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Introduction To Auditing

Companies rely on financial information to make decisions. Auditing is a form of attestation where an independent auditor evaluates evidence to determine if a company's financial assertions align with established standards. The objective of an audit is to enable the auditor to express an opinion on whether the financial statements fairly represent the company's financial position. Independent auditing is necessary due to the separation of information users and providers and the potential for bias.

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Mark Lawrence Yusi
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66 views

Introduction To Auditing

Companies rely on financial information to make decisions. Auditing is a form of attestation where an independent auditor evaluates evidence to determine if a company's financial assertions align with established standards. The objective of an audit is to enable the auditor to express an opinion on whether the financial statements fairly represent the company's financial position. Independent auditing is necessary due to the separation of information users and providers and the potential for bias.

Uploaded by

Mark Lawrence Yusi
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Auditing Concepts

Introduction
Introduction

Companies usually rely on financial


information
Attestation

Attestation refers to an expert’s communication


about the reliability of someone else’s assertion
Auditing

Auditing is a form of attestation.


Auditing
American Accounting Association:
Auditing is a systematic process by which a competent, independent person
objectively obtains and evaluates evidence regarding assertions about economic
actions and events to ascertain the degree of correspondence between those
assertions and established criteria and communicating the results to interested
users.
Objective Of Auditing
The Philippine Standards of Auditing 120 “Framework of Philippine Standards
on Auditing” states the objective of an audit as follows:
“The objective of an audit of financial statements is to enable the auditor to
express an opinion whether the financial statements are prepared, in all material
respects, in accordance with an identified financial reporting framework. The
phrase used to express the auditor’s opinion is “present fairly, in all material
respects”. A similar objective applies to the audit of financial or other
information prepared in accordance with appropriate criteria.”
Why is independent auditing
necessary?
Information Risk
Remoteness of information users from information providers.
Owners and management are different
Directors are not involved in day to day operations or decisions
Business may be geographically scattered
Potential bias and motives of information provider
Voluminous data
Complex exchange transactions
Reduction of Information Risk
Allow users to verify information
Users share information risk with management.
Have the financial statements audited
Types of Audit
Financial statement audits
Compliance audit
Operational Audit
Types of Auditors
External auditor
Internal auditors
Government auditors
Role of Management
Role of Auditors
Limitations in Audit
Sampling Risk
Non-sampling Risk
Reliance on management’s representation
Inherent limitations of the client’s accounting and internal control systems
Nature of evidence
General Principles governing the audit of FS

• The auditor should comply with the code of Professional Ethics for CPAs
promulgated by the BOA.
• The auditor should conduct an audit in accordance with the Philippine
Standards on Auditing.
• The auditor should perform an audit with an attitude of professional
skepticism (questioning mind)
Theoretical Framework for Auditing
• Audit function operates on the assumption that all financial data are verifiable
• The auditor should always maintain independence with respect to the financial statements under
audit
• There should be no long-term conflict between the auditor and the client management
• Effective internal control system reduces the possibility of errors and fraud affecting the financial
statements
• Consistent application of GAAP and PFRS results in fair presentation of FS
• What was held true in the past will continue to hold true in the future in the absence of known
conditions to the contrary
• An audit benefits the public

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