Professional Documents
Culture Documents
Accountancy
Module 1 – Day 1
Auditing & Assurance
• Introduction
• Name, employer, experience
• Timetable
• Overview program
• Requirements
Timetable this week
• 7 modules of 3 days
• Theory
• Exercises
• Case studies (in course)
• Discussions
• Presentations
• Cases
• Papers
• Exams
➢ Briefing sheet
Refer to the EPMA 2021 course
manual
Cases
• Planning
• Expectations
• Set-up
• Results
• Mandatory <> Optional
• Preparation of In Course cases
• Homework
• Minimum: 12 cases (at least 6 in module 4 till 6) with grade 5 out of 10 or
higher
• Guidelines
• Correctors
Papers
• Institutional exam
• 5 partial exams (to pass: average grade > 5,5; max of 2 insuff.)
• Integration case (to pass: > 6)
• Paper presentation (to pass: > 6)
• National exam
• Written exam part I & II
• Oral exam
➢ Entry requirement:
• Minimum: 12 cases
with grade 5 out of 10
or higher
Communication
➢ Auditing
• Professor: Prof. drs. John van Kollenburg RA
• Lecturer: various
➢ Briefing sheet
Overview
People
Products
Money
Raw Materials
Money
Capacity
Financial Statements
Relationship
Recording and Processing
Transactions Journal Entries Closing Process
Of Classes of Transactions
People
Sales Financial
Money Accounting
Purchases Reporting
Fixed Assets
General Ledger
Production
Raw Materials
F/S
Capacity People / HR
Products
Cash
Services
Property Plant
Adjustments
Equipment
Valuations
Money
Estimations
ICAIS Book-
Keeping
The assurance market and other related subjects
An Introduction
to Assurance and
Financial
Statement
Auditing
Standards on Auditing
❖ Topics
• Concept of auditing
• Information risk
• Audit theories
• Types of audits
• Types of auditors
• Audit & Assurance
Auditing
EPMA 1.6.2
Economic Demand for Auditing
EPMA 1.6.3
What is Information Risk?
• Information reflects the possibility that the information upon which the
business risk decision was made, was inaccurate.
• A likely cause of information risk can be inaccurate financial statements
(due to fraud or error).
• Executives, staff, customers and stakeholders all rely on that information
being accurate and complete.
Causes of Information Risk
• Remoteness of information
• Biases and motives of the provider
• Voluminous data
• Complex exchange transactions
• Fraud
EPMA 1.6.4
EPMA 1.6.4
Reducing Information Risk
EPMA 1.6.4
EPMA 1.6.4
The Role of Auditing
Agency Theory /
Information Theory
1
2
3
4
EPMA 1.6.6
Benefits of an Audit
• Reduction of Information Risk:
• External
• Internal
• Improvement of internal processes
• Deterrence of fraud
• Increased compliance (legal, regulatory and contractual)
• Market permissions
• Access to specialized expertise
-----------------------------------------------------
• Information theory of audit :
Benefits auditing > costs of auditing
EPMA 1.6.7
Confidence Theory
Confidence Theory
Limperg (1926)
EPMA 1.6.9
Confidence theory
• Operational
• Internal control
• Compliance
• Financial Statement
• Other?
Types of Audits
Types of Auditors
EPMA 1.6.11
Auditing and Assurance Defined
Auditing Assurance
Testing provided
information against a
set of criteria
EPMA 1.6.12
Criteria
Recording and Processing
Transactions Journal Entries Closing Process
Of Classes of Transactions
People
Sales Financial
Money Accounting
Purchases Reporting
Fixed Assets
General Ledger
Production
Raw Materials
F/S
Capacity People / HR
Products
Cash
Services
Property Plant
Adjustments
Equipment
Valuations
Money
Estimations
ICAIS Book-
Keeping
Audit & Assurance
❖ Definition of auditing:
Accumulation and evaluation of evidence about information to determine
and report on the degree of correspondence between the information and
the established criteria. Auditing should be done by a competent,
independent person.
• Information
• Established criteria
• Accumulation and evaluating of evidence
• Competent, independent person
• reporting
Auditing and Assurance Defined
Auditing Assurance
EPMA 1.6.13
Types of Services offered by Audit Firms
• Assurance Services:
• Audit of financial statements, review of financial information, and
other assurance services (e.g. assurance on a entity’s reporting on
sustainability performance)
• Related Services:
Agreed-upon procedures regarding financial information and
compilation of financial information
• Other Services:
Tax services, advisory services, accounting services and specialised
services (e.g. forensic audit)
EPMA 1.6.14
EPMA 1.6.14
Problem
Discussion in
groups and
presentation by
students
IAASB: Assurance Engagements
An engagement in which
a practitioner expresses
a conclusion designed to
enhance the degree of
confidence of the
intended users other
than the responsible
party about the outcome
of the evaluation or
measurement of a
subject matter against
criteria.
