Chapter 2

The Financial Statement Auditing Environment

Part 1: The different types of auditors and the various types of audit, attest, and
assurance services.

Part 2: The public accounting firms and the composition of audit teams.

Part 3: A model of business.

Part 4: The major organizations that affect the public accounting profession’s

environment.

Part 5: The auditing standards.

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Part 2: The public accounting firms and the composition of audit teams.

I. The public accounting firm

II. The audit team:

1.Partner

2.Manager

3.Senior/In-Charge

4.Associate/Stuff
Selected Duties of Audit Team Members : 1-Partner

•Reach agreement with the auditee on the scope of the service to be

provided.
•Ensure that the audit is properly planned and that the audit is
conducted in accordance with applicable auditing standards.
•Assemble an audit team that has the required skills and experience.
•Supervise the audit team and review the working papers.
•Conclude on the adequacy of audit evidence and sign the audit
report.
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Selected Duties of Audit Team Members : 2-Manager

•Ensure that the audit is properly planned, including scheduling of

team members.
•Supervise the preparation of and approve the audit program.
•Review the working papers, financial statements, and audit report.
•Deal with invoicing and ensure collection of payment for
services.
•Inform the partner about any auditing or accounting problems
encountered.
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Selected Duties of Audit Team Members : 3-Senior/In-Charge

•Assist in the development of the audit plan.

•Prepare budgets.
•Assign tasks to associates and direct the day-to-day performance
of the audit.
•Supervise and review the work of associates.
•Inform the manager about any auditing or accounting problems
encountered.
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Selected Duties of Audit Team Members : 4-Associate/Staff

•Perform the audit procedures assigned to them.

•Prepare adequate and appropriate documentation of
completed work.
•Inform the senior about any auditing or accounting
problems encountered.
 Chapter 2
The Financial Statement Auditing Environment

Part 1: The different types of auditors and the various types of audit, attest, and
assurance services.

Part 2: The public accounting firms and the composition of audit teams.

Part 3: A model of business.

Part 4: The major organizations that affect the public accounting profession’s

environment.

Part 5: The auditing standards.

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Part 3: A model of business.

I. The general model

II. Corporate governance

III. A model of five components

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I. The general model

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II. Corporate Governance

Due to the way resources are invested and managed in the modern

business world, a system of corporate governance is necessary,

1)managers are overseen and supervised
2) consists of all the people, processes, and activities in place to help
ensure proper stewardship over an entity’s assets.
3)Strong corporate governance ensures an entity properly utilize their time,
talents, and resources
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II. Objectives and Strategies

The management with guidance and direction from the board of

directors set the objectives, along with strategies designed to achieve

those objectives.

• The organization must also assess and manage risks that may threaten

the achievement of its objectives.

• It designs and implements a system of internal control to ensure that the

transactions are handled and recorded appropriately and that its

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II. A model of five components

1. The Financing Process

• Obtaining capital through borrowing or soliciting investments from
owners.
• Investment in assets such as land, buildings, and equipment.
• Repaying lenders and provide a return on owners’ investments.

2. The Purchasing Process

• Acquiring goods and services to support their operations.
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3. The Human Resource Management Process

• Hiring personnel to perform various functions in accordance with the
enterprise’s mission and strategy:
• Hiring, training, evaluating, compensating(Payroll), terminating,
and promoting employees.
4. The Inventory Management Process
• Accumulating and allocating costs to inventory and making
adjustments to record inventory at the lower of cost or market.
• Service providers (such as auditors, lawyers, or advertising agencies)
rarely have significant inventories to manage.
5. The Revenue Process
• Sales of goods or services to customers.