ACCT 3280 Chapter 1: Chapter 1 - Intro To Auditing.docx
Document Summary
Auditing verification of information by someone other than the one providing it. Auditors verify the reliability of raw transactions which, over a period of time, comprise financial statements, thereby reducing the information risk for investors. The recent failures of assurance (enron, worldcom) have brought auditing into the limelight and so investors are more cautious of the risks of investing giving rise to the demand for reliable and trustworthy audits. Client is the person (company, board of directors, agency)that pays for the audit services to be conducted upon a company. Auditee is the organization who"s financial statements are being audited. Three party accountability the auditor is called the first party and the seller of investments the second party. Accounting is the process of recording, classifying, and summarizing into financial statements a company"s transactions that create assets, liabilities, equities, revenues, and expenses. The auditing function is to verify this information through external professional auditors: this is called assurance engagement.