UNIVERSITY OF ZULULAND FACULTY OF COMMERCE, ADMINISTRATION AND LAW DEPARTMENT OF ACCOUNTING AND AUDITING Auditing 3B CADD302 & CAUD302 Course Guide: Semester 2 2015
1. About the Course 1.1. Introduction Welcome to Auditing. We hope that you will find this course both challenging and rewarding. This course provides an introduction to the financial statement audit process. What is a Financial Statement Audit? Companies produce financial statements that provide information about their financial position (balance sheet) and performance (income statement). This information is used by a wide variety of stakeholders in making economic decisions. Many of the stakeholders (e.g. shareholders, financial institutions) that use this information are not involved in its preparation. To enhance the degree of confidence that stakeholders have in the financial statements, a qualified external party (auditor) is engaged to examine the financial statements to give their professional opinion on whether they fairly present, in all material respects, the company's performance over a given period. This opinion adds credibility to the financial statements. An audit also provides management with assurance that the information that they are using to make business decisions is reliable. Furthermore, a rigorous audit process provides insights into areas where management may improve their business processes and controls. In South Africa, the Companies Act 2008 requires that an audit be performed for certain companies. Companies that are not required by law to be audited often voluntarily elect to be audited due to the value an audit adds to the business process. An auditor requires a holistic understanding of business processes, a working knowledge of the various laws and regulations that businesses must comply with, as well as knowledge and understanding of International Auditing Standards (regulations that govern the performance of an audit). 1.2. Nature of Auditing Auditing is a practical subject and requires that you develop the following fundamental skills: · Critical thinking skills such as reasoning, logic and evaluation of alternatives (rather than calculation of 'right' answers). . Language and communication skills in order to convey your thought processes to your reader, rather than merely writing down the end product (i.e. right answers) of those thought processes. · An ability to apply principals and concepts to practical situations to solve problems.
To develop these skills you must avoid "rote learning" and focus on understanding the big picture. This point is further illustrated in the article below: The Big Picture adapted from notes by Dr J Skinner (reproduced here with In the everyday world outside of academic learning we automatically make sense of what we do, or hear, or watch. If something interests us, we don't have to search for its most important aspects, or ask what its significance is in the wider scheme of things. Take a soccer or rugby match for instance: the importance of the winning goal or a spectacular conversion in the dying minutes of the game will be obvious to those who know the game. Its significance for the team's position in the relevant league, for the career of the