Introduction to Auditing

Question 1

Primary purpose of auditing:

Answer 1

To confirm the authenticity of books of accounts prepared by the accountant.

Question 2

What do the financial accounts represent:

Answer 2

Prepared for a fixed term and report that:
* The balance sheet exhibits an accurate and fair view of the state of affairs
of concern.
* The profit and loss accounts reveal the right and balanced view of the profit
and loss for the financial period.
* The accounts have been prepared in conformity with the law.

Question 3

Meaning of Auditing:

Answer 3

The audit is performed to ascertain the validity and reliability of the information.
Examination of books and accounts with supporting vouchers and documents to
detect and prevent error, and fraud is the primary function of auditing.

Question 4

Techniques of Auditing:

Answer 4

1. visible verification of assets
2. verification and analysis of transactions with available evidence
3. inspection of the books and accounts
4. checking past profits and losses

Question 5

IIA definition of Auditing

Answer 5

The Institute of Internal Auditors (IIA) states that continuous auditing is the auditrelated activities that are done more continuously than activities scheduled as part of
the annual audit plan

Question 6

Annual audit plan

Answer 6

A schedule of audits planned for any given year, but
continuous auditing goes above and beyond those point-in-time audits and is
frequently mining, reviewing, and assessing information, typically with the help of
technology.

Question 7

Continuous auditing techniques:

Answer 7

1. Binary Check
   this test if a control is working effectively
2. Identifying outliers
3. The most useful techniques is using trends

Question 8

Benefits of continuous auditing techniques:

Answer 8

t. It further enables:
* The timely collection of audit evidence, with less rush and effort.
* Better analysis of the strength of your controls through more frequent measurement and trending.
* Better alignment with the pace of change in highly dynamic environments.
(Point-in-time assurance audits become outdated quickly in dynamic environments like a technology start-up)
* The use of automated compliance monitoring tools that can help save time and resources in evidence collection.
* The use of tools to help automate the collection of evidence and data, to perform trending, and to provide insights.

Question 9

What to consider when implementing continuous auditing?

Answer 9

1. You need to involve your auditor to ensure they do not push back on the auditing system you wish to implement.
2. Identify controls that can be easily used to identify risks
3. using audit tools significantly decreases the burden of evidence collection.
4. Start with a narrow focus and then broaden it over time.

Question 10

Things to look for in a continuous audit tool:

Answer 10

• Does it cover your technical environment (e.g., Azure, Google Cloud, on-premises servers)? Can it connect to it and pull data from it?
• Does it cover related technologies (e.g., endpoint protection, mobile device management, firewalls, vulnerability scanners, ticketing systems, audit logging, and monitoring)? Does it cover non-technical areas, such as security awareness training solutions?
• How easy is it to configure to your compliance standards (e.g., HIPAA, HITRUST, ISO 27001/02)?
• What is the quality of the reporting? Some tools will not satisfy what an auditor needs to understand the source of the information, such as dates and time stamps on when the data was pulled.
• How much setup will the tool require to tailor to your audit needs? What overhead is associated with the tools? What does the ongoing management of the tool entails.

Question 11

Traditional vs Continuous Auditing?

Answer 11

Traditional auditing is associated with conducting tests to issue an opinion on the fairness of the financial statements of the company being audited. Those tests include tests on internal controls that the company uses to produce figures in the financial statements, tests on the balances of the accounts, and tests on the overall posting system of its accounts.

Continuous auditing focuses on testing for the prevalence of risk and the effectiveness of a control. A framework and detailed procedures, along with technology, are key to enabling such an approach. Continuous auditing offers another way to understand risks and controls and enhances sampling from periodic reviews to ongoing testing.

Continuous auditing is not intended to replace traditional auditing but is to be used as a tool in implementing certain standard audit procedures to enhance audit methodology and effectiveness. For example, continuous auditing may occur by performing trend analysis on expense accounts to identify variances or drivers and alerting the audit team to a potential issue.

Question 12

Three primary financial statements are:

Answer 12

• income statement
• balance sheet
• cash flow statement