CHAPTER 3

OVERVIEW OF AUDITING

Questions

1. Define auditing. Explain the basic objective of auditing as provided for in PSA
120 “Framework of Philippine Standards on Auditing.”

2. In the conduct of audits of financial statements it would be a serious breach of

responsibility if the auditor did not thoroughly understand accounting.
However, many competent accountants do not have an understanding of the
auditing process. What causes the difference?

3. What are the differences and similarities in audits of financial statements,

compliance audits and opetational audits?

4. What are the major differences in the scope of audit responsibilities for CPAs,
COA Auditors, BIR Agents, and internal auditors?

5. Identify the major causes of information risk and identify the three main ways
information risk can be reduced. What are the advantages and disadvantages of
each?

6. Explain what is meant by information risk and discuss the four primary
causes of information risk.

7. Discuss the three primary ways users of information can reduce information
risk.

8. Discuss the four factors that are likely to significantly reduce information
risk in the next five to ten years.

9. Explain the relationship between accounting and auditing.

10. Describe several business situtations that would create a need for a report by an
indepedent public accountant concerning the fairness of a company’s financial
statements.
11. The overall risk of investment in a business includes both business and
information risk. Contrast these two typesof risk. Whisck one is most directly
affected by the auditors?

12. What does and operational audit attempt to measure?

13. Discuss the similarities between financial statements audits, operational audits,
and compliance audits. Give examples of each type.

14. Discuss the similarities and differences between the roles of independent COA
Auditors, BIR Agents and Internal Auditors.

15. Define internal auditing by describing its nature and objectives.

16. How can internal auditor establish independence?

17. What types of audits do COA auditors perform?

18. Contrast independent, internal, and governmental auditors.