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At 04 - Introduction To Auditing

This document provides an overview of financial statement auditing. It outlines the key steps in the audit process from pre-engagement to post-audit responsibilities. It also defines the important assertions that auditors consider, including presentation, existence, rights and obligations, completeness, and valuation. The document distinguishes between financial statement audits, operational audits, and compliance audits. It further discusses the roles of auditors and clients, and how to prevent and detect fraud. The sources and attributes of audit evidence are explained, along with common audit procedures based on their nature and purpose.

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Princess Lajum
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34 views

At 04 - Introduction To Auditing

This document provides an overview of financial statement auditing. It outlines the key steps in the audit process from pre-engagement to post-audit responsibilities. It also defines the important assertions that auditors consider, including presentation, existence, rights and obligations, completeness, and valuation. The document distinguishes between financial statement audits, operational audits, and compliance audits. It further discusses the roles of auditors and clients, and how to prevent and detect fraud. The sources and attributes of audit evidence are explained, along with common audit procedures based on their nature and purpose.

Uploaded by

Princess Lajum
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AT 04: INTRODUCTION TO AUDTING

• FS AUDIT PROCESS:
1. Pre-engagement ® screening of clients
2. Audit Planning ® effecCveness
3. Internal Controls ® efficiency
4. SubstanCve TesCng ® evidence gathering
5. Audit CompleCon
6. Audit Report
7. Post-audit ResponsibiliCes

• ASSERTIONS:
1. PresentaCon and Disclosure
¯
Current, Non-Current
Revenue/Gain

Notes to FS

2. Existence and Occurrence Income/Expense


¯ Changes in balance sheet accounts
refers to Balance
Sheet Accounts

Assets LiabiliCes

3. Rights and ObligaCons


¯ ¯
Assets LiabiliCes

4. Completeness
5. ValuaCon and AllocaCon

• FS AUDIT vs. OPERATIONAL AUDIT vs. COMPLIANCE AUDIT


• AUDITOR vs. CLIENT

• PREVENTING FRAUD vs. DETECTING FRAUD

• ETHICAL REQUIREMENTS:
1. Fundamental Principles
a. Integrity ® honest and straighZorward
b. ObjecCvity ® to not allow bias, conflict of interest or undue influence of others to override
professional or business judgments
c. Professional Competence and Due Care ® to maintain professional knowledge and skill at the level
required and act diligently and in accordance with
applicable technical and professional standards
d. Professional Behavior ® to comply with relevant laws and regulaCons and avoid any acCon that
discredits the profession
e. ConfidenCality ® GENERAL RULE: no disclosure of engagement informaCon
EXCEPTION: Specific authority was obtained from the client
Required by law
Profession right or duty to disclose
2. Independence
a. Independence of Mind ® the auditor is able to make decisions without being affected by undue
pressure internally or externally
b. Independence in Appearance ® avoiding circumstances that may make appear that the auditor is not
independent

• STANDARDS ACCORDING TO AUDITING AND ASSURANCE STANDARDS COUNCIL (AASC):


a. For Audits ® Philippine Standard for AudiCng (PSAs)
b. For Reviews ® Philippines Standard for Review and Engagements (PSREs)
c. For Other Assurance Services ® Philippine Standard for Assurance Engagements (PSAEs)
d. For Agreed-Upon Procedures and CompilaCon ® Philippine Standard on Related Services (PSRSs)

• AUDIT EVIDENCE
® two sources of evidence:
1. AccounCng Records
a. Journals
b. Ledgers
c. Worksheets
d. AdjusCng Journal Entries
2. Other InformaCon ® sources other than accounCng records
® different a;ributes of evidence: 100% TesCng
1. Sufficiency ® quanCty or amount of evidence gathered SelecCng Specific Items
Audit Sampling
êThree Constraints:
a. Time
b. Cost
c. Quality
2. Appropriateness ® quality of evidence Relevance
Reliability ® 1. external source > internal source
2. good controls > weak controls
3. wrihen evidence > oral evidence
4. direct personal > inferenCal secondhand
knowledge knowledge
5. original documents > Photocopies
• AUDIT PROCEDURES:
êAudit Procedures According to Nature:
1. Inquiry ® seeking informaCon from knowledgeable persons
® weakest source of evidence
2. InspecCon ® examining documents, records and tangible assets
3. ObservaCon ® looking at a process or procedure being performed by others
4. AnalyCcal Procedures ® studying plausible relaConships between both financial and non-financial data
5. ConfirmaCon ® verifying informaCon by asking third parCes in a wrihen manner
6. Reperformance ® the auditor's independent execuCon of procedures or controls that were originally
performed as part of the enCty's internal control
7. RecalculaCon/RecomputaCon ® checking the mathemaCcal accuracy of documents or records

êAudit Procedures According to Purpose:


1. Risk Assessment Procedure ® obtaining understanding the client and its environment
2. Test of Controls ® effecCveness of controls
3. SubstanCve TesCng ® detecCng material misstatements

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