Summary that includes the chapters of the book that are covered in the Auditing course, as well as the articles covered in this course. Also usefull as background knowledge for the course 'Advanced Auditing' in the master.
Week 1: Chapter 1, 2 and 4, Artice RRhnke + Sihmidt
Chapter 1: Internatinac aRditnn iverview
Audit opinion: independent and expert ipiniin in the fairness if the repirts.
The fRnitin if aRditnn is ti cend iredibicit ti the fnaniiac statements.
The ibjeitve if the IAASB (internatinac aRditnn and assRranie standards biard is ti imprive the
denree if Rnifirmit if aRditnn praities and recated serviies thriRnhiRt the wircd.
Definition of uuditin: an aRdit is a s stemati priiess if ibjeitvec ibtaininn and evacRatnn evidenie
renardinn assertins abiRt eiinimii aitins and events ti asiertain the denree if iirrespindenie
between these assertins and estabcished iriteria, and iimmRniiatnn the resRcts ti interested Rsers.
The aRditir has ti perfirm the aRdit with prof essionul sceptiss reiinnisinn that iiriRmstanies ma
exist that iaRse the fnaniiac statements ti be suteriully sisstuted. The aRditir has ti exeriise
prof essionul judesent in pcanninn and perfirminn the aRdit and he mRst ibtain sufficient uppropriute
uudit evidence ti redRie aRdit risk ti an aiieptabc ciw cevec.
T pes if aRdits:
- ARdits if fnaniiac statements: examine fnaniiac statements ti determine if the are trRe.
- Operatinac aRdits: a stRd if a speiifi Rnit if an irnanisatin ti measRre its perfirmanie.
- Cimpcianie aRdit: a review if an irnanizatinns priiedRres ti iheik if the ficciw the
priiedRres set b an hinher aRthirit .
T pes if aRditirs:
- Internac aRditirs
- Externac aRditirs
The aRditir wicc defne aRdit ibjeitves fir the existenie if saces, iimpceteness if expenses,
presentatin and disicisRre and vacRatin and rinhts and ibcinatins if inventir .
Munuesent ussertions: are impcied ir expressed representatins b mananement abiRt icasses if
transaitins and recated aiiiRnts in fnaniiac statements. ARdit priiedRres are desinned ti ibtain
evidenie abiRt these.
T pes if assertins:
- Assertins abiRt icasses if transaitins and events fir the periid Rnder aRdit:
Occurrence: events that are reiirded have iiiRrred and pertain ti the entt
Cospleteness: ever thinn that has ti be reiirded, is reiirded
Accurucy: data are reiirded appripriatec
Cut-off: events have been reiirded in the iirreit aiiiRntnn periid
Clussificution: transaitins and events have been reiirded in priper aiiiRnts
- Assertins abiRt aiiiRnt bacanies at the periid end
Existence: assets, ciabicites, and eqRit interest exist
Rihts und obliutions: the entt hicds ir iintrics the rinhts ti assets, and ciabicites are
the ibcinatins if the entt
, Cospleteness: ever thinn that has ti be reiirded, is reiirded
Vuluution und ullocution: assets, ciabicites, and eqRit interests are inicRded in the
fnaniiac statements at appripriate amiRnts and an resRctnn vacRatin ir acciiatin
adjRstments are appripriatec reiirded.
- Assertins abiRt presentatin and disicisRre
Occurrence und rihts und obliutions
Cospleteness
Clussificution und understundubility: fnaniiac infirmatin is appripriatec presented
and desiribed, and disicisRres are icearc expressed.
Accurucy und vuluution
Audit process sodel: fiRr phases.
1. Ccient aiieptanie
Objeitve: determine bith aiieptanie if a icient and aiieptanie b a icient.
PriiedRres: - EvacRate the icientns baiknriRnd and reasins fir the aRdit
- Determine whether the aRditir is abce ti meet the ethiiac reqRirements
renardinn the icient
- Determine need fir ither prifessiinacs
- CimmRniiate with predeiessir aRditir
- Prepare icient pripisac
- Seceit staf ti perfirm the aRdit
- Obtain an ennanement ceter
2. Pcanninn and desinn if an aRdit appriaih
Objeitve: determine the amiRnt and t pe if evidenie and review reqRired ti nive the aRditir
assRranie that there is ni materiac misstatement if the fnaniiac statements.
PriiedRres: - Perfirm aRdit priiedRres ti Rnderstand the entt and its envirinment,
inicRdinn the entt ns internac iintrics
- Assess the risks if materiac misstatements if the fnaniiac statements
- Determine materiacit
- Prepare the pcanninn memirandRm and aRdit prinramme, iintaininn the
aRditirns respinse ti the identfed risks
3. Testnn and evidenie
Objeitve: test fir evidenie sRppirtnn internac iintrics and the fairness if the fnaniiac
statements
PriiedRres: - Tests if iintrics
- SRbstantve tests if transaitins
- Anac tiac priiedRres
- Tests if detaics if bacanies
- Searih fir Rnreiirded ciabicites
4. EvacRatin and repirtnn
Objeitve: iimpcete the aRdit priiedRres and issRe an iptin
PriiedRres: - EvacRate nivernanie evidenie
, - Perfirm priiedRres ti identf sRbseqRent events
- Review fnaniiac statements and ither repirt materiac
- Perfirm wrap-Rp priiedRres
- Prepare Maters fir Atentin if Partners
- Repirt ti the biard if direitirs
- Prepare aRdit repirt
The irnanisatinac hierarih if a t piiac internatinac aRditnn frm:
- Direitir/Partner: iwners if the frm
- Mananer: sRpervises the aRdits iindRited b the seniirs
- Seniir aiiiRntants (ir sRpervisirs : in iharne if aRdit fecdwirk and t piiacc have twi ir mire
ears if experienie in pRbcii aRditnn
- Staf aiiiRntants (ir jRniir assistant then seniir : t piiacc the frst pisitin if simeine
enterinn the pRbcii aiiiRntnn prifessiin
Chapter 2: The aRdit market
FiRr theiries fir the demand fir aRdit serviies:
- Piciieman their : an aRditirns jib is ti fiiRs in arithmetiac aiiRrai and in the preventin and
deteitin if fraRd.
