Audit Evidence is one of the International Standards on Auditing. -It serves to expect the auditor to obtain audit evidence from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
Session 1 Module 2INTRODUCTION TO AUDITING .docxklinda1
Session 1 Module 2
INTRODUCTION TO AUDITING
1
LEARNING OBJECTIVES
After this module you should be able to:
Define auditing
Differentiate between different levels of assurance
Appreciate different audit opinions (covered in depth in session11)
Differentiate between the different role of the preparer of financial statements and the auditor.
Explain the reasons for the demand for audit and assurance services
Appreciate the Corporations Act requirements for company audits
Explain the audit expectation gap.
These are the objectives that students are expected to understand and be able to explain and apply.
Students will only be assessed within the learning objectives provided for each module of the course.
2
AUDITING AND ASSURANCE DEFINED
An audit is an assurance engagement defined as ‘an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.’
This is a definition of an audit highlighting the main parties involved and their roles
3
1-4
Diagram of assurance engagement
4
*Comment on : main parties and their roles
Jaq (J) - add figure 1-1
1-5
Five elements ofassurance
engagement
Three-party relationships:
assurance practitioner (auditor)
responsible party (preparer)
intended user
Subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
Audit engagement has 5 elements
These are explained on following slides
5
AUDITING AND ASSURANCE DEFINED
‘intended users’ - the people for whom the auditor prepares their report.
Example: shareholders, creditors, employees
‘responsible party’ - the person or organisation responsible for preparing the financial statements. Example: company management
‘subject matter’ – that which the auditor is expressing a conclusion on. i.e. financial reports
‘criteria’ – the rules or principles by which the subject matter is being evaluated. i.e. Accounting standards and interpretations and Corporations laws
Comment on explanations of terms
6
AUDITING AND ASSURANCE DEFINED cont’d.
Sufficient appropriate evidence
The quantity and quality of evidence the auditor requires in order to express a conclusion on the subject matter
*Written assurance report
Written report from the auditor expressing the auditor’s conclusion on the subject matter
Comment on explanations of terms
7
DIFFERENT LEVELS OF ASSURANCE
AUDITORS MAY PROVIDE VARYING LEVELS OF ASSURANCE WHEN CONDUCTING ASSURANCE ENGAGEMENTS.
Reasonable assurance
Limited assurance
No assurance
There are 3 levels of assurance which are described on next slide
8
DIFFERENT LEVELS OF ASSURANCELEVEL OF ASSURANCE
EXAMPLE
THE ASSURANCE EXPRESSIONREASONABLE
Highest level of assurance but not absolute assurance on the reliability of the subject matterFinancial Statement AuditThe auditor has conducted sufficient tests and.
Audit Evidence is one of the International Standards on Auditing. -It serves to expect the auditor to obtain audit evidence from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
Session 1 Module 2INTRODUCTION TO AUDITING .docxklinda1
Session 1 Module 2
INTRODUCTION TO AUDITING
1
LEARNING OBJECTIVES
After this module you should be able to:
Define auditing
Differentiate between different levels of assurance
Appreciate different audit opinions (covered in depth in session11)
Differentiate between the different role of the preparer of financial statements and the auditor.
Explain the reasons for the demand for audit and assurance services
Appreciate the Corporations Act requirements for company audits
Explain the audit expectation gap.
These are the objectives that students are expected to understand and be able to explain and apply.
Students will only be assessed within the learning objectives provided for each module of the course.
2
AUDITING AND ASSURANCE DEFINED
An audit is an assurance engagement defined as ‘an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.’
This is a definition of an audit highlighting the main parties involved and their roles
3
1-4
Diagram of assurance engagement
4
*Comment on : main parties and their roles
Jaq (J) - add figure 1-1
1-5
Five elements ofassurance
engagement
Three-party relationships:
assurance practitioner (auditor)
responsible party (preparer)
intended user
Subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
Audit engagement has 5 elements
These are explained on following slides
5
AUDITING AND ASSURANCE DEFINED
‘intended users’ - the people for whom the auditor prepares their report.
Example: shareholders, creditors, employees
‘responsible party’ - the person or organisation responsible for preparing the financial statements. Example: company management
‘subject matter’ – that which the auditor is expressing a conclusion on. i.e. financial reports
‘criteria’ – the rules or principles by which the subject matter is being evaluated. i.e. Accounting standards and interpretations and Corporations laws
Comment on explanations of terms
6
AUDITING AND ASSURANCE DEFINED cont’d.
Sufficient appropriate evidence
The quantity and quality of evidence the auditor requires in order to express a conclusion on the subject matter
*Written assurance report
Written report from the auditor expressing the auditor’s conclusion on the subject matter
Comment on explanations of terms
7
DIFFERENT LEVELS OF ASSURANCE
AUDITORS MAY PROVIDE VARYING LEVELS OF ASSURANCE WHEN CONDUCTING ASSURANCE ENGAGEMENTS.
Reasonable assurance
Limited assurance
No assurance
There are 3 levels of assurance which are described on next slide
8
DIFFERENT LEVELS OF ASSURANCELEVEL OF ASSURANCE
EXAMPLE
THE ASSURANCE EXPRESSIONREASONABLE
Highest level of assurance but not absolute assurance on the reliability of the subject matterFinancial Statement AuditThe auditor has conducted sufficient tests and.
