While assurance services include many areas of information, auditing refers primarily to the certification of financial statements. The most general definition of auditing comes from a committee of the American Accounting Association (AAA)_ the organization of accounting professors. The AAA Committee on Basic Auditing Concepts defined auditing as follows: "Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users". This definition contains several ideas important in a wide variety of audit practices. Auditing is a systematic …show more content…
Other auditors, however, often are not provided with explicit representations. An internal auditor maybe assigned to evaluate the cost effectiveness of the company's policy to lease rather than to purchase, heavy equipments. A governmental auditor maybe assigned to determine whether goals of providing equal educational opportunity have been achieved with federal grant funds. Oftentimes, these latter two types of auditors must develop the explicit performance criteria for …show more content…
The American Accounting Association definition is broad and general enough to encompass independent (external), internal and governmental auditing. The more specific viewpoint of external auditors in public accounting practice is reflected in a statement of the main objective of a financial statement audit by the American Institute of Certified Public Accountants (AICPA), the public accounting community's professional association: The purpose of an audit is to enhance the degree of confidence that intended users can place in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, on all material respects, in accordance with an applicable financial reporting framework. In the case of most general purpose frameworks, that opinion is on whether the financial statements are presented fairly, in all material respects, in accordance with framework. An audit conducted in accordance with generally accepted auditing standards and relevant ethical requirements enables the auditor to form that
The non-profit professional organization, American Institute of Certified Public Accountants (AICPA), was founded in the United States of America. The organization was founded in 1887, to help ensure that the accounting profession would gain the same respect as the other prestigious occupations had received from the public. The accounting profession, similar to the medical, legal, and engineering professions, is characterized by “…rigorous educational requirements [150 credit hours], high professional standards, a strict code of professional ethics, licensing status [Uniform CPA Examination], and a commitment to serving the public interest” (AICPA, 2016). These five characteristics
Rittenberg, Larry, Bradley Schwieger, and Karla Johnstone. Auditing. 6th ed. Mason: Thomas South-Western, 2005. 10-40.
The audit committee should respect the independent opinions from external auditors. Also, there should be certain amount of CPA in the Audit Committee of the Board.
Whittington, Ray & Pany, Kurt (2014). Principles of Auditing & Other Assurance Services, 19th Edition (pp. 189). McGraw-Hill.
The auditing standards explain that during the course of an audit, auditors perform a lot of different tests to uncover misstatements. The auditors look for any information in the reporting process that could possibly affect the company’s operations within the next year (AU 341.01). With the help of tests, the auditors can assess whether the company will continue to operate. Auditors are not responsible for performing tests specifically for the purpose of finding evidence regarding going concern; however, they are responsible for disclosing any evidence or information they come across during the audit. Auditors communicate all evaluations to the management and the Audit Committee at the end of the audit.
Auditing as a profession as evolved drastically over decades and as time has passed auditing activities has expanded from performing specific assurance activities for management, to assisting and advising management with their specific business activities. The Institute of Internal Auditors define internal auditing as ‘”…an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.’ (Institute of Internal Auditors, 2013) Through this definition it can be explained why auditors can be seen as the ‘eyes and ears’ of management. Concentrating specifically on the principles of Governance, the usage of Internal Auditing Standards, the Current Role of Internal Auditing in SA, reviewing current crisis, the importance of Internal Auditing to management is evident.
The. Loughran, Maire. Auditing For Dummies -. Hoboken: Wiley Publishing, 2010. Print.
Since it is the PA firm’s responsibility to conduct audits, it is a public accountant’s objective to adhere to CAS 200 whereby their objectives are to provide reasonable assurance that the financial statements are not misstated, consider the possibility of fraud or error and communicate finding in accordance with the Canadian Auditing Standards. Public Accountants are only required to provide a reasonable level of assurance when auditing financial statements. The users of the financial statements may vary. They may be shareholders, creditors or management, but the only responsibility the shareholder has, is to provide reasonable assurance that the financial statements present fairly and in accordance to a certain criteria such as GAAP.
As illustrated in ISA 200, “Objective and General Principles Governing an Audit of Financial Statements,” the objective of an audit of financial statements is to empower the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. Owing to the inherent limitations of an audit, there is a mandatory risk that some material misstatements of the financial statements will not be detected, even though the audit is properly planned and performed in accordance with
...e financial reports and statements are correct. This auditing will be conducted by auditing department of the organization, even may be done by an independent auditor who is not part of the organization, and sometimes public officials are elected. In case of unmatched consequences the organization need to give explanation on the misrepresentation of wrong statements. Auditors purpose is then to ensure that the misrepresentations are corrected, then maintain accurate, reliable financial documents and statements.
The audit risk is consists of three elements which are inherent risk, control risk and detection risk. The audit model is important to the audit process. The audit risk model provides the basic for the current emphasis on the risk-based audit approach and it assists the auditor in determining the scope of auditing procedures for a particular account balance or class of transactions. Based on the assessed risk, the auditor may determine whether the use of more tests of control or substantive procedures is appropriate to address the
In 1887, the American Association of Public Accountants was formed with the first standardized tests coming out about a decade later (Zeff, 2003, pg. 2). In 1896, New York State passed the first law for Certified Public Accountants (CPA), which Zeff (2003) “marked the beginning of an accredited profession of accounting in the United States” (pg 2). In Canada, the first association began in 1902 with the Dominion Association of Chartered Accountants (Buckstein, part 1 pg 2). Buckstein quoted John L. Carey, the author of a paper outlining the history of the accounting profession worldwide stated “the reason for creating a full-fledged professional organization was to distinguish skilled accountants of integrity from self-styled accountants whose competence had not been demonstrated” (pg. 2) As Zeff (2003) stated with the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934 all publicly traded companies were now required to have their financials audited by independent CPA’s (pg. 4). This showcased the importance of having skilled and knowledgeable individuals produce verifiable and accurate information that the public (in all its forms) could rely upon. The combination of having professional accounting bodies and government legislations have attempted to establish
The fundamental duty of an external financial auditor is to form and express an opinion on whether the reporting entity’s financial statements are prepared in accordance with the relevant financial reporting framework. In discharging this duty, the auditor must exercise “reasonable skill, care and caution” (Lopes, J. in Kingston Cotton Mill Co 1896) as reflected in current legal and professional requirements.
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.
No matter auditors work with technology or not, the most important thing in process of auditing is evidence. The basic framework for the auditor understands of evidence and its use to support the auditor's opinion on the financial statement. In reaching an opinion on the financial statements, the evidence gathered from the audit procedure is used to determine the fairness of the financial statements and the type of audit report to be issued. The characters of paper audit evidence are: