On the other hand, if the management’s financial statements are not presented fairly, the auditor issues a qualified opinion report. If the management’s financial statements are presented fairly, the auditor issues an unqualified opinion report. Fourth, the external auditor gathers and evaluates evidence concerning the explicit and implicit assertions made by the management (auditee’s assertions) in the financial statements and reports to the stockholders about the fairness of the financial statements presentation in the form of an audit opinion report. The auditor provides a form of attestation service, an auditing service, to the stockholders. Third, the stockholders appoint an outside independent party (an external auditor) to monitor and report the goals/activities of the management. Their goals/activities are not necessarily congruent. Second, both the stockholders and management seek to maximize their self-interest.
Generally accepted auditing standards reclass threshold professional#
First, stockholders (referred to as principals) of a corporation appoint a board of directors who in turn hires a professional management team (referred to as agents) to run the corporation. See Figure 1-1 below for the relationships. The Demand for Auditing The definition of auditing can further be discussed in terms of a principal-agent framework that explains the demand for auditing. The auditor communicates the degree of correspondence between the auditee's assertions and established criteria in the form of an audit report to interested parties that include stockholders, lenders and creditors. Based on the evidence gathered, the auditor forms an opinion as to the closeness with which the auditee's assertions comply with established standards and polices, for example, generally accepted accounting principles (GAAP) and other statutory rules and regulations. These are assertions made explicitly and/or implicitly by the auditee with regard to the accounting information presented to the auditor, for example, the auditee has valued inventories at the lower of cost or market value. Auditing involves independently obtaining and gathering evidence, such as confirmations of balances, and objectively evaluating the sufficiency and appropriateness of this evidence. Key Phrase A systematic process Objectively evaluating and examining of evidence Assertions about economic actions and events Degree of correspondence between assertions and established criteria Communicating results to interested usersĬomments Auditing is a logically structured and planned inquiry process. Several key phrases of this definition merit special comment in Table 1-1. LO1-6 Explain the organizational structure, category, and hierarchy of CPA firms.Ĭhapter 1 Financial and Integrated Audits Definition of Auditing Auditing may be defined as: "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 users." Source: Committee on Basic Auditing Concepts, Statement of Basic Auditing Concepts AAA, 1973, p.2. LO1-5 Explain the different categories of audit and types of auditor. LO1-4 Differentiate between assurance and consulting services. LO1-3 Differentiate between financial audit and integrated audit. LO1-2 Distinguish among auditing, attestation, and assurance services. Table of Contents 1 Financial and Integrated Auditsġ8 General Cash and Investments - TOC and TOBįinancial and Integrated Audits - Frederick ChooĬhapter 1 Financial and Integrated Audits Chapter Learning Outcomes (LOs) Checklist After reading this chapter, you should be able to: LO1-1 Understanding the reason for auditing.
0 kommentar(er)
