Acct 3708 Lecture Pdf

The audit of financial statements is mandatory for publically listed entities throughout the world. The auditor conducts various tests and based on the results forms an opinion on the truthfulness and fairness of the financial statements of the company and whether or not they are prepared in accordance with the financial reporting standards and are free from any material misstatement (Freedman, 2013). The purpose of auditing is to enhance the confidence of investors and to add credibility to the truthfulness of company 's true financial performance. However, there are some dos ' and don 'ts that an auditor must take care of. For instance, anything that threatens the independence of the auditor must be avoided as it adversely affects the truthfulness and objectivity of the opinion formed.

Auditing is a systematic process of objectively obtaining and evaluating 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 (Boynton & Johnson, 2006). In auditing there are many attributes that describes the auditor’s work. Elements of the Generally Accepted Auditing Standards are followed by auditors. The Generally Accepted Auditing Standards apply to financial, operational, and compliance audits. Auditing public traded companies has been effected by the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board. Auditors have additional responsibilities because of

We will conduct our audits in accordance with auditing standards generally accepted in the United States of America (“GAAS”). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether caused by error or fraud. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. The procedures selected depend on our judgment, including the assessment of the risks of material

The objectives of a review in accordance with the statements on standards for accounting differ significantly with those of audit financial statements in compliance with the general accepted auditing standards. During a review the accountants will perform analytical procedures and will obtain their information from asking the management a variety of questions rather than obtaining an understanding of the internal control structures and obtaining evidential matter throughout inspection, observation or confirmation as an audit process requires. Upon completion of the process the accountants will issue an opinion providing limited assurances on the fair presentation of the financial statements. This limited assurance opinion is different from

There are many different types of audits including financial statements audit, the operational audit and the compliance audit. Either an internal auditor or an external auditor from another firm can conduct these various audits. “The American Accounting Association defines auditing as a systematic process of objectively obtaining and evaluating the accounts of financial records of a governmental, business, or other entity based on established criteria” (www.referenceforbusiness.com, 2009). Essentially the review is done to enable an accountant to assess the representations of management and to consider whether the financial statements conform to the

Auditors provide a key investigation function in the business world. The law in relation to the liability of auditors changed significantly with the introduction of Companies Act 2006. It is now possible for audit firms to limit their liability towards clients through contractual agreements. The current auditing liability regime has proven to be controversial. This essay will first present the relevant liability rules and examine the underlying problems, then evaluating the significance of these rules with regard to auditing reforming.

1. What does ‘assurance’ mean in the financial reporting context? Who are the three parties relevant to an assurance engagement?

If the financial statements of a company have been attested and result in the auditor providing reasonable assurance, it means the practitioner is giving a ‘high but not absolute level of assurance’ which means the practitioner has been able to collect enough ‘sufficient (from icaew study manual) relevant and appropriate evidence and assess it successfully in order to draw to a positive conclusion. An example of a statement by the auditor providing a reasonable assurance would be ‘In my opinion the statements and information I have overlooked are reasonable and represent a fair and true view of the current financial position of the company in question as of 01 January 2015 and has been prepared in accordance with the IFRS and framework’. The reasonable/high level of assurance provides confidence to shareholders, it also suggests the business’s internal controls are within a good standard.

Statements prepared by company managers for their shareholders (Heang and Ali 2008). The general consensus achieved the primary objective of an audit function is to add credibility to the financial statement rather than on the detection of fraud and errors. This change in audit objective is evident in the successive edition of Montgomery’s Auditing text issued during this period which stated “An incidental, but nevertheless important, objective of an audit is detection of fraud.” (1934, p. 26). “Primary responsibility…for the control and discovery of irregularities necessarily lies with management.” (1940, p. 13). Hence, it can be witnessed that the shift of the focus of an audit function from preventing and detecting fraud and error towards assessing the truth and fairness of the companies’ financial statements began at this period (Heang and Ali 2008).

External auditors are responsible for ensuring a company’s financial statements are free from material misstatement. These individuals work to provide comfort and reliability to third parties, such as investors or creditors, who may rely on a company’s financial performance. As such, auditors must objectively perform audits in a systematic and consistent manner to limit the risk of material misstatement and false representation. However, to conduct an effective audit, extensive planning and supervision is necessary, as defined under the first auditing standard of field work under the Generally Accepted Auditing Standards (GAAS) created by the Public Company Accounting Oversight Board (PCAOB) (find source). This standard states that “the

Auditing is all about assessing the financial statements of a company in order to obtain reasonable assurance that they are prepared in accordance with the appropriate conceptual frameworks. The financial statements must give a true and fair view therefore auditors are responsible in detecting if there are risks of material misstatements caused by intentionally misstating or omitting items. Auditors must follow all ethical principles and should adhere to auditing standards in order to have an objective audit opinion. It is essential that they remain independent and free of influence from their client. They must have control over the process, in case the client wants to hide something that affects their company adversely.

The auditor’s role is different from the role of the management; the auditor is responsible for expressing an opinion on whether management has fairly presented the information in the financial statements. During an audit, an independent qualified auditor evaluates the financial statements. During the audit, the auditor collects evidence to obtain reasonable assurance that the amounts and disclosures in the financial statements are free of material misstatement. An auditor is also responsible to check whether audit evidence increases doubt about the ability of the client to continue as a going concern

Amended Preface to the Hong Kong Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements Hong Kong Framework for Assurance Engagements

An audit is ‘an independent examination of, and the subsequent expression of opinion on, the financial statements of an organization’ (Hussey, 1999, p. 33). The audit can be viewed as an integral part of corporate financial reporting, where the assurance it provides stems from the trust placed in the judgement of the auditor. The audit is designed to demonstrate ‘the completeness, accuracy and validity of transactions which, when aggregated, make up the financial statements’ (Power, 1997, p. 24).

An audit is the examination and checking of financial statements by a professional auditor or accountant who has had no part in its preparation. The process involves an examination of the evidence from which the final revenue accounts and balance sheet, or other statements of an organization have been prepared, in order to ascertain that they present a true reflection of the summarized transactions for the period under review and of the financial state of the organization at the end date, so enabling the auditor to report thereon. The objective of the ordinary audit of financial statements by the independent auditor is the expression of an opinion as to the fairness with which