2. Facilitator :
Degu Desta Teshale
ISO, QA & QC Consultant
plus Trainer
Drdegudesta@gmail.com
+251(0)942129279- telegram
3. OBJECTIVES OF AUDITING SEMINAR?
How do we objectively evaluate an internal audit program?
What are the steps needed to evolve an internal audit program?
provide useful information about auditing
What is the environment needed for this growth to occur?
Who is the auditor of the 21st century?
to create awareness
slightly notify the purposes of auditing
4. OUTLINE OF REVIEWING
The criteria that the auditors will use to check the
financial statement are the accounting standards;
A team of auditors (qualified auditors) from outside
the company will come to check whether the FS
are “true and fair”
5. The Pillars of Auditing
An audit program can be thought of as a platform that rests on the three
pillars of:
•Compliance
•Improvement
•Risk Management
6. Risk Management
How do auditors help manage risk?
1.Audit frequency
2.Sample size
3.Complexity of audit plan
4.Containment
5.Corrective action plans
6.Effectiveness verification
7.Special training
7. • An examination of FS, records, activities by an independent person
for a specified purpose;
• Purpose is to evaluate the fairness of FS;
• Audit implies a written report about the accuracy & reliability of
accounts, FS…
Outline of Reviewing
8. AUDITING?
• Auditing is the on-site verification activity
• to ensure compliance to requirements
• an audit is a “systematic, independent and
documented process for obtaining audit evidence,
• Detecting frauds & errors;
9. AUDITING?
Is a systematic independent examinations
of data, FS, records, operations,
documents, performance of..
Dynamic ongoing activity w/c is not a one
time check;
Is a branch of accounting that involves an
objective examination of accounting info;
GAAP IFRS
10. AUDIT SCOPE
Extent and boundaries of audit
Location Covered
Organizational under
Units, depts , auditing
process
Activities, Processes
11. Terms & defn’s
Auditor
Assessor
Inspector
Evaluator
Solicite
Risk
Withstand
Monitoring and mentoring
Observer
Non conformity
Conformity
major NC
minor NC Findings
Observations
12. Terms & defn’s
Document?
Record?
Competence?
Compliance?
Income, Revenue, Profit, Gain
Expense, Cost, Expenditure, Loss
Quality?
Accounting vs Accountant?
13. Terms & Defn’s
Scope vs Entire /specific tasks/
Auditors Audire to
hear
Policies, procedure… internal control
Opinion
Systematic:- means auditing is an
objective & logical process based on
scientific approach to dec. making / like.
Reasonable conclusion, sufficient evidence,
unbiased
14. TERMINOLOGY
AUDITOR - Person with the
demonstrated personal attributes and
competence to conduct an audit
AUDITEE – Organization being
audited
AUDIT CLIENT - Organization or
person requesting an audit
15. Terms & defn’s
Input, being financial information
Process, examination mainly appointment ..
audit strategy….detailed audit plan…..completion ….
Audit report
Output , report containing an auditor’s opinion
Audit standards:- to give auditors guidance &
rules as to how they should perform their audit
work ( international standards on Auditing ISAS,
international audit & assurance standards Board
IAASB, International Federation of accountants
IFAC
17. AUDIT CRITERIA
SET OF POLICIES, PROCEDURES OR
REQUIREMENTS USED AS A REFERENCE
AGAINST WHICH COLLECTED AUDIT EVIDENCE IS
COMPARED
18. AUDIT EVIDENCE
RECORDS, VERIFIED STATEMENTS OF FACTS
OR OTHER INFORMATION WHICH ARE RELEVANT
TO THE AUDIT CRITERIA ARE VERIFIABLE
19. AUDITING VS. ACCOUNTING
Auditing Accounting
Its objective is to certify the
correctness and justification of the
FS prepared by the accountant
Its objective is to ascertain the
trading results of a business
concern during a financial year
Analytical in nature & essentially
retrospective
Primarily constructive and
concerned with current recording of
business facts
Refers to the preparation of final
accounts & its interpretation
Refers to examination & checking
of these accounting records
is generally done at the end of
financial year
work is undertaken through out
the year
determining whether recorded
information properly reflects the
economic events of the entity
process of recording,
classifying, summarizing,
communicating financial
activities of an entity
20. Auditor vs Accountant
Both must understanding principles & rules of IFRS;
Auditors must have knowledge & expertise in the collection
and interpretation of audit evidence;
Auditors determining
proper audit procedures
Sample size
Items to examine unique expertize
Timing of tests
Evaluating the results
Auditor can also work as an accountant, since she/he knows
the recording principles & rules, but
An accountant cannot act as an auditor……….to become an
auditor an accountant has to get additional training &
certificate of competence
21. AUDITOR VS ACCOUNTANT
Auditor Accountant
Is required to submit the report to
the proprietor after the completion
of his audit work
Not required to submit a report to
the proprietor of the concern when
the accounting work is over
Not a permanent employee of the
concern, H/she may changed from
year to year
Is a permanent employee of the
