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Three Main Types of Audits Explained

1. There are three main types of audits: audits of financial statements to determine if they present a true and fair view, operational audits to examine specific organizational units, and compliance audits to review procedures and determine adherence to rules and regulations. There are also two main types of auditors: internal auditors employed by companies and independent auditors who are certified. 2. An audit is defined as a systematic process of obtaining and evaluating evidence to determine the degree to which assertions correspond to established criteria and communicating the results. 3. Ethics refer to moral principles and rules of conduct. For accountants, the key ethical principles are integrity, objectivity, professional competence, confidentiality, and professional behavior

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13 views3 pages

Three Main Types of Audits Explained

1. There are three main types of audits: audits of financial statements to determine if they present a true and fair view, operational audits to examine specific organizational units, and compliance audits to review procedures and determine adherence to rules and regulations. There are also two main types of auditors: internal auditors employed by companies and independent auditors who are certified. 2. An audit is defined as a systematic process of obtaining and evaluating evidence to determine the degree to which assertions correspond to established criteria and communicating the results. 3. Ethics refer to moral principles and rules of conduct. For accountants, the key ethical principles are integrity, objectivity, professional competence, confidentiality, and professional behavior

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Vega Agnitya
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

1.

Types of audit & auditor (CHAPTER 1 SLIDE 21 & 22)


TYPES OF AUDIT :
Audit of financial statements
Examine financial statements, determine if they give a true and fair view or fairly present
the financial statements.
Operational Audit
A study of a specific unit of an organization for the purpose of measuring its performance.
Compliance Audit
A review of an organization’s procedures and financial records performed to determine
whether the organization is following specific procedures, rules, or regulations set out
by some higher authority.


TYPES OF AUDITOR :
• Internal auditors are employed by individual companies to investigate and appraise the
effectiveness of company operations for management.
• Independent auditors are typically certified either by a professional organization or
government agency.
•
2. Audit definition (CHAPTER 1 SLIDE 17)

“An audit 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.” 

- American Accounting Association

3. Ethics (CHAPTER 3 SLIDE 2, 9, 10, 11, &12)



=A sense of agreement in a society as to what is right and wrong.

=Ethics represent a set of moral principles, rules of conduct or values.
– Ethics apply when an individual has to make a decision from various alternatives
regarding moral principles.
= The IFAC Code of Ethics for Professional Accountants fundamental principles for ALL
Accountants:
1) Integrity to be straightforward and honest in all professional and business relationships.
2) Objectivity: To not allow bias, conflict of interest or undue influence of others to override
professional or business judgments.
3) Professional Competence and Due Care: to maintain professional knowledge and skill at the
level required to ensure that a client or employer receives competent professional service based
on current developments in practice, legislation and techniques and act diligently and in
accordance with applicable technical and professional standards.
4) Confidentiality: To respect the confidentiality of information acquired as a result of
professional and business relationships and, therefore, not disclose any such information to
third parties without proper and specific authority, unless there is a legal or professional right or
duty to disclose, nor use the information for the personal advantage of the professional
accountant or third parties.
5) Professional Behavior: to comply with relevant laws and regulations and avoid any action that
discredits the profession.
4. Explain about sources of information for client evaluation (CHAPTER 5 SLIDE 6)

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5. Client acceptance procedures (CHAPTER 5 SLIDE 3)


✓ Evaluate the clients background and reasons for the audit.
✓ Determine whether the auditor is able to meet the ethical requirements regarding the client
✓ Determine need for other professionals.
✓ Communicate with predecessor auditor.
✓ Prepare client proposal.
✓ Select staff to perform the audit.
✓ Obtain an engagement letter.

6. Explain audit risk, control risk, detection risk with chart & illustration (CHAPTER 6 SLIDE
22-29)
AUDIT RISK ILLUSTRATION
AUDIT RISK

= Audit risk is the risk that the auditor expresses an
inappropriate audit opinion when the financial statements
are materially misstated. It includes: 

- Risks of material misstatement

- Inherent risk 

- Control risk

- Detection risk
= Illustration 6-12 shows a symbolic graphic used by
AICPA to illustrate how audit risk works.

INHERENT RISK
Inherent risk is the susceptibility of an assertion about a
class of transaction, account balance or disclosure to
misstatements that could be material, before consideration of
any related controls.

CONTROL RISK 

The risk that a misstatement that could occur in an assertion
about a class of transaction, account balance or disclosure and that
could be material, will not be prevented, or detected and corrected,
on a timely basis by the entity’s internal control.
DETECTION RISK 

The risk that an auditor’s substantive procedures will not detect a misstatement that exists
and that could be material. Audit Risk F (IR, CR, DR)

7. The important the ICS to auditor

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