shared via CourseHero com This study resource was This study source was downloaded by 100000812118324 from CourseHero com on 08 25 2021 06 58 14 GMT 05 00 https www coursehero com file 78040855 Week 1 Overview of Audit ACTG411 Assurance Principles Professional Ethics Good Govdocx Week 1 Overview of AuditLearning Objectives LO After completing this module the student is expected to 1 Define what is auditing2 Enumerate the different types of audits and auditors3 Understand the advantages of audit and inherent limitations of audit What is Auditing As defined by the Philippine Standards on Auditing PSA auditing is to enable the auditor to express anopinion whether the financial statements are prepared in all material respects in accordance with anidentified financial reporting framework Another definition of auditing as defined by the American Accounting Association AAA it is asystematic process of objectively obtaining and evaluating evidence regarding assertions about economicactions and events to ascertain the degree of correspondence between these assertions and establishedcriteria and communicating results to interested users The above definitions convey the following notions with regards to auditing Auditing is a systematic processAn audit involves series of steps and procedures which are carried out in logical order Objectively obtaining and evaluating evidenceObjectively obtaining evidence means that the one conducting the audit should exercise animpartial attitude meaning to say free from bias and conflicts of interests Evaluating evidence comes in the form of which the gathered information must be corroborated Such gathered information may come from the documents of the company interview withmanagement and the like of which calls for the need of validation and verification process Regarding assertions about economic actions and events Assertions are the representations of management that explains the economic actions andevents that happen during the audit period Accordingly the role of an auditor is to validate suchassertions or management representations To ascertain the degree of correspondence between these assertions and established criteriaIn conducting the audit auditors use standards in order to ascertain the assertions made by themanagement Established criteria are usually the standards that are being used to validate assertions ormanagement representations So taking into an instance the audit of financial statements the auditor will perform auditprocedures in order to ascertain that the financial statements prepared by the management this is the assertions conforms with the Generally Accepted Accounting Principles GAAP thisis the established criteria Communicating results to interested users shared via CourseHero com This study resource was This study source was downloaded by 100000812118324 from CourseHero com on 08 25 2021 06 58 14 GMT 05 00 https www coursehero com file 78040855 Week 1 Overview of Audit ACTG411 Assurance Principles Professional Ethics Good Govdocx This involves the process of communicating the audit findings to users of financial statements byway of issuing the what we called auditor s opinion These users can be both internal and external users Internal usersThese are the users of financial information who are working within the company and usefinancial information primarily on planning controlling and making decision for the bettermentof the company s operations They are the company s management itself Senior top level management middle levelmanagement and low level management External usersThese are the users of financial information who are outside of an organization and does notdirectly run its operations but uses financial information of the company to make decisionsparticularly if decisions involve investing or granting credit to the company Types of AuditsThe following are the types audit that can be conducted 1 Financial Audit2 Operational Audit3 Tax Audit4 Compliance Audit5 Information System AuditFinancial Audit This is the type of audit that confirms the fairness of all the information reported in a company sfinancial statement This is the most common type of audit being conducted by an independent Certified PublicAccountant CPA Operational Audit This is a type of audit that involves an evaluation of processes procedures and results of theoperations of a business with the intention of improving the current processes and proceduresof the company This type of audit may be conducted internally or through hiring an external entity to do theaudit on the company s behalf Tax Audit This is a type of audit that involves examination of the tax returns submitted by an individual orbusiness entity with the intention of determining whether income tax payment is valid andcorrect and if such payment has been made on the proper period that such tax payments hasbeen made In the Philippine setting this is the type of audit being conducted by the CPAs working in theassessment division of Bureau of Internal Revenue BIR shared via CourseHero com This study resource was This study source was downloaded by 100000812118324 from CourseHero com on 08 25 2021 06 58 14 GMT 05 00 https www coursehero com file 78040855 Week 1 Overview of Audit ACTG411 Assurance Principles Professional Ethics Good Govdocx Compliance Audit This is the type of audit that determine whether the company s current policies and proceduresis in compliance with internal or regulatory standards This type of audit is most commonly conducted in regulated industries Information Systems Audit This is a type of audit that involves a review of the controls over software development dataprocessing and access to computer systems The type of audit is intended in order to determine any issues that could impair the ability ofinformation technology IT systems to provide accurate information to users as well as toensure that unauthorized users do not have access to the data and such data are well protectedfrom such unauthorized users Advantages of AuditAudits are usually conducted in order to assess the fairness and reliability of the information beingprovided Thus audit primarily gives the following advantages 1 It safeguards the financial interest of persons who are not associated with the management ofthe entity whether they are partners or shareholders 2 It acts as a moral check on the employees from committing defalcations or embezzlement 3 Audited statements of account are helpful in setting