Science of Enhancing Quality of Audit And Assurance Service by CA History of Audit The word Audit is derived from a Latin word ‘Audrie’ which means to ‘hear’. During the medieval times when manual bookkeeping was prevalent, auditors in Britain used to hear the accounts
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ToggleScience of Enhancing Quality of Audit And Assurance Service by CAHistory of AuditHow Does Audit Help?Audit Evidence, Audit Report, And Assurance ReportStages of External Audit WorkRole And Responsibility of An AuditorExpectation GapSarbanes-Oxley Act of 2002 Read & Download the full copy in pdf:
Science of Enhancing Quality of Audit And Assurance Service by CA
History of Audit
The word Audit is derived from a Latin word ‘Audrie’ which means to ‘hear’.
During the medieval times when manual bookkeeping was prevalent, auditors in Britain used to hear the accounts read out for them and checked that the organization’s personnel were not negligent or fake.
Therefore, the concept of Audit came in prevalence.
An Audit is an objective inspection & evaluation of the financial statements of an organization to make sure that the records are a fair and accurate representation of the transactions they claim to represent.
It can be done internally by employees of the organization, or externally by an outside firm.
How Does Audit Help?
• Audit helps in:
1.) Maintaining an effective system
2.) Achieving Company’s Goals
3.) Preventing fraud
4.) Minimize the cost of capital
Audit Evidence, Audit Report, And Assurance Report
• Auditing Evidence is the information collected for the review of a company’s Financial Transactions and internal control practices and other factors necessary for the certification of financial statements by an auditor or certified public accountant.
• An Audit Report is a written opinion of an auditor regarding an entity’s financial statement.
• Assurance Report: The ISRE (International Standard On Review Engagement) say’s that the review report should contain a clear written concept of negative assurance. Based on the work performed, the auditor should assess whether any information obtained during the review indicates that the financial statement does not give a true and fair view in accordance with the identified financial reporting framework.
Stages of External Audit Work
Role And Responsibility of An Auditor
Role of Auditors:
International Audit Standards maintain that an auditor’s mandate may require him to take cognizance and report matters that come to his knowledge in performing his audit duties which relate to:
A. Compliance with legislative or regulatory requirements;
B. Adequacy of accounting and control systems;
C. Viability of economic activities, programs, and projects
Responsibilities are:
A. Prepare an Audit Report.
B. Form a negative opinion, where necessary
C. Comply with Auditing Standards
D. Make inquiries
E. Reporting of fraud
F. Adhere to the Code of Ethics and Code of Professional Conduct
G. Lend assistance in case of a branch audit
Expectation Gap
The gap between the expectation of the users of the Assurance report and the firm’s responsibilities in respect of those reports is called the expectation gap.
Some misunderstandings of users:
A.) Holding auditors solely liable for the preparation of the financial statements.
B.) A little perception of the concept of materiality.
C.) Taking Reasonable Assurance as Absolute Assurance.
This Gap can be reduced by:
A.) Expanding the Audit Report.
B.) Engagement Letter.
C.) Audit Committee
Sarbanes-Oxley Act of 2002
In response to several accounting-related corporate scandals, Congress passed the above-mentioned act.
The Act’s major provisions includes:
A.) The requirement of CEO/CFO certification of Financial Statements.
B.) The requirement of an Auditor examination of the company’s internal control.
C.) Creation of Public Company Accounting Oversight Board (PCAOB) to serve as an auditing profession “Watchdog”.
D.) Prohibition of certain client services by firms conducting a client’s audit.
Read & Download the full copy in pdf: