Auditing and Assurance Principles Jose M. Ireneo Shirley C. Ireneo George R. James
Chapter 1: Fundamentals of Assurance Services Summary of Leaning Objectives 1. Appreciate why it is imperative for students to take
up Auditing .The application of auditing concepts learned in this
course will enable a student to sharpen logic and evidence gathering skill which are necessary in today’s business world. The demand for audits will continue way into the distant future. As long as there is a need for reliable and fairly stated information, CPAs will continue to provide audits.
2. Define assurance and assurance engagements and give
examples. .Assurance .Refers to the auditors satisfaction as to the reliability of an
assertion being made by one party for use by another party. .Assurance engagements .Are three-party contracts in which assurers (such as a
CPA) reports on the quality of information. .Include assertion-based services such as audits and
review of financial statements, and direct reporting engagements
3. Discuss the Five elements of assurance engagements .Every assurance engagements has five elements: a) A three party relationship involving a practitioner (CPA), a
responsible party, and intended users b) An appropriate subject matter c) Suitable criteria d) Sufficient appropriate evidence, and e) A written assurance report in the form appropriate to a
reasonable assurance engagement or a limited assrance engagement.
4. Classify assurance engagements according
to structure and according to level of assurance provided. .Assurance engagements may be classified
according to level of assurance provided ( reasonable assurance and limited assurance) and according to structure (assertionbased and direct reporting).
5. Discuss the meaning of assertion-based
engagements and give examples. .Assertion-based assurance
engagements(attest engagement) .Is an engagement in which 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 include audits and reviews.
6. Give examples of non-assurance
engagements and describe each one briefly .Examples of common non-assurance services
are agreed upon procedures; compilation of financial and other information; preparation of tax returns where no conclusion is expressed, and tax consulting; and management consulting and other advisory services.
Chapter 2:Audits of Historical Financial Information Summary of learning objectives 1. Define Auditing .Auditing .Is a systematic process of objectively obtaining
and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.
2. Distinguish between auditing and accounting .The main difference between accountants
and auditors is the skill required in obtaining and evaluating evidence. 3. Distinguish between audits, assertion-based
engagements and assurance services .The main difference between audits,
assertions, and assurance lie in the scope of services.
4. Enumerate and explain the different of audit
engagements .Audits may be classified as follows: a) According to the nature of data or assertion
being audited; financial statement audits, operational audits, and compliance audits. b) According to the type of auditor performing
the engagement: external audits, internal audits and government audits
5. Know the objective and scope of a financial
statement audit .Objective of an audit .Expression of an opinion on the fairness of such
financial statements .The auditor normally determines the scope of an
audit with the requirements of legislation, regulations or relevant professional bodies. It should be organized to cover adequately all aspects of the entity as far as they are relevant to the financial statements being audited.
6. Explain the meaning of information risk and
enumerate the different means to reduce information risk .Information risk . the risk that information is misstated or misleading .To reduce information risk, management of business
and the users of their financial statements may adopt any or all of the following approaches: a) Allow users to verify information b) User shares information risk with management c) Have the financial statements audited.
7. Be familiar with the unqualified audit report .The unqualified audit report now consists of five paragraphs per PSA 700
(Revised) 8. Give examples of the limitations of an audit .An audit cannot provide absolute assurance that the subject matter(for
example, the financial statements) is free of any fraud, or error. .An audit is not guarantee that the fraud will be prevented. .The following factors are reasons why an audit can provide a high ( but not
absolute) level of assurance: a) The use of [selective] testing b) The inherent limitations of any accounting and internal control systems c) The fact that most audit evidence is persuasive rather than conclusive d) The use of judgement
9. Appreciate how auditing has evolved
through human history .The word audit is a Latin term associated
with hearing or listening (hence the “auditory nerve”, auditorium, etc ). .Centuries ago, most people lack