2 - Introduction to auditing - Unisa Study Notesgimmenotes.co.za/wp-content/uploads/2016/12/AUE2601-Tabaldi-Slide… · Title: 2 - Introduction to auditing.ppt Author: Yvonne Venter

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Introduction to auditing Understanding the process & introduction

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AUE2601-SU1-Summary Notes Copyright Tabaldi

© 2014 Resonance Skills, a South African company. All rights reserved. This presentation is protected by copyright. © 2014 Resonance Skills, a South African company. All rights reserved. This presentation is protected by copyright.

Understanding the process

• What is auditing?




Introduction

•  The auditor • Assurance and non-assurance engagements •  The financial statement audit engagement • Auditing postulates •  The accounting profession




The Auditor




Purpose of an audit

The purpose of an audit is to enhance the degree of confidence of users in the financial statements.

This is done by expressing an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with a framework.




Need for auditors

• Different owner and manager • Need to appoint independent person • Enhance confidence / assurance / credibility • Directors accountable shareholders • Government accountable taxpayers




Code: Fundamental principles

•  Integrity • Objectivity • Professional competence and due care • Confidentiality • Professional behaviour •  Advertising




Assurance and non-assurance engagements




Assurance

• Absolute • Reasonable •  Limited • None




Elements of an assurance engagement

•  Three party relationship • Appropriate subject matter •  Suitable criteria •  Sufficient appropriate evidence • Written assurance report




Statutory and Non-Statutory

•  Statutory •  Companies Act

• Non-Statutory •  Why?




Public interest score

• Employees •  Turnover •  Third party debt •  Shareholders




Types of auditors

EXTERNAL AUDIT INTERNAL AUDIT

Audit Internal management function

Not employees of entity Employee of entity

Report to shareholders Report to management (audit com)

Legislation Board of directors

INDEPENDENT INDEPENDENT

ASSURANCE PROVIDED ASSURANCE PROVIDED




The financial statement audit engagement




Purpose of an audit

The purpose of an audit is to enhance the degree of confidence of users in the financial statements.

This is done by expressing an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with a framework.




Includes:

• Obtain reasonable assurance whether financial statements as a whole are free from material misstatement, whether due to fraud / error, enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework • Report on financial statements in accordance with ISAs

and ethical requirements




3 Party relationship

• Practitioner

• User

• Responsible party •  Assertions




Auditing postulates




Postulates

• No conflict of interest auditor and management • Auditor act exclusively as auditor • Professional status imposes professional obligations •  Financial data is verifiable •  Internal controls reduce probability of errors • Application of IFRS results in fair presentation •  True in past = true in future •  Financial statements free collusion / irregularities




The accounting profession




Profession

• Education

•  Training

• Professional body




Professional bodies in SA

•  SAICA

•  IRBA

• Comply with education, training and competency




Pronouncements

• Auditing Profession Act • Companies Act • Constitution & by-laws of SAICA •  SAICA & IRBA codes •  International standards (ISA, ISRE, ISAE, ISRS, IAPS, SAPS,

ISQC) – prepared by IAASB •  JSE listing requirements




Introduction to auditing Wrap up




Wrap up

•  The auditor • Assurance and non-assurance engagements •  The financial statement audit engagement • Auditing postulates •  The accounting profession



Documents

2 - Introduction to auditing - Unisa Study Notesgimmenotes.co.za/wp-content/uploads/2016/12/AUE2601-Tabaldi-Slide… · Title: 2 - Introduction to auditing.ppt Author: Yvonne Venter