Auditing 1

The auditor's role is to determine whether the reports prepared by the
manager conform to the contract's provision

Thus, the auditor's verification of the financial information adds
credibility to the report and reduces information risk
Information Risk
The risk that information circulated by a company's management will
be false misleading
Business, institutions and individuals must maintain records of the
financial condition and progress.
These records are necessary to evaluate and guide business
operations, to determine financial status, to meet legal requirements
and to serve as a basis for credit.
Creditors and investors, present and prospective, may wish to study
the financial statements of many enterprises for credit extensions and
investment purposes.
Government agencies will need financial reports to help them carry
out the duties imposed upon them by law.
Internal Management needs financial reports for planning, directing
and controlling business operations.
A free-market economy can exist and further strengthened thru

sharing of:
 Accurate and reliable Information
 Transparent and neutral data
Need for Reliable Information

 Allocation of limited capital resources
 Funds entrusted are utilized properly
 Possibility of wrong decision
 Avoidance of business scandals and failures
Inadequate accounting conceals waste and truth which prevents

efficient allocation of limited capital and use of economic resources
Economic decisions are often made under conditions of uncertainties
There is always a risk that the decision maker will select the wrong
alternative and incur a loss
INVESTORS & STAKEHOLDERS

 tired of financial scandals and failures
 want investments are not invested in fraud & scandals
Among the parties that depends on reliable information:

 The government in obtaining revenue based on income tax
return
 Prospective investors deciding to buy or sell the corporate
shares
 The banker making a decision to approve loans
 The employees on the security of their jobs and careers
The need of various users for more reliable financial information has
created a demand for an independent audit of financial statements
The auditor's opinion enhances the value and usefulness of these

financial statements.
By attaching a report to the Financial Statements, the Auditor provides
increased ASSURANCE to users that the Financial Statements are
reliable
Accountancy as a Profession
A Profession to be considered Elite:
 Systematic Theory
 Professional Authority
 Community Sanctions
 Regulations Code
 A Culture
Systematic Theory
 Science of validation.
 Covered by accounting theories; financial and reporting
standards; audit practices and standards.
 Knowledge achieved in college level education
 Continued and further developed in the practice of the
profession.
Systematic Theory Examples:

 Theory of Accounts
 Auditing Theory
 PERS, GAAP, IFRIC,
 IAS/PAS, ISA/PSA, Professional Ethics
 Financial Reporting Framework (FRF)
 Bachelor of Science in Accountancy
 Continuing Professional Development (CPD)
 Expanding Horizon Strategic Plan
Professional Authority
the client submits to the judgment of the accountant who is competent
to handle accounting matters
Professional AuthorityExamples:
• bookkeeping
• assurance services
• audit exceptions
• consultations
• audit engagements
• compilation
• tax services
• preparation of financial statements
Community Sanctions
 Admission is limited and controlled
 Pass the CPA licensure board examination
 Must be graduate of BSA
 Responsible to the community for his actions
Examples:
 BSA
 CPA licensure exams
 BOA accreditation
 Seminars
 Legal liabilities
Regulation Code
Prevention of abuse, malpractice, and monopoly thru governance and
rules of law
Examples:
 Quality control system
 Quality assurance review (QAR)
 Board of accountancy
 SEC
 Court of justice
 Rotation of auditors
A Culture
An accountant is a member of a time-honored (distinguished)
profession with members comply and behave with distinction
Example:
 Accounting equation
 Debit and credit
 FIFO
 Balance sheet, income statement
 Financial statements
 Code of ethics
Who Is A Professional Accountant?

An individual who holds a valid certificate issued by the Board of
Accountancy (CPA) whether in public practice, industry, commerce,
public sector, or education.
Who is a Certified Public Accountant?
A person who, after obtaining the required education passes an
extensive examination and is licensed by the country to practice as a
professional accountant
Sectoral Classification
 Professional Accountants In Public Practice
 Professional Accountants in Business
In public practice, a professional accountant in a firm that provides

professional services
In business, a professional accountant in:
• commerce & industry
• education
• government
Developing Capability and Competencies after Admission to the

Profession
To acquire capability and competence required of professional
accountants, individuals may need further education and development
beyond that needed to qualify as professional accountants.
Education and development for acquiring and maintaining the

capabilities:
 Advanced Professional Education
 On the job training and experience program
 Off the job training
 Continuing professional development courses and activities
(CPE)
Professional accountants in public practice are bound by:

a. Professional and accounting standards and reporting
requirements
b. Regulatory and professional ethics framework as to conduct of
the work
Professional accountants in business
a. Responsible to management
b. Exert all efforts to provide exemplary accounting- based
business analysis, projections, and interpretations.
Competency Requirements for Professional Accountants in

Public Practice
A. Knowledge Content
Knowledge content within the education and development program
a. Audit of historical financial information at an advanced level
1. Best practices including relevant current issues and development
2. ISA and International Auditing Practice and Statements (IAPS)
3. Any other applicable standard or laws
b. Financial accounting and reporting at an advanced level

1. Financial accounting and reporting processes
2. IFRS
3. Any other applicable standards or laws
c. Information Technology
1. IT system for financial accounting & reporting
2. Frameworks for evaluating controls and assessing risks in
accounting and information system
B. Practical experience
 Completion of a period relevant practical experience long and
intensive enough to demonstrate acquisition of necessary
knowledge professional skills, values, ethics, and attitudes
 Practical experience that contributes to the competence of an
audit professional needs to be relevant to audit assignments that
allows:
a. Application of the requisite knowledge and skills
b.Develop and demonstrate the required competence
Competency Requirements for Professional Accountants in

Business
Professional skills for professional accountants in business:
 Intellectual skills
 Technical and functional skills
 Personal skills
 Interpersonal and communication skills
 Organizational and business management skills
Five Areas that the Professional Accountant's Mindset needs to

Embrace
1. Professionalism & Ethical Behaviour
Involves upholding ethical standards in accordance with the code
of ethics for professional accountants.
2. Professional Judgment
Requires quick and intuitive decision making with a need for
evidence-based decisions
3. Organizational and Environmental Awareness
Perform as integrators, aligning economic, environmental and
social performance and as navigators supporting the needs of
governing bodies and management
4. Investor and wider stockholder focus
Lead in managing relationship with investors, funders,
regulators.
5. Change, uncertainty and complexity
a. Ability to adapt to changes and developments
b. Apply professional skills to ambiguous and imperfect situation
c. Manage uncertainties and complexities thru focus on effective
governance and risk management control

Auditing 1

Uploaded by

Copyright:

Available Formats

Auditing 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Auditing 1

Uploaded by

Copyright:

Available Formats

The auditor's role is to determine whether the reports prepared by the

manager conform to the contract's provision

A free-market economy can exist and further strengthened thru

Need for Reliable Information

Inadequate accounting conceals waste and truth which prevents

INVESTORS & STAKEHOLDERS

Among the parties that depends on reliable information:

The auditor's opinion enhances the value and usefulness of these

Systematic Theory Examples:

Who Is A Professional Accountant?

In public practice, a professional accountant in a firm that provides

Developing Capability and Competencies after Admission to the

Education and development for acquiring and maintaining the

Professional accountants in public practice are bound by:

Competency Requirements for Professional Accountants in

b. Financial accounting and reporting at an advanced level

Competency Requirements for Professional Accountants in

Five Areas that the Professional Accountant's Mindset needs to

You might also like