Uploaded by PADILLA, JOHN JERICHO R.

CIS 1st meeting summary

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Objectives:
Overview: What is Auditing?
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Auditing is a systematic process of obtaining and evaluating evidence.
Examination/Inspection of various books of accounts by an auditor, followed by
physically checking of inventories to determine if the organization is following a
documented system of recording transactions.
It is done to determine the accuracy of the financial statement provided by the
organization.
Types of auditing:
External audit (Financial Audit)
Represents the interest of the Outsiders – External auditors
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Independent attestation of an expert (auditor) who expresses opinion regarding the
presentation of financial statements
Independence / independent
Objective = to check the accuracy and completeness of FS
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Attestation Service – independent review of companies FS by an auditor.
o It provides opinion regarding the reliability of financial statement of the company.
 Requirements for attestation service:
1. Written assertions
2. Practitioner’s written report
3. Formal establishment of measurement criteria
or their description in the presentation
4. Limited only to examination, review, and application of agreed-upon
procedures.
Advisory Service – consulting service
o Develops findings, conclusion, recommendation presented to a client for consideration
and decision making.
o Due to Sarbanes-Oxley Act of 2002, it is now unlawful to provide non-audit services for
those who are already providing “Attestation Services” to their clients.
 The following non-audit services:
1. Bookkeeping
2. Appraisal or valuation services
3. Actuarial services (ano to?)
4. Internal audit outsourcing services
5. Management functions
6. Investment banking services
7. Legal services and expert services unrelated to the audit
Internal audit
Represents the interest of the organization
“Independent appraisal function established within an organization to examine and evaluate its
activities as a service to the organization” – IIA
Services conducted by internal auditors:
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Conduct financial audit. (mali daw sabi ni sir! Bawal sila makisawsaw sa FS audit)
o Dapat daw: compliance audit, management audit, operations audit. (ito na
yung summary nung mga nasa baba)
Examine operation’s compliance.
Reviewing the organization’s compliance with legal obligations
Evaluating operational efficiency
Detecting and pursuing fraud within the firm
Differences between internal and external
Internal auditors
 Internal auditors are usually employees of an organization
 Typically, they are appointed by BOD
 They are established to enhance control systems, add value and improve organization’s
operations.
 After completing the task, they report to BOD
 Represent the interest of the company
External auditors
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CPAs
Independent auditor that expresses opinion about FS
They give assurance expressing evidence-based opinion
Represent the interest of outsiders
Fraud audit
 Detailed examination of the financial records of a business, with intent to find instances of
fraud.
 Objective is to investigate anomalies and gather evidence of fraud
 May be initiated by the management / employees / BODs who suspect fraud.
Audit committee – in charge of overseeing FS recording and disclosure
 Usually consists of 3 people
 MUST be outsiders
 Must have atleast 1 Financial Expert
** this is in accordance of SOX (Sarbanes-Oxley Act of 2002)
Role of Audit Committee
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Serves as “check and balance” for the internal audit function.
o Segregation of duties, to avoid absolute power.
Must be willing to challenge internal auditors.
To look for ways to identify risk.
Financial Audit
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Usually ginagawa annually
Focus on FS of the company
Focus to seek by the auditors
o Misstatement
o Errors
o Irregularity
Financial statements – major part of financial audit
o They provide crucial information in terms of asset, liabilities, earning, expenditures of
the company.
o In the PH, we are not using GAAP
 We use PAS.
GAAS (pero di to ngayon, meron nang PSA (Philippine Auditing Standard)
Divided into 3 catergories:
1. General Standards (TIC)
a. Technical training and proficiency as an auditor.
b. Independence
c. Care (due professional care)
2. Standards of Field Work (PIE)
a. Planning (the audit work should be planned and assistance of any should be properly
supervised.)
b. Internal control (sufficient understanding of internal control.)
c. Evidence (the auditor must obtain sufficient and competent evidence).
3. Reporting Standards (ACIO)
a. Accordance (Auditor must state whether the fs is in accordance with GAAP)
b. Circumstances (The report must identify circumstances where GAAP do not apply)
c. Identify (the report must identify items that do not have adequate informative
disclosure.
d. Opinion (the report must contain auditor’s Opinion in the FS as a whole.)
Auditing… how to we do it?
Systematic Process – auditing undergoes a systematic process
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It is a crucial process as it is a logical and structured approach.
It is not random or unplanned.
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