Nature of Auditing Essay

Audited account

Summary of Chapter 1

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Nature of Auditing

The chief topic of auditing isgarnering the groundstodetermine and studythegrade of correspondencebetween the information about something withestablished standards. To scrutinize something, you must happen information in a verifiable house and some criterions which relevance to this information. Evidence is the chief of import for hearer, information of grounds can be used by hearer to finding the audited information is in conformity with the set uping standards, or non.

The Auditor must be person who qualified plenty to understand the standard of information used and must be competent for cognizing the types and sum of grounds needed to make the proper decision after all of the grounds has been examined in the right manner. The competency of hearer can be known by detecting his or her public presentation and dig the decision. And the last phase of the scrutinizing procedure is to fix the AUDIT REPORT, which will be used for communicating of the hearer ‘s users.

Differentiation between scrutinizing and accounting

In lineation, accounting and scrutinizing have many similar standards. Accounting talk more about entering, sorting, and summarizing of all economic events to supplying fiscal information ( Financial Report ) . Auditing talk about finding whether the recorded information is decently reflects the existent events occur during the accounting period or non.

Economic demand for audit

The hazard of information reflects the concern determination in the pas was made accurately or non. Auditing can diminish the hazard of the information by information that verified by user, the shared information between user and direction, and the audited fiscal statement which means the fiscal statements are clearly safe for user.

Types of Audited accounts

There are three types of audits, the operational audit, the conformity audit, and audit for historical fiscal statements. Operational audit is concern about the operational rhythm of house. Compliance audit is concern more in relationship between the house with other house or bank. Audit of Historical fiscal statements merely concern in fiscal statements about it is grounds or resources.

Type of audit-auditor

Hearer discerned in four types, the first is independent certified public accounting houses ( Independent CPA ) , 2nd governmental general accounting office hearer, 3rd internal gross agents, and the last is internal hearer.

Assurance Servicess

Assurance service is anindependent professional service( abslolutely independent ) that improves quality of the information provided by look intoing and detecting all sorts related to the information for determination shapers ( directors ) . Assurance service can merely be performed byCertified public accountantor by a assortment of otherprofessionals, so the individual should educated plenty in accounting.

The Attestation service is a type of an confidence service which CPA house issues a study about dependability of an averment which prepared by another party. There are five classs of attestation service, the first is audit of historical fiscal statements, attestation of internal control over fiscal coverage ( five studies ) , reappraisal of fiscal statements, attestation services on the information engineering, and other attestation service.

Certified Public Accounting ( CPA )

To going CPAs, we must make full all the three demand. The first is Educational demand ( unmarried man in accounting ) , so the unvarying CPA scrutiny demand, and experience demand.

Summary of Chapter 2

Certified Public Accounting Firms

“ CPA Firms is the legal right to execute audit and confidence is granted to CPA houses by the ordinance of each province. A CPA houses besides provide any other services to their clients, such as pull offing revenue enhancement and consulting services. ” ( Auditing 12e, Arens /Beasley/Elder 2008 ) . There are four classs to depict, the Big Four international houses, the National houses, the Regional and big local houses, and the Small local houses.

Activities of CPA Firms

CPA Firms provides any services like audit, attestation, and confidence services. Outside that, there are accounting and bookkeeping services, revenue enhancement services ( calculate and pay the revenue enhancement ) , and direction consulting services.

Structure of CPA Firms

There are three chief factors that influence organisational construction of all house, First,The demand for independency from the clients, 2nd,the importance of a construction,a good construction will take to promote competency,and the last,the increased judicial proceeding hazard faced by the hearers. Six constructions are available for CPA. There areproprietary ( for personal house ) , professional corporation, general partnership ( for partnership house ) , limited liability company, general corporation, and limited liability partnership. Each construction provides a detached entity with the comptroller in private.

Securities and Exchange Commission ( SEC )

Overall intent of the SEC ( Securities and Exchange Commission ) is to help house in supplying investors the dependable information upon which to do certified investing determinations. A good determination will do a good investing.

American Institute of Certified Public Accountants ( AICPA )

“ AICPA have power to put criterions and regulations that all members ( in whole universe ) and other practising CPAs must follow. AICPA set uping criterions and regulations in the:

1. Auditing criterions ( IAAS ) ,

2. Compilation and reappraisal criterions ( the fiscal statements ) ,

3. Other attestation service criterions,

4. Consulting service criterions,

5. Code of professional behavior

The other maps of AICPA:

1. Writes and grades the CPA scrutiny.

2. Support research by its ain staff and provide grants to the others.

3. Publishes many assortment of stuffs ( in mass media ) .

4. Provides seminars and instruction in many assortment of capable affairs.

There are five nucleus values in AICPA, foremost is go oning instruction and life-long acquisition, unity, competency, objectiveness, and the last is attuned to wide concern issues ”

( Auditing 12e, Arens/Beasley/Elder 2008 )

By and large Accepted Auditing Standards

“ General Standards”

– Adequate preparation and proficiency

– Independence in all mental attitude

– Professional attention

Standards of Field Work

– Have a proper planning and supervising

– Must understanding the entity really clearly

– Sufficient appropriate grounds

Standards of Reporting

– The prepared statements must accordance with GAAP

– Any Fortunes when GAAP non allowed

– Adequacy of revelations ( full revelation )

– Expression of sentiment on fiscal statements ( in notes ) ”

( Auditing 12e, Arens/Beasley/Elder 2008 )

For your information, nowadays about company in whole universe no longer uses GAAP any longer but IFRS, so we use all of the IFRS criterions the manner we describing fiscal statements.

Quality Control

Quality control has many elements within it. Independence, objectiveness, unity, credence, forces direction, monitoring, continuance of clients and battles, and engagement public presentation are the chief elements of quality control.

Summary of Chapter 3

Standard Unqualified Audit Report

“ Standard unqualified audit study consist of

1. Title of the study

2. Audit study reference

3. Introductory paragraph ( first paragraph )

4, Scope paragraph

5. Opinion paragraph ( paragraph that consist an sentiment of the hearer )

6. Name of CPA house and signature

7. Audit study day of the month ”

( Auditing 123, Arens /Beasley /Elder 2008 )

There are several conditions for criterion unqualified audit study that should be fulfilled. First, all fiscal statements are included. All-of-five of fiscal statement must be completed. Then, the three general criterions must hold been followed ( wholly ) in all respects on the battle ( in chapter 2 ) . After that, the sufficient grounds has been accumulated decently, to reason the three criterions of fieldwork ( in chapter 2 ) have been met ( nil less than three ) . Then, fiscal statements ( five study ) are presented in conformity with by and large accepted criterions by accounting rules. The last is no fortunes require the add-on of an explanatory paragraph or word alteration of the study.

The four classs of Audit Reports started with standard unqualified, so travel to unqualified with explanatory paragraph or modified diction. The good one, qualified is the best audit studies, and the last is inauspicious or disclaimer.

Unqualified Report with Explanatory Paragraph

Meanss

1. The study deficiency of application that consist in by and large accepted accounting rules criterions ( now is IFRS )

2. Significant uncertainty about traveling concern ( traveling concern is one of the accounting rules )

3. The hearer agrees with going from promulgated accounting rules

4. The Emphasis of a affair

5. Reports that affecting other hearers

Materiality

Materiality is a misstatement in the fiscal statements. This misstatement would impact the determination shaper of a sensible user whose utilizing it.