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Western University
Management and Organizational Studies
Management and Organizational Studies 4464A/B
Muhammad Shuja

Chapter 1 Auditing and Internal ControlExternal financial auditsan independent attestation performed by an auditor who expresses an opinion regarding the presentation of FS o Aka attest service or financial audits o Audit objective assuring the fair presentation of FSo Require written assertions and a practitioners written report require the formal establishment of measurement criteria or their description in the presentation o Levels of service include examination review and application of agreedupon proceduresAdvisory servicesprofessional services offered by public accounting firms to improve their client organizations operational efficiency and effectiveness o The advisory units of PA firms are responsible for dual rolesto provide nonaudit clients with IT advisory services and work with firms audit staff to perform ITrelated tests of controls in their attest servicesInternal auditingan independent appraisal function established within a firm to examine and evaluate its activities as a service to the firm Usually done by auditors who work for the firm who report to the executive mgmt or audit committee of the board of directorsThe characteristic that distinguishes external from internal auditors is their respective constituenciesexternal auditors represent outsiders whereas internal auditors represent the interests of the firm Internal auditors may work with external auditors in performing parts of an attest audit in order to achieve audit efficiency and reduce audit fees An internal auditors independence is compromised if they report directly to the controllerif this occurs external auditors are prohibited to rely on evidence provided by internal auditors The objective of a fraud audit is to investigate anomalies and gather evidence of fraud that may lead to a criminal conviction Fraud audits can be initiated by corporate management who suspect employee fraud or be initiated by the board of directors who may suspect employee executives Role of audit committee o Consists of outsiders usually 3 of whom at least one must be a financial expert o Serves as an indepe
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