University:
California State University, Northridge
Course:
ACCT 460 | Auditing Principles and Analytics
Academic year:

2024
Views:

390

Pages:

16
Author:

Dante Waller

The Demand for Audit and Other Assurance Services Chapter 1 Part 1 Sarbanes-Oxley Act The Act established the Public Company Accounting Oversight Board. It also requires auditors to report on the effectiveness of internal control over financial reporting. Learning Objective 1 Describe auditing. Nature of 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. Information and Established Criteria To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. Accumulating Evidence and Evaluating Evidence Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. Competent, Independent Person The auditor must be qualified to understand the criteria used and must be competent to know the types and amount of evidence to accumulate to reach the proper conclusion after the evidence has been examined. The competence of the individual performing the audit is of little value if he or she is biased in the accumulation and evaluation of evidence. Audit Report The final stage in the auditing process is preparing the Audit Report, which is the communication of the auditor’s findings to users. Audit of a Tax Return Example Information Competent, independent person Internal Revenue agent Federal tax returns filed by taxpayer Report on results Determines correspondence Accumulates and evaluates evidence Established criteria Examines cancelled checks and other supporting records Internal Revenue Code and all interpretations Report on tax deficiencies Learning Objective 2 Distinguish between auditing and accounting. Distinguish Between Auditing and Accounting Accounting is the recording, classifying, and summarizing of economic events for the purpose of providing financial information used in decision making. Auditing is determining whether recorded information properly reflects the economic events that occurred during the accounting period. 1 - 11 Learning Objective 3 Explain the importance of auditing in reducing information risk. Economic Demand for Auditing Information risk reflects the possibility that the information upon which the business risk decision was made was inaccurate. Auditing can have a significant effect on information risk. Learning Objective 4 List the causes of information risk, and explain how this risk may be reduced. Causes of Information Risk  Remoteness of information  Biases and motives of the provider  Voluminous data  Complex exchange transactions Reducing Information Risk  User verifies information  User shares information risk with management  Audited financial statements are provided