EPMA 1.10.33
IAASB: Assurance Engagements
EPMA 1.10.34
IAASB: Assurance Engagements
• Ethical requirements.
• Appropriate subject matter.
• Suitable criteria.
• Sufficient appropriate evidence.
• Practitioner’s conclusion in a written report.
• Reasonable or limited assurance.
• Conclusion in positive or negative
form.
• Rational purpose.
Assurance engagement risk is the risk that the
practitioner expresses an inappropriate
conclusion when the subject matter
information is materially misstated.
EPMA 1.10.35
The Audit Process [1] – ISA 200/ 300
• File clean-up
• Issue audit report
• Archiving
ISA 200
• The auditor shall undertake the following activities prior to starting an initial
audit:
a. Performing procedures required by ISA 220 regarding the acceptance of
the client relationship and the specific audit engagement; and
b. Communicating with the predecessor auditor, where there has been a
change of auditors, in compliance with relevant ethical requirements.
c. Performing procedures required by ISA 220 regarding the continuance of
the client relationship and the specific audit engagement;
ISA 200
• Preliminary engagement activities
• Team requirements
• Compliance with ethical requirements
• Terms of the engagement
• The engagement partner and other key members of the engagement team
shall be involved in planning the audit, including planning and
participating in the discussion among engagement team members.
• The auditor shall undertake the following activities at the beginning of the
current audit engagement:
a. Evaluating compliance with relevant ethical requirements, including
independence, in accordance with ISA 220; and
b. Establishing an understanding of the terms of the engagement, as
required by ISA 210.3.
ISA 300 • Plan and execute the audit
• Planning an audit involves establishing the overall audit strategy for the engagement
and developing an audit plan.
• Adequate planning benefits the audit of financial statements in several ways, including
the following:
• Helping the auditor to devote appropriate attention to important areas of the
audit.
• Helping the auditor identify and resolve potential problems on a timely basis.
• Helping the auditor properly organize and manage the audit engagement so that it
is performed in an effective and efficient manner.
• Assisting in the selection of engagement team members with appropriate levels of
capabilities and competence to respond to anticipated risks, and the proper
assignment of work to them.
• Facilitating the direction and supervision of engagement team members and the
review of their work.
• Assisting, where applicable, in coordination of work done by auditors of
components and experts.
ISA 300 • Plan and execute the audit
• The auditor shall establish an overall audit strategy that sets the scope, timing
and direction of the audit, and that guides the development of the audit plan.
• In establishing the overall audit strategy, the auditor shall:
a. Identify the characteristics of the engagement that define its scope;
b. Ascertain the reporting objectives of the engagement to plan the timing
of the audit and the nature of the communications required;
c. Consider the factors that, in the auditor’s professional judgment, are
significant in directing the engagement team’s efforts;
d. Consider the results of preliminary engagement activities and, where
applicable, whether knowledge gained on other engagements
performed by the engagement partner for the entity is relevant; and
e. Ascertain the nature, timing and extent of resources necessary to
perform the engagement.
ISA 300 • Plan and execute the audit
• The auditor shall develop an audit plan that shall include a description of:
• The nature, timing and extent of planned risk assessment procedures,
as determined under ISA 315.4
• The nature, timing and extent of planned further audit procedures at
the assertion level, as determined under ISA 330.5
• Other planned audit procedures that are required to be carried out so
that the engagement complies with ISAs.
The Audit Process – ISA 200/ 300
EPMA 1.6.14
Problem
1-17
Discussion in
groups and
presentation by
students
Assurance services
Assurance services
are independent
professional services
that improve the
quality of information,
or its context, for
decision-makers.
Elliott Committee
Assurance Services and IAASB Engagement Standards
IAASB Assurance Standards and Assurance Level
EPMA 1.10.49
Review of Historical Financial Information
• Review as an alternative to an audit.
• Review performed by the auditor of the entity, for
example review of interim financial information.
• Historical financial information.
• Inquiries and analytical procedures.
• Limited assurance.
• Negative form of expression of the conclusion.
EPMA 1.10.50
Related Services
Related
Services
ISRS
4400
Provide
Agreed-Upon No
Procedures
Assurance
Compilati ISRS
on 4410
EPMA 1.10.51
EPMA 1.6.14
Case: Rose Revenues
Discussion in
groups and
presentation by
students
Plenary discussion
of day 1