Chapter 17 - Auditing and evaluating the AIS. When you''ve finished studying this chapter, and completing the activities at its conclusion, you should be able to: Describe the various kinds of audits you might encounter in your accounting career, explain the purpose of the audit clarity project and summarize its essential components, explain ten generally accepted auditing standards & their role in a financial statement audit.
Chapter 17 Auditing and Evaluating the AIS Copyrightâ2016McGrawưHillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGrawưHillEducation Outline ã Learning objectives • Types of audits • Audit Clarity Project • Generally accepted auditing standards • Financial statement audit steps 172 Learning objectives Describe the various kinds of audits you might encounter in your accounting career Explain the purpose of the Audit Clarity Project and summarize its Discuss the basic steps associated with a financial statement audit Explain the connection between auditing and accounting information systems 173 Types of audits • Financial audit Express an opinion on the fairness of a company’s financial statements • Operational audit • Systems audit Ascertain whether information technology is producing expected results Determine if a company’s business processes & policies “make sense” 174 Types of audits • Compliance audit • Examine the AIS and financial statements of GNFP entities • Investigates the AIS and related data to determine if fraud has occurred Management audit Determines the way management decisions are supported Investigative audit • International audit Applies and combines one or more of the other types in international 175 Audit Clarity Project • The ACP’s goals were to make audit standards easier to read and to converge them with international audit standards Four main change areas to financial statement audit standards – Format – Terminology – Additional requirements – Audit report 176 Audit Clarity Project 177 Audit Clarity Project • Terminology – – Applicable financial reporting framework • US GAAP • IFRS Emphasis of matter paragraph Calls attention to something in the 178 Audit Clarity Project • Additional requirements – Ensure appropriateness of applicable financial reporting framework if other than US GAAP – Obtain agreement from management regarding their responsibilities for financial statements & internal control – Adhere to quality control standards throughout the audit 179 Audit Clarity Project Table 17.1 Elements of the unmodified auditor’s report Element Explanation Title Must include the phrase “independent auditor’s report” Addressee May be the board of directors, management or other parties Introductory paragraph Must identify the organization, the financial statements audited and related information Management’s responsibilities Financial statements and internal controls Auditor’s responsibilities Performing an audit according to generally accepted auditing standards (GAAS) Auditor’s opinion States that, in the auditor’s opinion, the statements are fairly presented Signature, address and date Audit firm’s information 1710 Generally Accepted Auditing Standards Figure 17.3 1711 Financial statement audit steps Figure 17.4 1712 1713 ... presented Signature, address and date Audit firm’s information 17? ?10 Generally Accepted Auditing Standards Figure 17. 3 17? ?11 Financial statement audit steps Figure 17. 4 17? ?12 17? ?13 ... Clarity Project and summarize its Discuss the basic steps associated with a financial statement audit Explain the connection between auditing and accounting information systems 17? ?3 Types of audits... audited and related information Management’s responsibilities Financial statements and internal controls Auditor’s responsibilities Performing an audit according to generally accepted auditing standards