Kế toán, kiểm toán - The auditing and assurance services profession

AUDITING AND ASSURANCESERVICES IN AUSTRALIA. AUTHORS: GAY & SIMNETTPrepared byRoger SimnettCopyright McGraw-Hill 20031Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettPART ONE:The Auditing and Assurance Services Profession2Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCHAPTER 1ASSURANCE AND AUDITING: AN OVERVIEW3Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettOVERVIEW OF CURRENT ENVIRONMENTCrisis of confidence in current financial system. Need to consider role played by Accounting standards Corporate governance Ethics Independence of auditors Business complexity and globalisation.4Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDITING PROFESSION’S RESPONSE TO CRISIS OF CONFIDENCENumerous reviews and committeesAuditing standards revisitedAuditing independence revisitedAuditor’s role in corporate governance considered5Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTHE ASSURANCE FRAMEWORKMany parties provide reports to users as an aid to decision-making.Reports may potentially be biased due to the vested interests of the report providers.Users may demand that credibility of report be enhanced by having someone who is both independent and expert examine the report.6Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettOBJECTIVE OF ASSURANCE ENGAGEMENT‘ for a professional accountant to evaluate or measure a subject matter that is the responsibility of another party against identified suitable criteria, and to express a conclusion that provides the intended user with a level of assurance about a subject matter.’ISAE 100/AUS 108 para.47Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettFig. 1.1 Diagrammatic summary of an assurance service engagement (p. 9)8Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettFORMS OF ASSURANCE SERVICESAudit engagements — high level of assurance, positive expression of opinion.Review engagements — moderate level of assurance, negative expression of opinion.Agreed-upon procedures engagements — no assurance, report of factual findings.9Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettATTEST V DIRECT REPORTINGAudit and review engagements can involve either an attest or direct reporting engagement.Attest engagement — auditor issues an opinion on written assertions made by party responsible for the subject matter.Direct reporting engagement — auditor issues an opinion directly on the subject matter, (no written assertion is made by the party responsible for the subject matter).10Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDITING DEFINEDA Statement of Basic Auditing Concepts (ASOBAC) (American Accounting Association) defines auditing as:A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.11Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSystematic process — audits are structured activities;Objectivity — freedom from bias;Obtaining and evaluating evidence — allows the auditor to determine the support for assertions or representations;Assertions about economic actions and events — describes the subject matter of an audit;Degree of correspondenceestablished criteria — the purpose of the audit is to determine conformity with some specified criteria; andCommunicating results — the results must be communicated to interested parties.The important parts of this definition:12Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettATTRIBUTES OF ACCOUNTING INFORMATION Relevance Reliability Comparability UnderstandabilityThese four attributes of accounting information provide the basis for the audit function.13Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettConflict of interest — managers may present biased information as they are also evaluated on the information.Consequence — information provided forms the basis of many users’ decisions.Complexity — many users do not have the expertise required to determine the quality of information presented.Remoteness — the separation of owners from management prevents users having assessing information quality.DEMAND FOR ASSURANCEArises because users are not in a position to establish the credibility of the information they are presented with, due to:14Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettHypotheses relating to demand for assurance:1. Agency theory (stewardship hypothesis)2. Information hypothesis3. Insurance hypothesis15Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettFig. 1.3 Simple diagram of agency relationship between managers and investors (p.16)16Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettHISTORY OF THE AUDIT FUNCTIONAudits have been performed at least since the thirteenth century.Audits until the early 1900s focused on the company’s solvency and the detection of fraud and error.Since the 1940s: the overall objective of auditing has been the expression of an opinion as to whether the financial report is materially misstated.Audits from early 1900s to 1940s: added objectives of verification of financial report accuracy and attestation to financial report credibility.17Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDIT APPROACHES SINCE THE 1940s IThese have evolved over time:Balance-sheet approach — involved auditor auditing the assets and liabilities with little emphasis on profit and loss account items.Transactions cycle approach — emphasised the review of controls which operated within each transaction cycle and provided for limited testing of balance sheet items.18Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDIT APPROACHES SINCE 1940s IIFinancial risk analysis approach — auditor considers relative financial risk and materiality in planning the audit, such that audit work is concentrated in areas where there is a higher risk of misstatement.Strategic business risk approach — as well as financial risk, auditor considers business strategy, associated business risks, and management’s plans to respond to changes in the business environment.19Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTHE AUDITOR, CLIENT AND PUBLIC RELATIONSHIP The auditor’s primary reporting responsibility is to resource providers of the client entity; however the client entity usually engages the auditor and pays the auditor’s fees.The auditor also discusses the audit findings with management prior to releasing information to the resource providers.In order to combat pressures on independence and objectivity, the auditing profession has issued a series of ethical rulings and professional standards to guide the auditor in the conduct of his/her duties.20Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTHE EXPECTATION GAPThe reasonableness gap: gap between what society expects auditors to achieve and what they can reasonably be expected to accomplish;The performance gap arising from deficient standards; andThe performance gap arising from deficient performance by auditors.Defined as: ‘the gap between society’s expectations of auditors and auditors’ performance as perceived by society’. Three components:21Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettFig. 1.5 Structure of the gap between audit expectation and audit performance (p.26)22Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettFOUR MAJOR ISSUES IN EXPECTATION GAPThe nature and meaning of audit report messages;Early warning by auditors of corporate failure;Auditor’s responsibility for the detection and reporting of fraud; andAuditor’s ability to communicate different levels of assurance.23Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTHE ROLE OF AUDITING STANDARDSAuditing standards (AUSs) in Australia are developed by the Auditing and Assurance Standards Board (AuASB) of the AARF. In most cases AUSs reflect International Standards on Auditing (ISAs).Prescribe the basic principles and essential procedures which govern the professional conduct of an auditor.Mandatory for members of the two accounting bodies, but currently do not have legislative backing.Failure to observe these standards may expose a member to investigation and disciplinary action from their accounting body (APS1.1).24Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUSs & AGSsAuditing Standards (AUS) outline basic principles and essential procedures which are identified with ‘black letter’ (bold type). Black letter requirements are mandatory for auditor to follow if information is material, except in rare and exceptional circumstances.Rare and exceptional circumstances include where option for departure identified within basic principle or essential procedure (e.g. AUS 506 re Attendance at stocktake).25Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDITS UNDER THE CORPORATIONS ACT 2001Management responsible for the preparation and presentation of appropriate accounts. Accounts to be accompanied by a report of an independent auditor appointed by the shareholders.Corporations Act 2001 (ss 292-306) indicates that directors must prepare statements of financial position and performance, directors’ declaration and other related notes and reports, together with any other information or explanation as is necessary to give a true and fair view.26Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettOTHER APPLICATIONS OF THE ASSURANCE FUNCTIONEvidence-gathering methods of auditing also employable inaudit of activities other than financial reports.Compliance audit — examination for the purpose of reporting on Performance audit — analyses organisation structure, internal systems, work flow, and managerial performance: efficiency, effectiveness and economy of these items. Comprehensive audit — usually includes components of compliance, performance and financial report audits.Internal audit — audits performed by staff of the entity as a service to management.Forensic audit — investigate audit, associated many times with fraud detection.legality and control of operations.27Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCRITICAL PERSPECTIVE OF CURRENT ISSUESExpanded range of services provided by auditing firms — what is the impact on independence?Strategic business risk audit methodologies — are these an attempt to sell other services, and is management becoming the client of the audit rather than the shareholder?Effect of globalisation — is business becoming too complex and can the auditor rely on auditing standards?Independence — from the three issues above, is the auditor truly independent?28Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger Simnett