- Lendinn iredibicit their : aRdited fnaniiac statements are Rsed b mananement ti enhanie the
stakehicderns faith in mananementns stewardship.
- Their if inspired iinfdenie: the demand fir aRdit serviies is the direit iinseqRenie if the
partiipatin if iRtside stakehicders (third partes in the iimpan . These stakehicders demand
aiiiRntabicit frim the mananement, in retRrn fir their iintribRtin ti the iimpan . Sinie
infirmatin privided b mananement minht be biased, beiaRse if a pissibce divernenie
between the interests if mananement and iRtside stakehicders, an aRdit if this infirmatin is
reqRired.
- Aneni their : a iimpan is viewed as the resRct if mire ir cess firmac iintraits, in whiih severac
nriRps make sime kind if iintribRtin ti the iimpan , niven a iertain priie. A repRtabce
aRditir is appiinted nit inc in the interest if third partes, bRt acsi in the interest if
mananement.
ARdit renRcatins:
- US Sarbanes-Oxce Ait: intends ti estabcish investir iinfdenie b imprivinn the qRacit if
iirpirate disicisRre and fnaniiac repirtnn, strennthen the independenie if aiiiRntnn frms
and inirease the rice and respinsibicit if iirpirate ifiers and direitirs fir fnaniiac
statements and iirpirate disicisRres.
- ERripean Uniin RenRcatin: severac direitves in the annRac and iinsicidated aiiiRnts if
fnaniiac and insRranie iirpiratins reqRire that the annRac/iinsicidated aiiiRnts be aRdited
b iertfed aRditirs. Three areas if aRdit renRcatin that are essentac: 1 the independenie if
the prifessiin; 2 ipeninn Rp the aRdit market; 3 ireatnn a mire intenrated ERripean market
and steppinn Rp its sRpervisiin.
, Twi t pes if aRdit frms:
- Bin fiRr frms
- Nin-Bin fiRr frms
T pes if ciabicit fir aRditirs:
- Liabicit fir aRditirs Rnder iimmin caw:
- Liabicit ti icients: icient fces a cawsRit beiaRse aRditir didnnt deteit an errir.
- Liabicites ti third partes: acc stakehicders ither than the aRdit icient.
- Civic ciabicit Rnder statRtir caw: pRrihasers if seiRrites if a frm have reiiRrse anainst the aRditir fir
Rp ti the irininac pRrihase priie if the fnaniiac statements are facse/misceadinn.
- Criminac ciabicit Rnder statRtir caw: an aRditir ian be hecd iriminacc ciabce when the caw makes it a
iriminac ifenie ti defraRd anither persin thriRnh kniwinnc beinn invicved with facse fnaniiac
statements.
- Liabicites as members if prifessiinac aiiiRntnn irnanisatins
Audit expectution up: the fait that Rsers if aRdit serviies (aRditees have expeitatins renardinn the
dRtes if aRditirs that exieed the iRrrent praitie in the prifessiin.
The expeitatins renard ti the ficciwinn dRtes if aRditirs in nivinn an ipiniin in the:
- Fairness if fnaniiac statements: the aRditees expeits that fnaniiac statements with an Rnmidifed
(RnqRacifed aRdit ipiniin are iimpcetec errir-free, bRt there are the inherent cimitatins if
aRditnn (materiacit and aRdit risk .
- Cimpan ns abicit ti iintnRe as a niinn iiniern: aRditees think that an Rnmidifed aRdit repirt means
that the iimpan wicc iintnRe as a niinn iiniern, bRt a iimpan ian stcc ni bankrRpt.
- Cimpan ns internac iintric s stem: hinh expeitatins if the aRditirns rice in testnn whether a
satsfaitir s stem if internac iintric is beinn iperated (in iRrrent aRdit envirinments, these
expeitatins are cikec ti be met .
- OiiRrrenie if fraRd: aRditirs are expeited ti fnd existnn fraRd iases and repirt them.
- OiiRrrenie if iccenac aits: aRditirs have ti desinn and exeiRte the aRdit in sRih a wa that there is a
reasinabce expeitatin if deteitnn materiac iccenac aits whiih have a direit impait in the firm
and iintent if the fnaniiac statements.
Impirtant candmark stRdies and ceniscatin that infRenied the internatinac aRdit market:
- The COSO repirt: ihapter 7 (same as in aiiiRntnn infirmatin s stems .
- The CadbRr repirt: deacs with the respinsibicites and dRtes if the exeiRtve and nin-exeiRtve
members if the biard if direitirs. The iimpanies shiRcd adhere ti a Cide if Best Praitie, in
whiih these respinsibicites and dRtes are cisted.
- The TRrnbRcc repirt: privides nRidanie ti assist LSE (Lindin Stiik Exihanne cisted iimpanies ti
impcement the reqRirements in the Cimbined Cide recatnn ti internac iintric. The biard if
direitirs shiRcd set appripriate piciiies in internac iintric and seek renRcar assRranie that the
internac iintric s stem is fRnitininn efeitvec in mananinn risks.
- The Sarbanes-Oxce ait
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