An auditing is a systematic process of evaluating evidence to determine if financial statements and internal controls are fairly presented. The main parties that benefit from audits are society through more efficient capital markets, owners and boards through more reliable financial information, and management through credibility. Auditors are responsible for issuing opinions on whether financial statements and internal controls are fairly stated while management is responsible for preparing them.

1. 1
An Introduction to Auditing
Auditing and Assurance Services:
Understanding the Integrated Audit

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3. Chapter 1
3
An Introduction to Auditing
Prepared by Richard J. Campbell

4. Learning Objectives
4
1. Recognize an integrated audit and a financial statement audit
report.
2. Describe the overall purpose and value of an audit, and identify the
differences among an integrated audit, and audit of internal control,
an audit of internal control over financial reporting, and a financial
statement audit.
3. Define and contrast the responsibilities and expectations of different
parties affected by the audit.
4. Learn the roles and interaction of the governing and standard-
setting bodies and other entities that affect auditing.
5. Understand the link between independent auditors and accountants
who provide other professional services.

5. Important Basics of Auditing
5
• Financial statement audit
• Audit of ICFR
• Integrated audit
• What it means when an auditor
issues an “unqualified” or
“clean” audit report on ICFR and
the financial statements

6. An Integrated Audit
6 Exhibit 1-1

7. A Definition of Auditing
Auditing is a systematic process of
7
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.
American Accounting Association, Committee on Basic Auditing Concepts, A Statement of
Basic Auditing Concepts

8. Difference in Accountants and
Auditors
8 • To be an accountant, it is necessary to
have accounting knowledge.
– Understand business transactions
– Know what information to capture
– Know controls needed for activity and
information
– Be able to report it for various purposes
– Be able to record it according to
accounting standards
• To be an auditor, it is also it is necessary
to know audit processes and audit
reporting

9. Roles of Auditors and
Management
9
By giving an opinion on financial statement fairness and
ICFR effectiveness the auditor is indirectly reporting on
management’s assertions.

10. The Auditing Process
10 • Management produces financial statements
and ICFR report
• Auditor gathers and evaluates evidence
– Many forms of evidence; anything the auditor
uses
• Auditor uses established standards to
compare evidence to the financial
statements and ICFR report
– Looks for correspondence between what is
presented and the underlying evidence
– Uses processes described/required in auditing
standards.

11. Beneficiaries of Audits
Exhibit 1-3
11

12. Value of an Audit
• To society: capital markets benefit
12
• To owners and prospective owners: remote
ownership, complex transactions, investment
decisions
• To corporate governance, the Board of Directors
and audit committee: representing shareholders’
interests
• To management
– running the company with good information
– cost of and access to capital
– operating efficiency and effectiveness
– credibility of performance indicators
– properly accounting for complex transactions

13. Value of an Audit
13
• Constituents: society, owners and
prospective owners, corporate
governance, management
• All of these constituents need good
information. Even nonpublic companies
elect to have audits, although they are
not required to do so by any law or
regulation.

14. Other Audit Related Services
14
• Internal Auditing
• Operational Auditing
• Forensic Accounting
• General Accountability Office

15. Value of Audit Knowledge for Non-
Auditors
15
In other words, why is this course
required at most universities for all
accounting majors?
• Understand purpose of auditor’s activities
• Increase efficiency of interface with auditor
• Enhanced communication
• Implementation of ICFR

16. Appendix A- Working in a CA
Firm
16
Types of Audit Services:
– Integrated audits for larger public
companies
– Financial statement audits for non-
accelerated filer public and non-public
companies
– Reviews of interim financial statements
for public companies
– Reviews and compilations for non-
public companies

17. Other Types of CA-Provided
Services
17
–Attest engagements
–Assurance engagements
–Tax engagements
–Accounting and bookkeeping
–Business advising/management
consulting

18. CA Services, “Assurance” and
“Nonassurance”
18
Exhibit A-1 – CA Services

19. Common Firm Structures
19 • Sole proprietorship
• Professional corporation
• General partnership
• Limited liability company
• Limited liability partnership

20. Firm Sizes
20
• Big Four
• International networks; national
• Regional; large local
• Small local

21. Common Auditor Position Titles
21
• Partner/Owner
• Manager
• In Charge Accountant
• Staff Accountant