business concern
Must have knowledge of principles
of accountancy otherwise he
cannot perform his job satisfactorily
Need not to be expert in the work
of auditing
Auditors must be a chartered
accountant
Need not be a chartered
accountant
22. PRINCIPLES OF AUDITING
1 Integrity
2Fair presentation RELATED TO THE AUDITOR
3Due professional care
4Confidentiality
5 Independence RELATED TO THE AUDIT
PROCESS
6. Evidence based
approach
23. Phases of an audit
1. Audit preparation: done in advance by
interested parties, such as the auditor, the
lead auditor, the client, and the audit program
manager
2. Audit performance: often called
the fieldwork
data-gathering portion
meeting with the auditee
on-site audit management
understanding the process and system
3. Audit reporting
addressing important organizational issues
24. Personal Behaviour
*ethical - fair, truthful, sincere & honest
*perceptive- aware of & able to understand the situations
*tenacious- focus on achieving objectives
*decisive- able to reach timely conclusions based on logical
reasoning and analysis
*self reliant- able to act and function independently
*communication- good communication skill
*open-minded- willing to consider alternative ideas
25. Professional Ethics of Auditor
Independence
Integrity
Objectivity also called auditing ethical standards
Confidentiality
29. Poor Qualities of Auditor
NEGATIVE CHARACTERISTICS
POOR AT PREPARATION & PLANNING
TOO RIGID
JUMPS TO CONCLUSIONS
ARGUMENTATIVE
BAD COMMUNICATOR
OPINIONATED
EASILY INFLUENCED
STAYS IN OFFICE
POOR TIMEKEEPING
AFRAID OF PASSING UNPOPULAR JUDGEMENTS
31. ADVANTAGE /PURPOSES/ OF AUDITS
• Why audit is needed?
• to verify compliance, conformance, or performance
• Increases credibility of financial info;
• Government acceptance
• Update accounts
• Facilitate taxation
• Enhances efficient utilization of resources;
• Preventing misuse of resources; called reducing errors
& frauds
• Provides confidence to both mgt and employees;
• Provides opportunity for improvement;
• Gaining information in an independent & unbiased way
33. Financial statement audit
covers the balance sheet & the related statement of income,
retained earnings, cash flows
To determine whether the prepared statements have been
in conformity with GAAP
Normally performed by authorized auditors
managements
Investors
Bankers users of FS audit
Creditors
Financial analysts
Government agencies …..
34. Operational audit
Is study of some specific unit of an org for the
purpose of measuring its performance
b/c to identify opportunities for improvement
To suggest recommendations for further action
35. Compliance audit
to determine whether the org being audited ff
procedures, regulations, policies,
Example, audit of income tax return …… by internal
revenue authority
36. Objective of FS Audit
To evaluate whether financial
statements fairly present the
true picture of the org,
Supporting evidence to
ascertain whether the
statements fairly show the
activities of the entity under
audit
37. Types of Auditors
• .also called CPA, certified public accountant
• Has no connection to the org being audited
• Conduct the audit on a fee basis
• Primarily responsible to third parties creditors and shareholders
• The type of audit is FS audit
External or
independent A.
• Employees of the co. they audit
• involved in an independent appraisal activity
• Its objectives ………. Recommending operating improvements
• ………..ascertaining the reliability of mgt data
• …………. ascertaining the extent of compliance
Internal A.
• responsible for conducting FS audit, operational Audit, compliance audit
• Auditors audit the returns of the tax payers for compliance with applicable tax
laws and regulations
• Known as tax auditors
Government A.
38. Users of the audited
financial Report
• Government agencies;
• Owners;
• Managers;
• To management;
• Employees
• Creditors
• Potential investors
39. *
*An independent auditor plans, conducts, and reports the results of
an audit in accordance with generally accepted auditing standards
*Auditing standards provide a measure of audit quality and the
objectives to be achieved in an audit.
40. *
General Standards
1. The auditor must have adequate technical training
and proficiency to perform the audit.
2. The auditor must maintain independence in mental
attitude in all matters relating to the audit.
3. The auditor must exercise due professional care in
the performance of the audit and the preparation of
the report.
41. *
Standards of Field Work
1. The auditor must adequately plan the work and
must properly supervise any assistants.
2. The auditor must obtain a sufficient
understanding of the entity and its environment,
3. The auditor must obtain sufficient appropriate
audit evidence by performing audit procedures to
afford a reasonable basis
42. *
•ARE WE DOING THINGS RIGHT ?
•ARE WE DOING THE RIGHT THINGS ?
•Discuss the types of Audit and Auditors and their roles
•What is the term competence, quality audit, compliance, conformity
for you?
43. Visit us: ETHIO INTERNATIONAL QUALITY CENTER via
tellegrum
0980630079;;; Drdegudesta@gmail.com
F o r y o u r a t t e n t i o n!
