Textbook Notes (368,317)
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FREB22H3 (2)
Chapter 1

Auditing Chapter 1.docx

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Pascal Riendeau

Auditing – Chapter 1 Auditing and Assurance Defined • Assurance Engagement – An engagement performed by an auditor or consultant to enhance the reliability of the subject matter • Involves an assurance provider arriving at an opinion about info being provided by their client to a third party Eg. Financial statement audit • Accountability Relationship – Situation in which one party is answerable to another for the subject matter Different Assurance Services • Financial Statement Audit – An audit that provides reasonable assurance about whether the financial statements are prepared in all material respects in accordance with the financial reporting framework • The auditor must form an opinion of the fair presentation of the financial statements -> must be independent and exercise due professional care • Planning -> Devising an overall audit strategy -> Execution -> Reviewed by Partner • Limitations of the audit result from the nature of financial reporting, the nature of audit procedures, and the need for the audit to be conducted within a reasonable period of time and at a reasonable cost • Nature of financial reporting refers to the use of judgement when preparing financial statements because of the subjectivity required when arriving at accounting estimates • Nature of audit procedures refers to the reliance on evidence provided by the client and its management • Compliance Audit – An audit to determine whether the entity has conformed with regulations, rules, or processes Eg. Tax audit • Operation Audit – An assessment of the economy, efficiency, and effectiveness of an organization’s operations Eg. If buying cheap inputs results in an inefficient production process, efficiency may be seen to be sacrificed to achieve economic goals • Comprehensive Audit – An audit that encompasses a range of audit and audit- related activities such as a financial statement, organizational, and compliance audit • Internal Audits – An independent service within an entity that generally evaluates and improves risk management, internal control procedures, and elements of the governance process • Corporate Social Responsibility - A range of activities undertaken voluntarily by a corporation; CSR disclosures include environmental, employee, and social reporting Difference Levels of Assurance • Reasonable Assurance – Assurance that provides high but not absolute assurance on the reliability of the subject matter. Gathers sufficient evidence upon which to form a positive expression of an opinion regarding whether the information being assured is presented fairly. • Moderate Assurance – Assurance that provides negative assurance on the reliability of the subject matter. Gathers sufficient evidence upon which to form a negative assurance regarding the reliability of information. • Review Engagement – Assurance of a company’s financial statements, does not require an audit level of assurance • No Assurance – What results when an auditor completes a set of tasks requested by the client and reports factually on the results of that work to the client. Merely reporting activities that have been performed and not providing assurance. To ensure users are aware of no assurance, a Notice to Reader repo
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