AUE 2601 EXAM PACK (A+ Assured)

INTRODUCTION TO AUDITING THEORY & AUDIT PRACTICE PART A – INTRODUCTION TO AUDITING THEORY Study Topic 2 (text book pg 1/2) 2.1 The need for Auditing Services Jackson & Stent Chapter 1 ISA 200 – Objectives and general principles governing an audit ISA 610 International Framework for Assurance Engagements External auditors – express an independent opinion if the AFS’s of a company fairly present the financial position and results of the company’s operations. NOT an employee of the company. Basically enhances the degree of confidence which users of the financial statements will have of the information they received from the financial statements. Internal auditors – perform independent assignments on behalf of senior management of the company – normally to evaluate the efficiency, economy and effectiveness of the company’s internal control systems and business activities. Enhances management’s degree of confidence that the company’s systems are functioning as intended. Employee of the company, but should be independent of the department, division or subsidiary which they are auditing. Government auditors – evaluate and investigate the financial affairs of government departments and report their findings to senior government therefore increasing the degree of confidence which they have in their departments. Employee of the government, but must be independent of the government department they are auditing. Forensic auditors – concentrate on investigating and gathering evidence where there has been alleged financial mismanagement, theft or fraud. Work independent of the entity under investigation and increases the degree of confidence the investigating body has in the evidence which is presented. Aue2601 Detailed Summarised Notes & past papers (from pg 104) Page 1 AUE2601 Detailed summarised notes & Past papers 1 2 Special purpose auditors – specialise in a particular field such as environmental auditors and VAT auditors. Enhance the confidence people have in the “correctness” of the information that is being presented. MUST BE INDEPENDENT OF THE ENTITY BEING AUDITED. Auditor required to observe the fundamental ethical principles of : · integrity (straightforward, honest, moral) · objectivity (impartial, fair, non-biased and non-prejudicial) · professional competence and due care – maintaining professional knowledge and skill at the required level and performing work diligently · professional behavior – comply with laws and regulations and avoid action which discredits the profession · confidentiality – respecting the confidentiality of client information. Financial reporting system is the entire process by which the management of a business entity compiles and discloses financial information concerning their financial position and the results of the entity’s operations. All this information is communicated to external parties in the entities financial statement at the end of each accounting period and the financial reporting process must address the needs of users of the financial information (investors, lenders, suppliers and employees). Information must be understandable, relevant, and reliable and prepared on a basis that is comparable with that used by other business entities. Objective of financial statements = to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. (From the conceptual accounting framework in the International Standard – IAS). Auditing vs. accounting : Management responsibility to prepare the financial statements in accordance to International Financial Reporting Standards (IFRS’s) and also to : · maintain an appropriate accounting system and · design and implement adequate internal controls to ensure the reliability and integrity of the accounting system Accounting = the series of tasks and records of an entity by which transactions are processed as a means of maintaining financial records. Auditing = examining audit eviden