External auditor

Overview of Auditing and the Profession - Prof. Helen Brown

• Report rights infringement
• published: 02 May 2013
• views: 5020

Lecture 2: Overview of Auditing and the Profession By Professor Helen Brown This lecture begins with the Professor comparing accounting and auditing. Accounting is defined as the recording, classifying, and summarization of economic events for the purpose of providing financial information used in decision making. Auditing is determining whether or not information is recorded properly to accurately reflect economic events and transactions that occurred during the accounting period. To further elaborate on auditing, it is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and the established criteria. Evidence is defined as any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. The information deemed as evidence must be in verifiable form and must meet certain standards (defined as criteria) through which the auditor can evaluate it. Auditing is usually performed by a competent, independent individual, The auditor must be qualified to understand the criteria used and must be competent to know the types and amount of evidence to accumulate to reach the proper conclusion after the evidence has been examined. The competence of the individual performing the audit is of little value if he or she is biased in the accumulation and evaluation of evidence. The purpose and need for auditing is also discussed in detail. Major factors that have increased the need for auditing in today's world include remoteness of information, biases and motives of provider, voluminous data, and complex exchange transactions. Auditing is also a significant factor in reducing information risk. The Professor also discusses the relationship among auditors, clients, and external users. Clients or audit committees hire auditors, and auditors issue reports relied upon by users to reduce information risk. Clients provide financial statement information to external users, and in exchange, external users provide capital to the client (in other words, investing). Next, assurance and attestation services are compared. An assurance service is an independent professional service that improves the quality of information for decision makers. They can be performed by CPA's and other professionals. An attestation service is a type of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party. The Professor also discusses the American Institute of Certified Public Accountants (denoted AICPA). The AICPA sets professional requirements for CPAs, conducts research, and publishes materials on many different subjects related to accounting, auditing, attestation, and assurance services, management consulting services, and taxes. The AICPA is empowered to set standards (guidelines) and rules that all members and other practicing CPAs must follow. Statements on Auditing Standards (SASs) interpret the 10 generally accepted auditing standards and are the most authoritative references available to auditors. Since the ten generally accepted auditing standards (GAAS) are too general to provide meaningful guidance, SASs elaborate on them. The next topic discussed are international standards on auditing (ISAs). They are issued by the International Auditing Practice Committee of the international Federation of Accountants (IFAC). It is the worldwide organization for the accountancy profession, and works to improve the uniformity of auditing practices and related services throughout the world. As a side note, generally accepted auditing standards (GAAS) are no longer use in public company audits - rather, audits performed on public companies refer to the standards provided by the PCAOB. GAAS is still used for private companies, though. ------QUICK NAVIGATION------ Video Begins with a comparison of Accounting and Auditing Auditing (defined in detail): 1:58 Why Audit? (reasons listed): 15:48 Information Risk (and the role Auditing plays in reducing / preventing it): 23:34 Relationships Among Auditors, Client, and External Users (with diagram): 27:30 Assurance vs. Attestation Services: 29:18 Chart Displaying "Types of Audits," examples of each, as well as what information they deal with: 33:52 Certified Public Accounting Firms (CPA Firms): 35:23 Structure of CPA Firms: 36:00 Sarbanes-Oxley Act Overview: 36:06 AICPA (responsibilities defined): 39:56 The Nature of US Auditing Standards: 48:46 Statements on Auditing Standards: 53:22 International Standards of Auditing: 54:45 Relationship Between GAAS PCAOB Auditing Standards: 55:45 Elements of Quality Control: 56:20 CPAs Encouraged to Conduct Themselves at a High Level (with illustration / flow chart) : 1:00:18