Castillo, Chinee A.

3BSA5B

Essay - Audit - An Overview

Answer the following questions:

1) Difference between accountants and auditors.

Generally speaking, an accountant is involved in preparing financial statements
and reports, and sometimes gives financial advice or makes financial recommendations.
They are tasked to supply or provide relevant financial accounting information so that
the statements users, particularly the owners and creditors, could make informed
judgment and better economic decisions. While, the auditors review the financial
records to make sure that there are no irregularities or discrepancies, and that the
financial records have been compiled in an appropriate manner. They are practitioners
that examines the financial statements determining whether the recorded financial
statements of an entity are in conformity with the generally accepted accounting
principles.

2) Objective and scope of financial statement audit.

The objective of an audit of financial statements is to enable the auditor to
express an opinion on the fairness of whether the financial statements are prepared, in
all material respects, in accordance with an applicable financial reporting framework.
The auditor’s report is the medium through which his opinion or, if circumstances
require, disclaim an opinion. The auditor should state whether his/her examination and
opinion are made in accordance to the Philippine Standards on Auditing (PSAs), and that
the financial statements presented are in conformity with the generally accepted
accounting principles. The determination of the scope of an audit is in accordance with
the requirements of legislation, regulations or relevant professional bodies. In the
observance of the PSAs, the auditor must exercise informed judgment in determining
which auditing procedures are deemed appropriate in the circumstances to achieve the
objective of the audit, to afford a reasonable basis for his opinion. The audit should be
organized to cover adequately all aspects of the entity as far as they are relevant to the
financial statements being audited.
3) Describe the type of assertions done in (a) Financial Statement Audit (b) Operational
Audit (c) Compliance Audit
(a) The assertion in Financial Statement Audit is ensuring the accuracy that the
financial statements are fairly presented in accordance with the generally accepted
accounting principles (GAAP). This signifies that evidence are gathered on the
assertions embodied in the financial statements, and that the evidences are to be of use
in determining whether the assertions adhere to generally accepted accounting
principles.
(b) The assertion in Operational Audit is an operational or performance data. In
Operational audit, it involves a systematic review of an entity’s activities in relation to
specified objectives for the purposes of assessing the performance, the efficiency and
the effectivity of the operations, and identifying opportunities for improvement giving
constructive suggestions or actions.
(c) The assertion in Compliance Audit is the compliance with applicable laws,
rules and regulations, or management policies. In Compliance Audit, it is determined
whether a person or an entity has adhered to legislations or laws, and regulations laid
out