UNIVERSITY OF LUZON

COLLEGEOF ACCOUNTANCY

INTRODUCTION TO AUDITING

Nan hil so h ob tiv otauditin

Au
Defmltlon pr a 0 Wu
is s stematic Inn andevaluatiau-i. |'- i n
mans about economic ac . I-- even to scenzun tie 4"??? - nn-ence Ween those
asse ionsand establishedcritena
__1
dcommunicatin theresultstointerestcd
users

l Systematicprocess audit follows a structured,documented plan

2 Conductedobjectively an audit is an independent,objectiveandexpertexaminationandevaluationof
eVIdence. Auditors are fair. They maintain impartialattitude
3 Auditor obtainsandevaluatesewdence auditorgathersandevaluatestheappropriateness andsufficiency
of evidence
4. Evrdence obtainedconcernsassertion?abouteconomicactionsandevents Assemonsare representations
by management, explicn or otherWIse,that are embodied in the financial statements
5 . Auditor ascertain: the degree of correspondence betweenassertionsand establishedcntena
-
6 Communicating the results to interested users reportingthe resultsto the users

Conditions that create a demand for Auditing

1. There is a potential connict of interestbetweenthosewho prepareinformation(management)and those
who use information (owners. investors creditors, and regulators) This potential conflict can result in
biased information
2 Information can have substantial economic consequencesfor a decrsmnmaker
3 Expertise is otten required for preparing and venfying information
4 Users oftntbrmation frequently are prevented from directly assessingthe quality of inform-hart

T - s ofAudits accd -. to nature ofassertion and ob ecrives .

l Financml Statements Audit ~ examination of financuil statementsof an entity to determine Whetherthe
financial statements are presented fairly iri confonnity With the generally accepted accounting princrples.
the objective is to enable the auditor to express an opinion whether the tinnncral statements are prepared,
in all material respects, in accordance With an identified financial reporting framework
Operational Audit a systematic rev1ew of an organization's activities in relation to spemtied objectives
for purposes of nssessmg performance. identifying opportunities for improvement and developing
recommendations for improvement or further action. The purpose of operational audit is to measure
performance of specific am of an organization, that is, the effectiveness and efliaency of operation
Compliance Audit - an audit to measure compliance With standards, laws and regulations, specinc
procedrnes, poliaes or speCitied criteria. Its purpose is to detennine whether an entity has adhered to and
followed the recognized criteria.

Tygs of Audit According to TM of Auditor.

1. External Audit an audit performed by an auditor independent of the entity The auditor who conductsthe
extemal audit is called external or independent auditor The external auditor performs the independent
financial statements audit. He may also conduct a compliance audit
Internal Auditing - an independent appraisal function established Within an organization to exnmme and
evaluate its activities as a service to the organization The internal auditor (employee of the company)
performs the lntemal auditing which encompassedoperationalauditing. lntemal auditor may also perform
compliance audit for their companies
Government Auditing involves the detennination of whether government funds are being handled
properly and in compliance With existing laws and Whetherthe programsare being conductedefficiently
and economically Government auditors perform financial statements audit. compliance audit and
operational audit