Lecture 1

Chapter 1- Demand for audit and assurance services.

Assurance services
- Independent professional services that improve the quality of information for decision
makers.

1. Attestation services
- A type of assurance services in which the public accounting firm issues a written
communication that express a conclusion about the liability of a written assertion of another
party.
- Three categories of Attestation services:
a. Audit historical financial statements
A form of attestation services in which the auditor issues a written report expressing an
opinion about whether the financial statement are in material conformity which
accounting standard.

b. Review of financial statement:
A type of attestation service performed by public accountants. Many entities want to
provide assurance on their financial statement, without incurring the cost of an audit.

c. Other attestation services
Such as a natural extension of audit of historical financial statement, as users seek
independent assurance about other types of information.

For example: banks often require debtors to engage public accountants to provide
assurance about the debtors compliance with certain financial covenant provision
stated in the loan agreement.

2. Other assurance services,
They are similar to attestation services in that public accountant must be independent and
must provide assurance about information used by decision maker, but differ in that the
public accountant may not be required to issue a written report.
a. Assurance services on information technology
b. Assurance services on other types of information

3. Non-assurance services provided by public accountants.
- Accounting and bookkeeping services, tax services and management consulting services.
- Management consulting services is to generate a recommendation to management
- Assurance services engagement is to improve the quality of information.


Nature of auditing
Auditing is 2.the accumulation and evaluation of evidence about information to determine and
4.report on the degree of correspondence between the 1.information and established criteria.
Auditing should be performed by 3.a competent, independent person. (pg13)

Types of audits
1. Financial statement audit
- To determine whether the overall financial statements (the information being verified) are
stated in accordance with specified criteria (accounting standard)
- The financial statements included are the balance sheet, income statement and cash flow
statement including accompanying footnotes.

2. Performance audits (operational audits)
- Review any part of an organizations operating procedures and method for the purpose of
evaluating efficiency and effectiveness
- An example: evaluating the efficiency and accuracy of processing payroll transactions in a
newly installed computer system.

3. Compliance audits
- To determine whether the client is following specific procedures, rules or regulations set by
some higher authority
- Compliance audit for a private business could include determining whether accounting
personnel are following the procedures prescribed by the company financial controller,
reviewing wage rate for compliance minimum wage laws or examining contractual
agreement with bankers.

Types of auditors
1. Public accounting firms
2. Officers serving the auditor General (work for government)
3. Tax auditor
4. Internal auditor







Australian Auditing Standard (ASA)
Introductory matters
ASA 101 requires auditors to apply mandatory component of Australian Auditing Standard when
conducting an audit or review in accordance with those standard.