Notes from all courses given concerning the Advanced Auditing course. Several examples are also included in the notes. These examples help to understand the theory, but can also be used as exam questions. The notes have helped me to understand the theory and pass the exam.
Summary Accounting Information Systems - Book Knechel & 24 papers
Summary accounting information systems (AIS) - book: auditing assurance and risk by Knecel & Salterio
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Tilburg University (UVT)
Accountancy
Advanced Auditing (324054M6)
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Advanced Auditing
Lecture 1 – Audit demand
Give a keyword that describes an auditor
- Independent
- Evidence
- Risk
- Materiality
- Regulation → highly regulated industry
Audit
Why – what – how
- WHY: improve information quality → historical information but also future
information (50%/50% in FS), but it also must have some sort of quantifiable
statement
o Key issues: assessments about future are hard to make
- WHAT: obtain sufficient and appropriate evidence
- HOW: regulated context → independent professional, professional standards
(ISAs/ISAEs/ISREs/ISRSs) and ethical standards
Assurance (why?/what?)
The AICPA definition:
Independent professional services that improve the quality of information for users.
The IFAC definition:
An engagement in which a practitioner aims to obtain 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 subject matter information.
If you audit a company, what do you want to know?
- What the users of the FS are → overview of intended users
What is an audit?
Opinion by an independent auditor on whether financial statements are in all material
aspects present fairly in accordance with GAAP
- GAAP: IFRS, RJ (Raad voor de Jaarverslaggeving), USGAAP, DAS (ESG: CSRD/EFRAG)
- GAAS: General Accepted Auditing Standards
Regulated context (GAAP)
Financial reporting
- Public firms: IFRS
- Private firms and non-for-profit: RJ
ESG Reporting
- Public and large private firms: EFRAG
- Other firms: ISSB, SDG
,Regulated context GAAS (how?)
ISAs (COS) – financial statements
- Dutch standards follow the same rules
- 200 – 299 General
principles and responsibilities
- 300 – 499 Risk assessment
and response to risk
- 500 – 599 Audit evidence
- 600 – 699 Using the work
of others
- 700 – 799 Audit
conclusions and reporting
- 800 – 899 Specialized
Areas
,Auditor reporting
Financial statements
- Positive statements → full and fair view
ESG reports
- Review report
In which dimension do you think differs an audit from a review?
- Evidence → big difference between audit and review
- For audit you need more evidence → that statement is positive
- You need sufficient and appropriate evidence to make an assumption
Audit regulation in The Netherlands
Individual auditors
- Audit alert and practice statements
- NVCOS
- ViO
- Code of ethics
- WAB
Audit firms
- NVKS
- VAO
- BTA
- WTA → Wet Toezicht Accountantsorganisatie
- WAB
Audit demand
Economics of audit demand
Demand by outside intervention
- NOW → need to be audited
- Based on regulation → exogenous
, Exogenous audit demand
- Decrease → smaller companies
- Increase → NOW, need to be audited (for certain size)
CSRD
- Review
Economics of audit demand
Demand by within the economy
- Voluntary audit
Endogenous audit demand
- Agency relation: Transfer of decision-making power
- Agency theory: Conflicts of interests ... due to differences in incentives and
information asymmetry
- Moral Hazard: agent actions not observed yet incentivized (work hard / shirk)
- Adverse selection: principle cannot observe the quality of the firm (lemon)
Endogenous?
- Endogenous: Independent audit reduces incentive problems of the manager and
should exist in earliest firms [JM1976]
- Exogenous: Audit textbooks: recent product of government intervention (e.g.,
created by securities acts) → intervention or codified
- Audit/auditing started as endogenous choice
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