9/8/2023
Auditing 1
Week 1 – The Auditing Universe
Dian Angelene, S.E., MAcc., CIA
“Auditor: Someone who does precision guesswork based of unreliable data provided by those of questionable knowledge.”
Primary Reference
Auditing and Assurance Services, International Perspective
Elder, Beasley, Hogan, Arens (2020)
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TODAY’S SCHEDULE
Introduction to
Auditing
Why Audit is so
Important?
Types of Audit
Assurance
Services
Types of
Auditors
Limitations of
Auditing
Audit Related
Certifications
TODAY’S SCHEDULE
Introduction to
Auditing
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01 - Introduction to Auditing
What is Auditing?
“The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the
information and established criteria. Should be done by a competent and independent person. (IAASB)
Key Points:
1.
2.
3.
4.
Information and established criteria
Accumulating and evaluating evidence
Competent, independent person
Reporting
01 - Introduction to Auditing
How auditing differs from accounting
Process of recording, classifying, … to provide financial
information for decision making
Process of ensuring that the recorded financial information
reflect the actual conditions and agreed with the standards
Must understand the principles, standards and basis for
preparing the financial information
Must understand the principles, standards and basis for
preparing the financial information
Expertise in: developing proper and cost efficient recording
process
Expertise in: accumulation and interpretation of evidences
Accounting
Auditing
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TODAY’S SCHEDULE
Why Audit is so
Important?
02 – Why Audit is so Important?
Important concept: Information risk. What is this?
A possibility that the information available/provided to be relied upon to make a decision, in fact, was inaccurate.
How to reduce this?
User verifies the information
User shares information with management
Audited financial statement are provided
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02 – Why Audit is so Important?
Anyone can give an example?
Auditor
Provide capitals
Client
External Users
Provide Financial
Statements
TODAY’S SCHEDULE
Assurance
Services
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03 – Assurance Services
Attestation Services
A type of assurance services
CPA firms issued a report about a subject matter made by another party
Primary categories of Attestation Services:
1.
2.
3.
4.
Audit of historical financial statements
Audit of internal control over financial reporting
Review of historical financial statements
Other attestation services
03 – Assurance Services
Primary categories of Attestation Services:
1.
Audit of historical financial statements
2.
Audit of internal control over financial reporting
Issuing a report on fairness of financial statement and in accordance
with the standard
Provide reasonable assurance…
…Free from material misstatements
Development and implementation of internal control according to
criteria
3.
4.
Review of historical financial statements
Lower levels of assurance
Less evidence needed
Cheaper than audits
Usually preferred by SMEs and Non-public companies
Other attestation services
Loan provisions compliance audit
External/third party’s control design effectiveness
Etc.
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03 – Assurance Services
Other Assurance Services
Anything else that cannot be categorized as an attestation service
This option is almost limitless; more than 200 different types of services, including accounting and bookkeeping, taxes, consulting, etc.
More Other Assurance Service Examples:
1.
2.
3.
4.
5.
6.
Mystery Shopping
Fraud and illegal acts risk assessment
Organic ingredients
ISO 9000 certifications
Corporate responsibility and sustainability
Other bunch of interesting activities! 😉
TODAY’S SCHEDULE
Limitations of
Auditing
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04 – Limitations of Auditing
Can auditor made a wrong conclusion?
I mean, nobody’s or nothing can be perfect… Auditing is no exception  Audit Risk
Audit only provide “Reasonable Assurance” not “Absolute Assurance”
Highest form of assurance, but there is still a remote chance of a material misstatement
Material Misstatement?
A misstatement if not disclosed might change the decision of the user of the information
Quick question! Do you think ALL company financial statement needs to be audited?
04 – Limitations of Auditing
Inherent Limitations of Auditing:
Use of
Professional
Judgement
Use of Sampling
Management
Representations
Risk of Fraud
Time
Constraints
Independence
Threats
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9/8/2023
TODAY’S SCHEDULE
Types of Audit
05 – Types of Audit
Operational
o Not limited to accounting
o Efficiency and effectiveness of
procedures and processes
o Management expect
recommendations
o Very difficult to evaluate objectively
o Extreme subjectivity in establishing
criteria
o More lean to a management
consulting services
Compliance
o Determining adherence to
procedures, rules or regulations
o Criteria set by higher authority
o Results reported to company’s
management
Fin Statement
o Evaluate whether financial statement
are prepared in accordance to the
applicable standards
Example, anyone?
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TODAY’S SCHEDULE
Types of
Auditors
06 – Types of Auditor
Certified Public Accounting Firms
o External or independent auditors
o Audit historical financial statement
o Need CPA designation to issue an
audit opinion
Government Accountability Office Auditors
o Working with the government
o Audit government agencies’
expenses and revenues
o Tax audits (IRA in US)
In Indonesia?
Kantor Pemeriksaan dan Penyidikan Pajak
Internal Auditors
o Audit for company’s management
o Job desk very variative
o Usually having expertise in
operational and computer system
audits
o Reports to the president of company,
to maintain independence
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TODAY’S SCHEDULE
Audit Related
Certifications
07 – Audit related Certifications
YourName, CA
YourName, CFE
YourName, CISA
YourName, CPA
YourName, CIA
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RECAP!
1.
2.
3.
4.
5.
6.
7.
8.
What is auditing?
Auditing vs Accounting
Information risk?
Audit-client-third party relationship
Audit risk?
Material misstatement?
Limitations in auditing?
Types of audit?
End of Today’s Lecture

Questions, anyone?
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