Kế toán, kiểm toán - Chapter 01: Auditing and assurance services

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 01 Auditing and Assurance Services“Our system of capital formation relies upon the confidence of millions of savers to invest in companies.The auditor’s opinion is critical to that trust." -- James R. Doty, ChairmanPublic Company Oversight Board (PCAOB)1-2Learning ObjectivesDefine information risk and explain how the financial statement auditing process helps to reduce this risk, thereby reducing the cost of capital for a company.Define and contrast financial statement auditing, attestation, and assurance type services.Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit.Define professional skepticism and explain its key characteristics.Describe the organization of public accounting firms and identify the various services that they offer.Describe the audits and auditors in governmental, internal, and operational auditing.List and explain the requirements for becoming a certified information professional.1-3User Demand for Reliable InformationToday’s informationMore complexDemanded by remote usersDemanded in a more timely mannerHas far reaching consequencesInformation riskThe risk that the information disseminated by a company will be materially false or misleading.Users demand an independent third party assessment of the informationBusiness riskThe risk that an entity will fail to meet its stated business objectives1-4Sarbanes-Oxley Act of 2002Management’s Responsibility For Financial ReportingOne of its most important provisions clearly indicates that the management team is responsible for the financial reporting process and the financial statements. In fact, Section 302 of the Act states that the key company officials must certify the financial statements. That is, the company CEO and CFO must sign a statement indicating:They have read the financial statements.They are not aware of any false or misleading statements (or any key omitted disclosures).They believe that the financial statements present an accurate picture of the company’s financial condition.Source: U.S. Congress, Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat/ 745 (2002).1-5Management’s Financial Statement Assertions (PCAOB)Existence or occurrence – Assets and liabilities included in the accounts exist and recorded transactions are valid and have actually occurred.Rights and obligations- Entity has a legal claim on all assets and revenues reported and has a legal responsibility for all liabilities and expensesCompleteness - All balances and transactions have been recorded in the financial statementsValuation or allocation – Assets, liabilities and recorded transactions have been valued in accordance with GAAPPresentation and disclosure – All accounts are presented in the appropriate place and all information required has been disclosed in the statements and footnotes.1-6Management’s Financial Statement Assertions (ASB)Assertions about Events and TransactionsOccurrence – Events giving rise to transactions are valid and have taken placeCompleteness and Cutoff - All transactions have been recorded and are recorded in the appropriate periodAccuracy – Transactions are recorded at the correct amountClassification – Transactions have been posted to the proper account1-7Management’s Financial Statement Assertions (ASB)Assertions about Account BalancesExistence – Balances include only assets and liabilities that existRights and obligations – Entity has legal claim on all assets and revenues reported and has a legal responsibility for all liabilities and expensesCompleteness – Balances include all items that should be included in accordance with GAAPAccuracy and valuation –Balances are reported at the proper amount in accordance with GAAP1-8Management’s Financial Statement Assertions (ASB)Assertions about Presentation and DisclosuresOccurrence and rights and obligations – items presented have occurred and are either owned by or represent the responsibility of the entityCompleteness – the proper disclosures have all been made by the entityClassification and understandability – accounts in the disclosures have been appropriately grouped and users can comprehend the disclosuresAccuracy and valuation – the amounts in the disclosures have been properly measured and are valued in accordance with GAAP1-9Exhibit 1.5: Assertions and their Relationships to the Financial Statements1-10Professional SkepticismRefers to an auditor’s questioning mindset towards representations made by management and evidential matter gatheredInquiry alone is never enough. The auditor must obtain sufficient corroborative evidence.Unusual financial trends need investigationDocuments are always checked for authenticity or possible alterationAsk questions, get answers, then verify the answers.Must be skeptical because a potential conflict of interest always exists between the auditor and the client.Management wants to portray the company and its operations in the best possible light.Auditors want to make sure that this portrayal is fair and accurate.1-11Types of Audits and Auditors Financial (External Auditors/CPAs)Ensure that financial statements are reliableOperational (Internal and Governmental Auditors/CIAs)Improve operational economyImprove operational efficiencyCompliance (Internal and Governmental Auditors)Ensure compliance with company and/or governmental rules and regulationsForensic (Fraud Auditors/CFEs)Designed to investigate a crime and will often involve gathering evidence designed to convict a fraudster1-12