Topic 1 - Intro to Auditing Flashcards
what is the Definition of an audit? (5)
■ systematic process
■ objectively obtain and evaluate evidence
■ about assertions concerning economic
actions and events
■ ascertain the degree of correspondence
between those assertions and established
criteria
■ communicate the results to interested users
What are the four phases of the systematic process?
Four phases of an audit: ■ Client acceptance/ continuance ■ Plan the audit ■ Perform audit tests ■ Complete the audit and report
What prescribes and guides an audit? (3)
- auditing standards
- code of ethics
- legislation
How do we ensure that evidence is objective?
- it is free from bias
- auditors must be independent from client
- auditors must exercise professional skepticism
how do auditors objectively obtain and evaluate
evidence?
■ Obtain evidence by applying
accepted procedures and processes
■ Draw conclusions based on what the evidence suggests
What is a set of assertions made by management
about the entity’s economic performance
and position?
Financial statements
what are the established criteria in a financial statement audit?
the accounting standards
What are four key questions in ascertaining the degree of correspondence between assertions and established criteria?
■are the accounting treatments valid?
■are estimates reasonable?
■are the disclosures appropriate?
■what is material?
who is the audit report for?
members/ shareholders
What four issues are addressed in the “client acceptance stage” of an audit?
■Reasons for the audit
■The financial reporting framework
■Client characteristics
■Auditor characteristics
What three issues are addressed in the “Planning the Audit” stage of an audit?
■Understand the client and its environment, including internal controls.
■Risk assessment
■Develop an audit strategy
What is business risk?
the risk that an entity’s business objectives
will not be attained as a result of external
and internal factors and pressures.
ultimately, the risk associated with the
entity’s survival and profitability.
What are the Fundamental Principles Underlying an Audit that an auditor must bare in mind? (5)
￭Integrity ￭Objectivity ￭Professional competence and due care ￭Confidentiality ￭Professional behaviour
what is Auditor Independence?
Ability to provide an opinion without being
affected by influences that compromise
professional judgment.
Which three things must an auditor exercise to maintain independence?
- integrity,
- objectivity
- professional skepticism.