INTERNATIONAL STANDARD ON AUDITING 200 (REVISED)
OVERALL OBJECTIVES OF THE INDEPENDENT AUDITOR AND THE
CONDUCT OF AN AUDIT IN ACCORDANCE WITH INTERNATIONAL
STANDARDS ON AUDITING
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
for Anti-inflammatory, Antiulcer, Anticancer, Wound healing, Antidiabetic, Hepatoprotective, Cardio protective, Diuretics and
Antifertility, Toxicity studies as per OECD guidelines
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
4. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence in
order to express a conclusion designed to
enhance the degree of confidence of the
intended users other than the responsible
party about the outcome of the
evaluation or measurement of a subject
matter against criteria
5. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence in
order to express a conclusion designed to
enhance the degree of confidence of the
intended users other than the responsible
party about the outcome of the
evaluation or measurement of a subject
matter against criteria
6. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion designed
to enhance the degree of confidence of
the intended users other than the
responsible party about the outcome of
the evaluation or measurement of a
subject matter against criteria
7. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
outcome of the evaluation or
measurement of a subject matter against
criteria
8. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
outcome of the evaluation or
measurement of a subject matter against
criteria
9. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
outcome of the evaluation or
measurement of a subject matter against
criteria
10. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
outcome of the evaluation or
measurement of a subject matter against
criteria
11. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express a conclusion
designed to enhance the degree of
confidence of the intended users other
than the responsible party about the
outcome of the evaluation or
measurement of a subject matter against
criteria
12. ELEMENTS OF ASSURANCE ENGAGEMENT
Three Party Involvement
Appropriate Subject Matter
Suitable Criteria
Sufficient Appropriate Evidence
Written Assurance Report in an
Appropriate Form
14. REASONABLE ASSURANCE
Gathers sufficient appropriate evidence to be
able to draw reasonable conclusions
Concludes that the subject matter conforms in
all material respects with identified suitable
criteria
Gives a positively worded assurance opinion
Gives a High Level of assurance(confidence)
Performs very thorough procedures
15. EXAMPLES-REASONABLE ASSURANCE
In our opinion internal control is effective, in all
material respects, based on ABC criteria
The accounts show a true and fair view.
The cash flow forecast is correct
The appointment of the employee is fair
16. LIMITED ASSURANCE
Gathers sufficient appropriate evidence to be
able to draw limited conclusions
Concludes that the subject matter with respect to
identified suitable criteria, is plausible in the
circumstances
Gives a negatively worded assurance opinion
Gives a moderate or lower level of
assurance(confidence)
Performs significantly fewer procedures.
17. EXAMPLES-LIMITED ASSURANCE
Based on our work described in the report,
nothing has come to our attention that causes us
to believe that internal control is not effective, in
all material respects, based on ABC criteria
We have discovered nothing wrong with the
accounts
The basis of the forecast is not unreasonable
There is no evidence of discrimination in the
appointment
18. EXTERNAL AUDIT ENGAGEMENT
(REASONABLE ASSURANCE)
Purpose- To enhance the degree of confidence of
intended users in financial statements (ISA 200 Overall
Objectives of the Independent Auditor and the Conduct of
Audit in accordance with ISAs)
Opinion- Financial Statements show true and fair view &
Financial statements are prepared, in all material
respects , in accordance with an applicable financial
reporting framework.
True- Factually correct information
Fair- Clear, Impartial and Unbiased information
19. OBJECTIVES OF AUDITOR
Obtain reasonable assurance about whether the
financial statements as a whole are free from
material misstatement, whether due to fraud or
error
Express an opinion on whether the financial
statements are prepared, in all material respects, in
accordance with an applicable financial reporting
framework
Report on the financial statements and communicate
as required by ISAs, in accordance with the auditor’s
findings
21. NEED FOR EXTERNAL AUDIT
Shareholders-Provide Finance and May not
be Involved in Day to Day Management
Directors-Manages company on behalf of
shareholders, must prepare financial
statements and may have various reasons
to manipulate the financial statements and
show different level of performance
Need for An Independent Review
22. BENEFITS OF EXTERNAL AUDIT
Higher quality information
Independent scrutiny and verification
Reduced Risk of management bias,
fraud and error
Enhanced credibility of FS
Deficiencies in the Internal Control
System highlighted
24. EXPECTATION GAP
A belief that auditors test all
transactions and events
A belief that auditors are required to
detect all fraud
A belief that auditor are responsible
for preparing the financial statements
25. LIMITATIONS OF AN AUDIT
Inclusion of subjective estimates and judgements
in Financial statements
Reliance on Internal Control Systems which have
their own inherent limitations
Reliance on Management Representations as only
source of evidence in some areas
Persuasive Evidence rather than Conclusive
Evidence
Sampling
26. REVIEW ENGAGEMENT
A Review Engagement
Voluntary
Analytical Procedures
Make Enquiries
Negative Assurance Report
30. KEY DEFINITIONS
Accountability
• People in position of power can be held to account for their actions
Stewardship
• Responsibility to take good care of resources
Fiduciary
relationship
• Relationship of good faith , duty of care towards someone
