Auditing: An Overview

●A systematic process by which a

competent, independent person
objectively obtaining and evaluating
evidence regarding assertions about
Auditing economic actions and events to ascertain
the degree of correspondence between
these assertions and established criteria,
communicating the results to interested
users.
 ●Are representations by
management, explicit or
Assertions otherwise, that are embodied in
the Financial Statement.
 ●Classes of transactions and events -
refer primarily to income statement
accounts.
Categories of
●Account Balances – refer to balance
Assertions
sheet accounts.
●Presentation and Disclosure – refer to
entire Financial Statement.
 ● Occurrence – transactions and events that have been
recorded have occurred and pertain to the entity.
● Completeness – all transactions and events that should
have been recorded have been recorded.
Classes of ● Accuracy – amounts and other data relating to recorded
transactions transactions and events have been recorded
appropriately.
and events
● Cutoff – transaction and events have been recorded in
the correct accounting period.
● Classification – transactions and events have been
recorded in the proper accounts.
 ● Existence – assets, liabilities, and equity interest exist.
● Rights and obligations – the entity holds or controls the
right to assets, and liabilities are the obligations of the
entity.
Account ● Completeness – all assets, liabilities and equity interest
Balance that should have been recorded have been recorded.
● Valuation and Allocation – assets, liabilities, and equity
interests are included in the Financial Statements at
appropriate amounts and any resulting valuation or
allocation adjustments are appropriately recorded.
 ● Occurrence and rights and obligations – disclosed
events, transactions, and other matters have occurred
and pertain to the entity.
● Completeness – all disclosures that should have been
Presentation included in the Financial Statements have been included.
and Disclosure ● Classification and Understandability – financial
information is appropriately presented and described,
and disclosures are clearly expressed.
● Accuracy and valuation – financial and other
information are disclosed fairly and appropriate amount.
 ●Financial Statement Audit
Types of Audit ●Operations Audit
●Compliance Audit
 ●This is conducted to determine whether
Financial Statements present fairly the
Financial financial position, performance, and cash
flows of an entity in accordance with the
Statement AFRF (the criteria). The AFRF may be
Audit the full PFRS, PFRS for SMEs, other
acceptable basis of accounting, or the U.S.
GAAP.
 ●This is a study of an entity’s specific unit for
purposes of measuring whether that unit
conducted its operations efficiently and
Operational effectively.
Audit ●Effectiveness is a measure of whether an entity
(Performance achieves its goals and objectives. (program
result audit)
Audit)
●Efficiency shows how well an entity uses its
resources to achieve its goals. (management
audit)
 ●This is an evaluation to determine
Compliance whether an entity is following
Audit specific policies, rules, or regulations
set out by higher authority.
External ●These are audits performed by
professional accountant in public practice
Independent who are independent of the entities whose
Audits assertions are the audit subject matter.
 ●An independent, objective assurance and
Internal Audits consulting activity designed to add value
and improve an organization’s operation.
 ●Involves determination whether
government funds are being handled
properly in compliance with the
Government
applicable laws and regulations,
Audit government programs are conducted
effectively and efficiently, and Financial
Statements are fairly presented.
 ●To obtain reasonable assurance whether
the financial statements are free from
material misstatement, whether due to
fraud or error, to enable the auditor to
Auditor’s express an opinion on whether the
overall financial statements are prepared, in all
objectives material respects, in accordance with
AFRF, and;
●To report on the financial statements and
communicate the auditor’s findings.
 ●Audit risk is the risk (or likelihood) that
the auditor gives an appropriate audit
opinion when the financial statements are
materially misstated (beta risk). Audit
Audit Risk risk does not include the risk that the
auditor might express an opinion that the
financial statement are materially
misstated when they are not (alpha risk).
 ●Phase 1 – Risk Assessment – the auditor decides
whether to accept an audit engagement.
●Phase 2 – Risk Response – The assessed
ROMM serves as a basis for the auditor’s
Risk – Based responses to obtain sufficient appropriate audit
evidence.
Audit Process
●Phase 3 Conclusion and Reporting – The auditor
evaluates the results of the audit from the audit
evidence obtained and form an opinion on the
financial statements and express clearly that
opinion through a written report.
 Phase 3 –
Phase 1 – Risk Assessment Phase 2 – Risk Response Conclusion and
Reporting
Preliminary Planning the Responding to Determining the Completing the
Engagement Audit Assessed Risks Extent of Audit and
Activities Testing Considering
Post Audit
Responsibilities
The Determining Understanding Considering Considering Forming the
Risk-Based Materiality the Entity and its Fraud, Error and Work of Other
Environment NOCLAR Practitioner
Auditor’s
Opinion and
Audit Report Contents
Understanding Identifying and Considering Considering Performing and
Approach the Entity’s Assessing Effect of IT Certain Specific Reporting on
Internal Control ROMM Items Specialized
Roadmap Audit
Engagement
Professional Judgement and Professional Skepticism
Audit Evidence and Documentation
Audit Quality