AUDIT/AUDITING
- Audit is the examination or inspection of various books of accounts by an auditor
- the idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are
done in a fair manner and there is no misrepresentation or fraud that is being conducted
Example of Auditing
- Daily Cash Report; one person checking another person's work
- debit, credit card, cash and check payments
Purpose of Auditing
- audit means performance to ascertain the reliability and validity of the information
Why do we need to Audit?
- to ascertain the quality of financial statement
Objectives of Auditing
- to form an independent opinion on the financial statements of the audited entity
Tax Audit
- examination by a taxing authority of your tax return information to ensure all reported data is correct
Financial Audit
- is a thorough detailed examination of a company's financial statements and accounts
How do we examine?
• Trial Balance - is a statement that shows the total of debit and credit balances of accounts. The total of debit
amount shall be equal to the credit amounts for the trial balance to tally. Hence, it verifies the arithmetical accuracy
of the postings in the ledger accounts
Basis of Comparison Internal Audit External Audit
Meaning Refers to an ongoing audit Is an audit function performed
function performed within an by the independent body which
organization by a separate is not a part of the organization
internal auditing department
Objective To review the routine activities To analyse and verify the
and provide suggestions for the financial statements of the
improvement company
Conducted by Employees Third party
Auditor is appointed by Management Members
Users of report Management Stakeholders
Opinion Opinion is provided on the Opinion is provided on the
effectiveness of the operational truthfulness and fairness of the
activities of the organization financial statement of the
company
Scope Decided by the management of Decided by the statute
the entity
INTRODUCTION TO THE CODE
Fundamental Principles
Integrity – a professional accountant should be straightforward and honest
Objectivity – a professional accountant should not allow bias, conflict of interest or undue influence of
others to override professional or business judgements
, Confidentiality – a professional accountant should respect the confidentiality of information acquired
Personal Behavior – a professional accountant should comply with relevant laws and regulations and should
avoid any action that discredits the profession
Internal Audit (first party audits)
- an independent service to evaluate an organization's internal controls
- it's corporate practices, processes and methods
- it helps in securing compliance with the various law applicable to an organization
Internal Auditing
- objective assurance and consulting activity designed to add value and improve an organization's operation
Internal Audit Process
- evaluates an organization's operation, internal controls, risk management
Types of Internal Audits
1. Compliance Audit
2. Operational Audits
3. Financial Audits
4. Information Technology Audits
Who audits an internal audit?
- chief audit executive
External Auditor
- is a public accountant who conducts audit, reviews, and other work for his or her clients
What does an external auditor do?
- conduct independent assessment of organizations financial statement and disclosures
- companies hire external auditors to ensure financial statements and disclosures remain free of material
misstatement
Example of external auditors
- audit report is provided to investors, lenders, other interested parties
CONTROLLING ACCOUNTS
- is a general “over-all” account for similar subject matter or same person
- for all claims receivable the controlling account is Accounts Receivable
- for all debts of the business to the supplies, the controlling account is Accounts Payable
NEGOTIABLE INSTRUMENT
- is a written document other than money that may be used for buying, selling and paying of debts
1. It must be in writing and signed by the issuer
2. It must contain an unconditional promise
3. It must be payable on demand
4. It must be payable to order
5. When the instrument is addressed to a drawee, he must be named
Example of negotiable instrument:
a. Promissory note
b. Bills of exchange
1. Check
2. Bank drafts
3. Commercial drafts
4. Money order
- Audit is the examination or inspection of various books of accounts by an auditor
- the idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are
done in a fair manner and there is no misrepresentation or fraud that is being conducted
Example of Auditing
- Daily Cash Report; one person checking another person's work
- debit, credit card, cash and check payments
Purpose of Auditing
- audit means performance to ascertain the reliability and validity of the information
Why do we need to Audit?
- to ascertain the quality of financial statement
Objectives of Auditing
- to form an independent opinion on the financial statements of the audited entity
Tax Audit
- examination by a taxing authority of your tax return information to ensure all reported data is correct
Financial Audit
- is a thorough detailed examination of a company's financial statements and accounts
How do we examine?
• Trial Balance - is a statement that shows the total of debit and credit balances of accounts. The total of debit
amount shall be equal to the credit amounts for the trial balance to tally. Hence, it verifies the arithmetical accuracy
of the postings in the ledger accounts
Basis of Comparison Internal Audit External Audit
Meaning Refers to an ongoing audit Is an audit function performed
function performed within an by the independent body which
organization by a separate is not a part of the organization
internal auditing department
Objective To review the routine activities To analyse and verify the
and provide suggestions for the financial statements of the
improvement company
Conducted by Employees Third party
Auditor is appointed by Management Members
Users of report Management Stakeholders
Opinion Opinion is provided on the Opinion is provided on the
effectiveness of the operational truthfulness and fairness of the
activities of the organization financial statement of the
company
Scope Decided by the management of Decided by the statute
the entity
INTRODUCTION TO THE CODE
Fundamental Principles
Integrity – a professional accountant should be straightforward and honest
Objectivity – a professional accountant should not allow bias, conflict of interest or undue influence of
others to override professional or business judgements
, Confidentiality – a professional accountant should respect the confidentiality of information acquired
Personal Behavior – a professional accountant should comply with relevant laws and regulations and should
avoid any action that discredits the profession
Internal Audit (first party audits)
- an independent service to evaluate an organization's internal controls
- it's corporate practices, processes and methods
- it helps in securing compliance with the various law applicable to an organization
Internal Auditing
- objective assurance and consulting activity designed to add value and improve an organization's operation
Internal Audit Process
- evaluates an organization's operation, internal controls, risk management
Types of Internal Audits
1. Compliance Audit
2. Operational Audits
3. Financial Audits
4. Information Technology Audits
Who audits an internal audit?
- chief audit executive
External Auditor
- is a public accountant who conducts audit, reviews, and other work for his or her clients
What does an external auditor do?
- conduct independent assessment of organizations financial statement and disclosures
- companies hire external auditors to ensure financial statements and disclosures remain free of material
misstatement
Example of external auditors
- audit report is provided to investors, lenders, other interested parties
CONTROLLING ACCOUNTS
- is a general “over-all” account for similar subject matter or same person
- for all claims receivable the controlling account is Accounts Receivable
- for all debts of the business to the supplies, the controlling account is Accounts Payable
NEGOTIABLE INSTRUMENT
- is a written document other than money that may be used for buying, selling and paying of debts
1. It must be in writing and signed by the issuer
2. It must contain an unconditional promise
3. It must be payable on demand
4. It must be payable to order
5. When the instrument is addressed to a drawee, he must be named
Example of negotiable instrument:
a. Promissory note
b. Bills of exchange
1. Check
2. Bank drafts
3. Commercial drafts
4. Money order
