Audit Notes

Topics: Auditing, Auditor's report, Audit Pages: 11 (2507 words) Published: December 4, 2013
Chapter 1 – The demand for an Auditing and Assurance Profession Key Services for Public Accounting Firms
Audits  High Assurance (95% - 99%)
Reviews  Moderate Assurance (60% - 70%)
Compilation  Low to No Assurance (0% - 10%)
Assurance Engagements (Triangle diagram based on the subject matter at hand) Practitioner (Auditor)  Users  Accountable Party (Management)

Practitioners give the Users a written conclusion
Accountable party must have an accountability relationship with the Users

Auditors in an engagement must be independent because they would be perceived as unbiased

Accounting  Recording, classifying, and summarizing economic events in a logical manner for the purpose of providing financial information to have a proper decision making process

Assurance  An engagement where a practitioner is engaged to issue a written communication expressing a conclusion concerning a subject matter for which the accountable party is responsible

Auditing  Accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria (GAAS, IFRS, ASPE). Auditing should be done by a competent, independent person.

Audit of F/S (Triangle diagram based on the conformity of the F/S with IFRS, GAAS, ASPE)

Auditor  Shareholder’s Management

Auditor gives their written opinion to the Shareholders
Management gives a stewardship relationship (to manage and look after the company for the S/H) with the shareholders

Audit Objectives

To gain reasonable assurance of F/S
To ensure F/S are free from material misstatements
For the auditor to express an opinion about the F/S being prepared with respects to the financial reporting frameworks (IFRS, ASPE)

Chapter 2 – The Public Accounting Profession

Quality Control for Firms (Table 2.2. p 39)

Leadership for Quality Control
Should be present for all audits
Quality control procedures should be implemented and communicated to everyone Firms should ensure all personnel are qualified
Establish a formal code of conduct
Ethical Principles are Required
Principles include:
Professional Confidence and Due Care
Confidentiality and Personality
The firm must ensure that they are complying with the independent auditor requirement for each engagement Acceptance or Continuance for the Client
Assessing the client’s risk of fraud and error, including evaluating the client’s management integrity and internal controls. Then using that evaluation to decide whether to accept the client. Human Resource Policies

Adequate hiring policies that ensure fair hiring and competence of personnel Ongoing professional development (Training)
Assigning work that matches the employees competence and performance evaluations related to audit quality Professional Development
Proper training and evaluations for every level of employment. (Staff accountant, senior, manager, partner, etc.) Engagement Performance
Ensuring audits/reviews follow GAAS
Audit is appropriately documented
The use of: software, supervision, review of work, use of professional consultation, and processes for handling differences in opinion Engagement Quality Control Review
Quality control should be monitored before, during, and after each engagement Review should include the use of second or independent partner opinions Process should exist for follow ups, internal, and external complaints Documentation

There should always be documentation of all engagements. Whether that may be hard copy, electronic format, from file retention or put into file storage.

GAAS  Generally Accepted Auditing Standards
Comply with relevant ethical requirements
Professional competence
Due care
Professional behaviour
Quality control

GAAS – Examination Standards
A strategic and risk based approach means...
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