ACC701 AUDITING

Tutorial1:

Overview of Auditing, Assurance, and

the Auditing Profession

Name: Priyenka Prishika Singh

ID#: 2013112605
1. How does the extended role of professional accountants affect the accounting profession?

The extended role of professional accountants serves as an advantage for the accounting profession,
it creates new opportunities new avenues and enhances the special skills of Professional
accountants

2. Discuss the difference types of assurance that may be obtained in an assurance engagement?

The IAASB International Framework for Assurance Engagements permits two types of assurance
engagement:

 reasonable  
 limited.

In a reasonable assurance engagement, the practitioner:

 Gathers sufficient appropriate evidence to be able to draw reasonable conclusions;

 Concludes that the subject matter conforms in all material respects with identified suitable
criteria; and
 Gives a positively worded assurance opinion.

In a limited assurance Engagement the practitioner:

 Gathers sufficient appropriate evidence to be able to draw limited conclusions;

 Concludes that the subject matter, with respect to identified suitable criteria, is plausible in
the circumstances; and
 Gives a negatively worded assurance opinion

3. An enhancing role of auditors has developed where the audit expertise is used widely
to assist the client's needs. What are your views concerning the role described, with
reference to the appearance of audit independence?

Auditors act as agents to principals when performing an audit and this relationship therefore brings
with it similar concerns with regard to trust and confidence as the director-shareholder relationship,
prompting questions about who is auditing the auditor. Therefore there is requirement of continuous
improvement of standards of Auditing and a vigilant governing body which from time to time
revisits and checks the various standards to keep the auditors independence intact.

4. What is meant by comprehensive audit? Should a comprehensive audit be carried out

by an independent auditor?

Comprehensive audit is an examination of all areas of accounting and tax records, a full and
complete investigation of a company's financial and economic activities. Comprehensive audit is a
means of identifying and correcting accounting and reporting errors.

A comprehensive audit should be carried out by an Internal auditor and not a statutory auditor. If
the comprehensive audit is carried out by an independent auditor then it increases the reliability of
the findings.
 5. How do you think corporate collapses have influenced the role of auditing in recent
years?

The recent Corporate collapses have forced a change In the auditing procedures and standards in the
recent years, The auditors are now required to be more vigilant and find new ways of assessing the
materiality of transactions. It has also warranted a change in the substantive and analytical process
of Audit .

Professional Application Questions

Question 1

a. Comment on the auditor's ability and methods in attesting the credibility of financial
statements prepared by the governing party of an organization.

An auditor can only provide an reasonable assurance on the credibility of financial statements
prepared by the governing party of an organization. He can provide so by using the following
auditing methods to check the controls of the organization.

Inquiry: Simply, the auditor asks appropriate management and staff about the controls in place at
the service organization to determine some relevant information. This method is often used in
conjunction with other, more reliable methods. For example, an auditor may inquire of management
if visitors to the data center are escorted at all times if the auditor is not able to observe this activity
while on site. No control objective or criteria should ever be supported by controls only tested
through inquiry procedures.

Observation: Activities and operations are tested using observation. This method is useful when
there is no documentation of the operation of a control, such as observing that a security camera is
in place or observing that a fire suppression system is installed.

Examination or Inspection of Evidence: This method is used to determine whether or not manual

controls are being performed. For instance, are backups scheduled to run on a regular basis? Are
forms being filled out appropriately? This method often includes reviewing written documentation
and records such as employee manuals, visitor logs, and system databases.

Re-performance: This method is used when the other three above methods combined fail to provide
sufficient assurance that a control is operating effectively or this method can be used to prove by
itself to demonstrate that controls are operating effectively. This method of testing (as well as a
CAAT) is the strongest type of testing to show the operating effectiveness of a control. Re-
performance requires the auditor to manually execute the control, such as re-performing a
calculation that a system automatically calculates.

CAAT: This method can be used to analyze large volumes of data, or just be able to analyze every
transaction rather than just a sample of all transactions. Software is generally used to perform a
CAAT, which can range from using a spreadsheet to using specialized databases or software
designed specifically for data analytics (e.g. ACL).

b) Explain what type of assurance an auditor should provide in a financial statement audit.

The IAASB International Framework for Assurance Engagements permits two types of assurance
engagement:

 reasonable  
 limited.

In a reasonable assurance engagement, the practitioner:

 Gathers sufficient appropriate evidence to be able to draw reasonable conclusions;

 Concludes that the subject matter conforms in all material respects with identified suitable
criteria; and
 Gives a positively worded assurance opinion.

An auditor should only provide reasonable assurance that the financial statements are free from
material misstatement.

Question 2

Following are several activities performed by auditors:

1. Compilation of tax returns for clients- Reasonable

2. Preparation of the financial statements-Reasonable

3. Review of an investment prospectus-Limited

4. Assessment of a loss subsequent to the discovery of fraud-Reasonable

5. Evaluation of the social cost subsequent to an oil leakage.-Limited

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