Professional Documents
Culture Documents
Acfn 723 Chapter 1and 2-2019
Acfn 723 Chapter 1and 2-2019
Acfn 723 Chapter 1and 2-2019
An Introduction to Auditing
- An Overview on:
Commission of Ethiopia
Ethiopia
Audit Services
• 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.
Attest Services
• Attest services occur when a practitioner is engaged to
issue ... a report on subject matter, or an assertion
about subject matter, that is the responsibility of
another party.
Assurance Services
• Independent professional services
that improve the quality of
information, or its context, for
decision makers.
• Objectives:
– strengthen the audit system required for a reliable information
necessary for the proper management and administration of the plans
and budget of the federal government;
– ascertain that all money and property of the federal government are
collected, preserved and used properly, in accordance with the laws
and regulations of the federal government and report the same to the
House:
– undertake a financial performance, environmental protection, control
audit, special audit and other audits of the offices and organizations of
the federal government;
– make efforts, in cooperation with concerned organs, to develop and
strengthen accounting and audit profession;
– give professional assistance and advice to Regional and Federal Civil
servants and organizations engaged in accounting and audit
professions;
– draw up a standard of auditing by which accounts of the offices and
organizations of the federal government shall be examined and follow
up the implementation of the same. (Source: ofag.gov.et)
ACFN 723: Advanced Auditing/PLK - 2019
The Accounting and Auditing Board of Ethiopia
(AABE)
AABE has clear and realistic statutory objectives which are stated in
Section 5 of the Regulation as to:
• (Source: aabe.gov.et)
(Source: www.iaasb.org)
• Introductory material
• Objectives
• Definitions
• Requirements
• Application and other
explanatory material
Enron WorldCom
Waste
Management
Sunbeam
Qwest
The Fund of
Funds
ACFN 723: Advanced Auditing/PLK - 2019
Overall Objectives of the Auditor
• Objective
The objective of the auditor is to plan the audit so that it will be
performed in an effective manner.
Establish overall
materiality
(more on this later!)
Establish Establish
performance performance
materiality for materiality for
accounts disclosures
Moderate Low
High Risk Risk Risk
The auditor correlates the amount of audit attention devoted to the location or
business unit with the level of risk present.
ACFN 723: Advanced Auditing/PLK - 2019
Tests of Controls
Inquiry Inspection
Observation
Walk-
Reperformance
Through
Step 2:
Determine Performance Materiality
Step 3:
Evaluate Audit Findings
Objective
The objective of the auditor is to design and perform
audit procedures in such a way as
to enable the auditor to obtain sufficient appropriate
audit evidence
to be able to draw reasonable conclusions on which to
base the auditor’s opinion
Minutes
from meetings Benchmarking
Invoices
Analyst’s
Worksheets Contracts reports
Adjustments Other
Information
to financial computations,
obtained from
statements reconciliations and
audit procedures
disclosures
ACFN 723: Advanced Auditing/PLK - 2019
Sufficiency of
Audit Evidence
Sufficiency is a measure of
the quantity of audit evidence.
Documentary evidence
Original documents
ACFN 723: Advanced Auditing/PLK - 2019
Evaluation of Audit Evidence
• ISA 705 and ISA 706 deal with how the form and
content of the auditor’s report are affected when
the auditor expresses a
– modified opinion or
– includes an Emphasis of Matter paragraph or an
– Other Matter paragraph in the auditor’s report.
Objectives
The objectives of the auditor are:
(a) To form an opinion on the financial statements
based on an evaluation of the conclusions
drawn from the audit evidence obtained; and
Nine Elements
1. Report title
2. Addressee
3. Introductory paragraph
4. Management’s responsibility
5. Auditor’s responsibility
6. Auditor’s opinion
7. Auditor’s signature
8. Date of audit report
9. Auditor’s address
ACFN 723: Advanced Auditing/PLK - 2019
Standard Audit Report with an
Unmodified Opinion
The Auditor’s Standard Report with an Unmodified Opinion
(continued)
ACFN 723: Advanced Auditing/PLK - 2019
Standard Audit Report with
an Unmodified Opinion
Objective
The objective of the auditor is to express clearly an appropriately
modified opinion on the financial statements that is necessary
when:
(a) The auditor concludes, based on the audit evidence obtained,
that the financial statements as a whole are not free from material
misstatement;
or
(b) The auditor is unable to obtain sufficient appropriate audit
evidence to conclude that the financial statements as a whole are
free from material misstatement.
Qualified
‘except for’
Disclaimer
Adverse
• Address:
Email: paulthompson@ifac.org
Small and Medium Practices Committee
International Federation of Accountants
545 Fifth Avenue,
NY 10017, USA
Reference:
• The IFAC Guide to Quality Control for Small- and Medium-Sized
Practices provides a detailed description of the quality control
standards and guidance on how to implement a system of quality
control for small- and medium-sized practices (SMPs).
• ISQC1: International Standard on Quality Control
• ISA 200, 220
Overview
• Performing quality work begins with strong leadership within the firm and
engagement partners committed to the highest ethical standards.
• This focuses on developing the system of quality control within a firm.
• The provision of quality audits and related services is vital to:
• Safeguarding the public interest;
• Maintaining client satisfaction;
• Delivering value for money;
• Ensuring compliance with professional standards; and
• Establishing and maintaining a professional reputation.
Audit Risk
• Audit risk is the risk of expressing an inappropriate
audit opinion on financial statements that are
materially misstated.
• The objective of the audit is to reduce this audit
risk to an acceptably low level.
• Assertions
Representations by management,
explicit or otherwise,
that are embodied in the financial statements,
as used by the auditor
to consider the different types of
potential misstatements that may occur.
Overview
• Audit file documentation (whether maintained on paper or
electronically) plays a critical role in:
• Assisting the engagement team in planning and performing the
audit;
• Providing evidence to demonstrate that the planned audit
procedures were in fact performed;
• Assisting engagement reviewers in carrying out their
responsibilities in accordance with professional standards;
• Recording the judgments involved in forming the audit opinion;
• Recording matters of continuing significance for future audits of
the entity.
• ISA 700
• Requirements and considerations related to: •
Forming an opinion on the financial statements;
and • Preparing an appropriately worded auditor’s
report.
Overview
• The final step in the audit process is to evaluate the audit evidence obtained,
consider the impact of any misstatements identified, form an audit opinion, and
prepare an appropriately worded audit report.
• Financial statements prepared in accordance with one or both of the two types
of general purpose framework designed to meet the common financial-
information needs of a wide range of users;
• Forming an opinion on a complete set of general purpose financial statements.
This is based on an evaluation of the conclusions drawn from the audit evidence
obtained; and
• Expressing clearly that opinion through a written report that also describes the
basis for that opinion.