1-1

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-2

Part One

INTRODUCTION TO AUDITING AND ASSURANCE SERVICES

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-3

Chapter 1

CHAPTER 1 AN INTRODUCTION TO AUDITING AND ASSURANCE SERVICES

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-4

THE DEMAND FOR AUDITING

Why do organizations request an audit? It allows contracting to take place in an agency relationship Evidence supporting a demand for auditing without regulation: Early Greece Extensive non-regulated audit

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-5

AUDITING, ATTESTATION, AND ASSURANCE SERVICES

AUDITING (broadly defined) is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested parties. AUDITING (narrowly defined) is a written report on the examinations of financial statements for a client.

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-6

AUDITING, ATTESTATION, AND ASSURANCE SERVICES

ATTESTATION occurs when a practitioner is engaged to issue or does issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. Examples: The effectiveness of internal control Financial information other than the financial statements Future-oriented financial information Compliance with statutory, regulatory, or contractual obligations Managements discussion and analysis

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-7

AUDITING, ATTESTATION, AND ASSURANCE SERVICES

ASSURANCE services are independent professional services that improve the quality of information, or its context, for decision makers. Examples: Risk assessment Information system reliability Electronic commerce Health care performance measurement

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-8

THE RELATIONSHIP BETWEEN AUDITING, ATTESTATION, AND ASSURANCE SERVICES

Auditing

Attestation

Assurance

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-9

TYPES OF AUDITS

Financial statements audits Compliance audits Operational audits Comprehensive audits Forensic audits

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-10

TYPES OF AUDITORS

External auditors Internal auditors Government auditors Forensic auditors

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-11

THE PUBLIC ACCOUNTING PROFESSION

Public accounting firms Types of services Audits Tax services Management advisory services Accounting and review services

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-12

ISSUES AFFECTING THE PROFESSION

Expanded services Globalization Litigation Independence issues

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-13

ORGANIZATIONAL GROUPS THAT IMPACT INDEPENDENT AUDITORS

Canadian Institute of Chartered Accountants (CICA) Assurance Standards Board (ASB)

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-14

GENERALLY ACCEPTED AUDITING STANDARDS (GAAS)

General standards Examination standards Reporting standards

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.

1-15

INTERNATIONAL STANDARDS ON AUDITING

International Federation of Accountants (IFAC) International Standards on Auditing (ISAs)

All

rights reserved.

2002 McGraw-Hill Ryerson Limited.