Auditing and Assurance
Services
CTRL 505
Winter 2019
Course Assessment
Midterm 30%
Final Exam 40%
Quizzes 20% (Best 2 out of 3)
Project 10%
Our Book : Arens, Alvin, A. Randal, J.
Elder and M. Beasley; Auditing and
Assurance services – an Integrated
Approach, Prentice-Hall International,
Twelfth Edition, 2008.
Chapter 1: The Demand
for Audit and Other
Assurance services
Tutorial Outline:
1. What ‘s Auditing and why do we need it ?
2. Discuss the relationship between assurance
and attestation services.
Introduction
Financial Accounting is used by the management to
generate the financial statements.
Financial statements includes: Balance Sheet( Statement of
Financial position) - Income Statements -Statement of Cash Flows- Statement
of Retained Earnings- Footnotes.
These financial statements are to be used by for
example:
Bank--- Loan Facility.
Government----Tax liability.
Investors/ Shareholders----Dividends .
Even Potential investors------Investment feasibility
These need reliable information to make economical
decisions.
To make the financial statements credible on which the
users of the financial statements make decisions, it should
be audited by someone independent of the management.
1st: What is Auditing?
Auditing is the accumulation and evaluation
of evidence about information to determine
and report on the degree of correspondence
between the information and established criteria.
Auditing should be done by a competent
independent person
What is Auditing? –
Information and
Established Criteria
Information Criteria
The matter subjected to o Standards by which the
auditing. auditor can evaluate the
information.
Examples: Examples:
Financial Statements GAAP
Income Tax Return Tax Law (Internal Revenue Code)
Any Companies’ Companies Standards
manufacturing/operating
process
There must be a Degree of Correspondence between
Information and Established Criteria i.e. a matching
between the information (e.g.: financial statements) and the
established criteria (e.g.: GAAP).
What is Auditing?-
Evidence
Evidence is any information used by the auditor to
determine whether the information being audited is
stated in accordance with the established criteria.
Evidence takes many different forms, including:
Finally the auditor shall communicate his
findings during the auditing process through
issuing an Audit Report addressed to the
financial statements users.
What is Auditing?-
Competent, Independent
Person
Auditor Auditor
Competent Independent from
the company
Qualified to being audited, by
not having:
understand the
Financial Interests
used criteria.
To Know the ( Stocks, Bonds).
Relatives
types of evidence
to accumulate. occupying
sensitive position.
2nd: Relationship between
assurance and attestation
services
ASSURANCE SERVICES
ATTESTATION SERVICES
Audits Reviews
Internal Control Certain
over Financial Reporting Management
Attestation Services on Consulting
Information Technology and
Other attestation services
Other Assurance Services
Question “1”:
1. C
2. D
3. B
4. C
5. D
6. A
Question “2”:
1. False.
2. True.
3. False.
Question 3
Question 3- Cont’d
ASSURANCE SERVICES
ATTESTATION SERVICES
Audits Reviews
Internal Control Certain
over Financial Reporting Management
Attestation Services on Consulting
Information Technology and
Other attestation services
Other Assurance Services
Question 3- Cont’d
1. An Audit of historical financial statements.
2. An Attestation service other than an audit service.
3. An Assurance service that is not an attestation service.
4. An Attestation service other than an audit service.
5. An Attestation service other than an audit service.
6. An Attestation service other than an audit service.
7. An Attestation service other than an audit service.
Question 4
1. A review report provides moderate assurance to
financial statement users, which lowers information
risk.
Therefore, the interest rate for the loan that requires a
review report is lower than the loan that did not
require a review because of lower information risk.
An audit report provides further assurance and lower
information risk.
As a result of reduced information risk, the interest rate
is lowest for the loan with the audit report.
Question 4 –Cont’d
Busch may desire to have an audit
because of the many other benefits
that an audit provides including :
Assurance about annual financial information
used for decision-making purposes
Detecting errors or fraud
Providing management with information
about the effectiveness of controls.
Recommendations to management that will
improve efficiency or effectiveness.