AUDITING PROCESS

BA 120.1 Mr. Virgilio Lapuz III, CPA, CIA

Outline

Overview Types of Audits Types of Auditors Independent Financial Statement audit Compelling business need Theoretical Framework Audit Process

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

What is an audit?
A systematic process of objectively obtaining and evaluation evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

Types of Audits

Financial Statement Audit Compliance Audit Operational Audit

Different types of Audits

Financial Assertions Financial Statements are Fairly Presented Compliance Organization has complied with laws, regulations and contracts Laws, regulations and contracts Operational Organization activities are conducted effectively and efficiently Objectives set by the Board of Directors

Criteria

Financial reporting standards or other financial reporting framework Opinion on whether FS are fairly presented in conformity with the framework External Auditors

Report Content

Report on the degree of compliance with applicable laws, regulations and contracts Government Auditors

Recommendation/ suggestions on how to improve operations

Auditors

Internal Auditors

Financial Statement Audit

Objective: Enable the auditor to express an opinion as to whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework or acceptable financial reporting standards

Responsibility for Financial Statements

Management responsible for preparing and presenting the financial statements in accordance with the financial reporting framework Auditor responsible in forming and expressing an opinion on these financial statements based on his audit.

Reasonable assurance

Use of Testing (Sampling Risk) Error in application of judgment (Non-sampling Risk) Reliance in Managements Representation Inherent Limitations of the clients accounting and internal control systems Nature of Evidence

Compelling Business Need

Conflict of Interest between management and users of financial statements Expertise Remoteness Financial consequences

Theoretical Framework
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Audit function operates on the assumption that all financial data are verifiable Auditor should always maintain independence with respect to the financial statements under audit There should be no long term conflict between the auditor and the client management Effective internal control system reduces the possibility of errors and fraud affecting the FS

Theoretical Framework
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Consistent application of GAAP/IFRS results in fair presentation of FS What was held true in the past will continue to hold true in the future in the absence of known conditions to the contrary An audit benefits the public Code of Ethics PSA -