Samenvatting
Summary Auditing assertions and process
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Easy to understand summaries with quoted paragraphs from the act
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Voorbeeld van de inhoud
Auditing processes and assertionsBackground to the audit function
(SO 1)
Auditor ensures evidence for all transaction,
then tests against assertions
Tests accuracy, cut off, completeness,
occurrence, classification and presentation-
assertions
Ensures it complies with a certain framework
Determines overall fairness of financial
statements
Expectation gap- not 100% assurance, only
reasonable assurance; material aspects
Definitions
Accounting - A systematic, analytical process,
according to which financial data is gathered,
sorted, processed, summarised and evaluated, producing financial information for users.
Auditing - A systematic process according to which the auditor examines information to determine that the basic
assertions conform to the prescribed criteria. Based on his examination and the evidence collected he expresses an
opinion to the relevant parties.
Assurance - Assurance means an engagement in which the 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.
Interdependence
- Accounting: financial information is produced;
- Auditing: financial information is examined;
- Assurance: strengthens the creditability and reliability of financial information produced by accounting.
Auditing postulates
Postulate – to assume or claim as true, existent or necessary
Truth and fairness
Financial data is verifiable
No collusion took place or other irregularities
Consistent application of accounting standards
The past is an indicator of the future unless clear evidence to the contrary.
Independence
Auditor does not have a COI with management
Fundamental principles are enacted
The auditor is not an employee of the client
Agency theory
Owner or principle appoint agent to act on their behalf shareholders are “principals” who appoint “agents”(directors),
to manage the company.
directors in particular are keen to give account of their actions, in order to retain their positions and to ensure that
their remuneration is not decreased.
It is within this context that the directorate is in need of a monitoring function that will enable them to give an
acceptable account of their stewardship, auditors perform this particular function.
, Types of auditors
o External auditor – not an employee of the audited entity
o Internal auditor – employee of the audited entity
o Government auditor – issue reports to the government
o Forensic auditor – investigates fraud then issue report based on findings
Role of IFAC
Contributes to development of strong and sustainable organisations, markets and economies.
Advocates transparency, accountability and comparability of FR
Helps develop the accountancy profession
Communicates importance and value of accountants in the global financial infrastructure
Auditing and financial reporting requirements of the company (SO 2)
* Know everything- in Sections of Companies Act
Section 8- categories of companies
Profit companies
State owned
Private- limits offer of securities, restricts transferability of securities
Personal liabilities-members personally liable (MOI states this), like audit firm (meets criteria of private company as
well)
All others are public companies
Non-profit companies
Schedule 1- must have a public benefit object
Section 29- financial statement responsibilities
1. Satisfy reporting standards
2. Fairly present state of affairs; and explain transactions; financial position
3. Show: Assets, liabilities, equity, income & expenses
4. Set out Date: Published and to which period applies
5. Indicate prominently on first page of statements: Audit, independent review, or neither; and the name of person
responsible for preparation of statements
6. Summary of financial info (must state that it is a summary, who prepared it and whether it has been audited)
* Person is guilty of an offence if involved with the statements/summary, knowing that it does not adhere to the above
******Section 30- annual financial statements
Publish financial statements within 6 months after financial year end
Public company + state-owned – Audited
Any other company – audit if required by regulation
-or voluntarily if stated in MOI
public company - independent review performed
If every shareholder is a director- does not need to be audited or independently reviewed
Financial statements must include:
- Auditor’s report (if audited)
- Director’s report – state of affairs, and any material matter to the shareholders
- Approved by board (signed by authorised director)
- Presented to shareholders at first meeting after approval (AGM)
Audited statements disclosure regarding directors
Remuneration of each director, pensions, amount of loss of office, securities held, and details of service contracts etc.
Review v Audit: R26, R28 and R29
Companies regulations- 2011, additions to the Act, extension to the act- Do not refer to sections, rather to regulations,
as section refers to the Act
Calculation of PIS- R26 (2)
Only full points awarded
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