Why Audit Is The Most Important Type Of Assurance?

According to an article in the CPA Journal, the accounting profession has long contended that an audit conducted in accordance with generally accepted auditing standards (GAAS) provides reasonable assurance that there are no material misstatements contained within financial statements. Suggest at least two (2) alternative methods that auditors can use to provide a more concrete level of assurance to investors. Provide support for your responses with examples of such methods in use.

One of the most important factors is reliability of financial statements. Reliability is further ensured by audit of financial statements. At last but not least, financial statements should be made in a comparable format either with previous periods or with the competitors.

A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered a “sniff” of an audit, which comparatively provides reasonable assurance that no material misstatements occurred. Since a review deals with a limited scope, it does not provide the basis for expressing an opinion on the presentation of the

Since auditors are not responsible for the actual financial statements, only the authenticity of them, as you stated, the more

e. “The auditor considers the level of assurance, if any, he wants from substantive testing for a particular audit objective and decides, among other things, which procedure, or combination of procedures, can provide that level of assurance. For some assertions, analytical

It’s trust-worthy and reliable to have independent and unbiased auditors confirm that an organization’s claims about its financial position and the process behind these claims are true and independent. The most important element for the audit report and opinion should be free bias. In order to achieve this goal, auditors need to be objective. Auditor, as one part of the professional accountancy bodies, is required to obey the ethics codes, which ensure the auditor to be independent.

1.2What qualities must an ‘assurer’ have in order for you to feel that their statement has high credibility?

The General purpose of a financial report is to meet the needs of a specific external parties in accordance with general purpose financial report. In order for a company to achieve this they must first comply with certain accounting standards and NZ framework. Examples of accounting standards such as being “true and fair” which means that the financial statements of company has to be free from misstatements and faithfully represents the financial performance and position of a company,( True and Fair, 2014). The true and fair value of financial statements is widely recognized as one of the best responsibilities of the management of a companies in the corporate law of other countries including NZ. There are a different entity or business that audit company’s financial statements and it’s up to the auditors to decide whether a

Financial Statements are used to evaluate the company’s performance. This information is also distributed to shareholders and investors. These financial statements must be accurately prepared according to the GAAP (Generally Accepted Accounting Principles) rules and regulations. A third party auditor is used in order to check the ‘…annual financial statements, to ensure that the annual financial statements are reliable and prepared according to GAAP (Sullivan, 2011).’ There are four types of financial statements: Stockholders’ Equity, Balance Sheet, Income Statement and Statement of Cash Flows.

According to Robert K. Elliot, 1997, assurance is a positive declaration that produces quality information which enhances the degree of confidence for all intended users as well as improves the quality of decision that being made. It is also part of corporate governance which provide reliable and accurate information to the stakeholders such as investors, employees, government, voluntary sector and market regulators, regarding the efficiency and effectiveness of organization’s policies, strategies and operations and compliance with the statutory obligations will be provided by the management. Due to the risk of uncertainties in the environments, stakeholders demand more from financial information to

(2) The reasonableness gap, one of the more subjective components of the gap, is caused by society’s increasing and often unrealistic demands for accountability. This gap can be narrowed by improving and increasing public education so as to demonstrate to the public that existing professional standards and legislative requirements are adequate. Proactive approaches such as the implementation of auditing education has to be enforced in as my occasions as possible, from business meetings to shareholders’ meeting. The MacDonald Comission expressed their opinion that audit educations have been ineffective as it concluded that most of the public expectations were reasonable and achievable. Therefore in addition, auditors have to both accustom to society’s more reasonable demands and improve the manner in which they communicate their findings to financial statement users. The accounting

However, for the purpose of reflecting assurance engagements requirements in Australia, this standard has been modified hence it contains some differences from ISAE 3000. Terminology and definitions used in Australia are incorporated in this standard. Some paragraphs that are not in ISAE 3000 have been added to this standard with

(iv) As a Non Financial Systems Police: As the global economy surged forward full steam, the need for having a fully fledged, strategically directed internal audit emerged as an inevitable service that could assist management in decision making, moving away from being merely a police on financial transactions. Thus, emerged the modern internal audit where the latter was established as a separate function, in house or outsourced, with clearly laid down missions and objectives to be achieved. As of today, internal audit undeniably is the backbone

CPAs offer other assurance services that are not defined as attestation services, they differ because no written report is required, “and the assurance does not have to be about the reliability of another party’s assertion about the compliance with specified criteria” (Arens et al., 2010 pg. 11).

Assurance Engagement: Key elements of an assurance engagement: Levels of assurance Objective of an Audit: True & Fair Why is assurance important? Why can assurance never be absolute? Professional ethics: Basic principle governing of an audit: Threats and safeguards: Suggestion to improve or safeguard against threat: ICAB Code