Lec 1 Overview Concept & context of auditing Audit testing Audit planning Audit report Auditing and Assurance defined : 1. Assurance engagement WE all 5 : an engagement in which an assurance practitioner expresses a conclusion ???????????? designed to enhance the degree of confidence of the intended users (other than the responsible party) about the outcome of the evaluation or measurement of a subject matter against criteria. ????(??????)???????????????????? ???? 2. 'intended users' FHf - the people for whom the auditor prepares their report. Example: shareholders. Other users:????: Investors: decisions to buy, hold or sell shares. Suppliers: can entity pay for goods supplied. Customers: going concern if relies on entity for goods. Lenders: can entity pay loan repayments. Employees: can entity pay wages, and job security. Governments: comply with regulations and pay taxes. General public: associate with entity - future plans. 3. 'responsible party' {E }] - the person or organisation responsible for preparing the financial statements. Example: company. 4. 'subject matter' teJf - that which the auditor is expressing a conclusion on. Example: financial reports 5. 'criteria' MEYE - the rules or principles by which the subject matter is being evaluated. 6. A type of assurance service (WEAR : public accounting firm issues a written communication that expresses a conclusion about the reliability of a written assertion/statement of another party. "#itJif ?????????,????????????/?????????? 1
The relationship between accounting & auditing : FINANCIAL REPORTING ACCOUNTING (guided by accounting standards) Responsibility of management Analyse events and transactions. AUDITING (guided by auditing standards) Responsibility of auditor Obtain and evaluate evidence concerning the financial statements. Measure and record transaction data. Verify that financial information has been presented fairly in accordance with an identified financial reporting framework. Classify and summarise recorded data. Express an opinion in the audit report. Prepare the financial statements and other reports in accordance with the identified financial reporting framework. Deliver the audit report to the entity. + Distribute the annual report, including financial statements and the auditor's report, to shareholders. Different types of audit 1. Financial report audit ?????? 1) Demand: · Agency theory ? Information hypothesis (?? for all users ???) · Insurance hypothesis (reputation) 2) Objective to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, ???????????????????,???????????? thereby enabling the auditor to express an opinion on whether the financial report is prepared, in all material respects, in accordance with an applicable financial reporting framework. ???????????????????,?????????????????????? 3) Responsibilities 2
· Management · Auditors . The external auditor performing a financial report audit does NOT provide an opinion on the performance or profitability of the entity. 2. Compliance audit ????? 3. Performance audit- efficiency, effectiveness & economy ????(????) 4. Comprehensive audit ???? 5. Environmental audit ???? 6. Internal audit ???? (? manage ??) Different types of auditor 1. Public accounting firms ???? International firms National firms Large local & regional firms Small local firms Senior Partner Manager Supervisor Assistant 2. Internal auditors (employee) ????? 3. Officers serving the