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CH1 - Audit An Overview
CH1 - Audit An Overview
Overview
Auditing
A systematic process of objectively obtaining
and evaluating evidence regarding assertions
about economic actions and events to
ascertain the degree of correspondence
between these assertions and established
criteria and communicating the results to
interested users.
Audit
1. systematic process
2. objective
3. obtaining and evaluating evidence regarding
assertions about economic actions and events
4. ascertain the degree of correspondence
between these assertions and established
criteria
5. communicating the results to interested users.
Financial Statement Assertions
Assertions made by management
Existence
Completeness
Rights and obligations
Valuation
Presentation and disclosure
Relatedevidence is obtained for accounts and
disclosure in financial statements
MANAGEMENT’S FINANCIAL
STATEMENT ASSERTIONS
Existence or Occurrence
• Refers to existence of assets and liabilities
• Refers to occurrence of recorded transactions
Completeness
• Refers to inclusion of all transactions and accounts in financial statements
Valuation or Allocation
• Refers to inclusion of accounts in financial statements at appropriate amounts
I - Internal Control
E - Evidence gathering
R - Report
Types of Audits
Financialstatement audit – to determine if FS
are presented fairly in accordance with
accounting standards.
Expertise
Remoteness
Financial consequences
Theoretical framework of auditing
Audit function operates on the assumption
that all financial data are verifiable
The auditor should always maintain
independence with respect to the FS under
audit.
There should be no long-term conflict
between the auditor and client management
Theoretical framework of auditing
Effective internal control system reduces the
possibility of errors and fraud affecting the FS
Consistent application of GAAP or PFRS
results in fair presentation of FS
What was held true in the past will continue to
hold true in the future in the absence of
known conditions to the contrary
An audit benefits the public