors to express an unqualified opinion on financial reporting internal controls.

An integrated audit shows auditors where weaknesses in internal control can exist. If there are ineffective internal controls, it flags areas as a high potential for material misstatements. By determining the high risk areas, auditors can perform substantive tests on a more thorough basis, designed specifically for the areas where high risks were present from an ineffective control environment.

If the auditor were merely conducting a financial statement audit that was not integrated, the auditors would be able to assess the ...

Solution Summary

The solution provides a detailed discussion in the form of a presentation as to why integrated audits are needed. Also discussed is the recent failure of a corporate governance in the US, including the appropriate public action. Auditing and corporate governance to help in the understanding of an integrated audit is also discussed and defined. References are provided.

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