Auditing Theory -Auditing and Assurance Services- An integrated approach
Chapter 1 The assurance service market
Objective 1-1 describe auditing:
Auditing: accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person.
Evidence: any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. To satisfy the purpose of the audit, auditors must obtain a sufficient quality and volume of evidence.
Forms of evidence:
- Transaction data
- Client testimony
- Written and electronic communications with outsiders
- observations
To do an audit there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate information. The auditor must be qualified to understand the criteria used and must be competent to know the type and amount of evidence to accumulate in order to reach the proper conclusion after examining the evidence. The auditor must also have an independent mental attitude. The final stage in the auditing process is preparing the audit report which communicates the auditor’s findings to the users. It must inform the readers of the degree of correspondence between information audited and the established criteria.
Objective 1-2 distinguish between auditing and accounting
Accounting: recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making.
Auditing: determining whether recorded information properly reflects the economic events that occurred during the accounting period.
Objective 1-3 explain importance of auditing in reducing information risk
Information risk: reflects the possibility