Mod1 Flashcards
Auditing
The verification of information by someone other than the person providing the info
CAS
Canadian Auditing standards
based on int’l auditing stnds
types of audits
environmental, compliance, forensic, internal
5 elements to external audit of F/S
1) 3 parties (practitioner, responsible party, user)
2) subject matter (F/S)
3) criteria (IFRS ASPE)
4) sufficient appropriate evidence
5) conclusion
statutory audit
companies are required to have annual audit (PubCo)
voluntary audit
companies can choose to have audit done
Reasons for voluntary audit
to gain additional financing from the bank
2 companies are merging
a company is acquiring another company
what is corporate governance structure of PubCo
S/H –> Executives –> Management –> Employees
who appoints external audit and who they work for?
appointed by audit committee of BoD
work for shareholder
agency risk
risk that management within the company will do things to benefit themselves rather than owners of the company
6 roles of external auditors
1) to be independent in appearance and fact
2) to be objective
3) to exercise professional judgment
4) to reduce the expectations GAP
5) to reduce agency risk
6) to reduce info risk
expectation gap (4 public perceptions of an auditor)
1) Auditor gets absolute assurance
2) auditor finds all errors
3) auditors work for the executives
4) auditors prepare the F/S
expectation gap (4 realities of an auditor)
1) gains sufficient assurance
2) auditor finds all MATERIAL errors
3) auditor works for the S/H
4) auditors verify the F/S
material
the number at which the economic decision of users would change
who conducts audits?
only public accounting firms can perform audits & only CPAs
