the expertise of IT and processes, and

accountant. detecting and pursuing

fraud within the
Accountants as System Auditors company
● Auditor: an expert who expresses an ■ Audit Committee is
opinion about the fairness of a required for publicly
company’s financial statements listed companies
○ Constituencies distinguishes (members of the board
external and internal auditing who serves as an
● All types of audits require a thorough independent check and
understanding of AIS functions and balance)
internal controls ■ They normally report to
● Accountants perform audits which the audit committee or
typically involve the AIS and these board of directors; they
audits include: do not report to
controller/financial
○ Internal Auditing
manager, CFO, CEO,
(Operational Audit) is an
or head of operations
independent, objective
assurance and consulting ■ Self imposed
activity designed to add value independence
and improve an organization's ➢ Administrativel
operations. y - CEO
➢ Functionally -
■ They work for the
Audit
company
Committee/BD
■ Normally they are CIAs O
(Certified Internal ■ It can be outsourced
Auditor) and CISAs
(Certified Information ○ IT Auditing is the review of the
Systems Auditor) computer-based components of
an organization. The audit is
■ Doesn’t necessarily
often performed as part of a
have to be a CPA,
broader financial audit.
basta CIA or CISA
○ Fraud audits is a detailed
■ Standards, Guidance,
examination of the financial
and Certification by IIA
records of a business, with the
and ISACA
intent of finding instances of
■ Independent Appraisal fraud. It had increased in
■ Operational Audits: popularity as a corporate
Financial audits, governance tool
performance of IT ■ To investigate
audits, examination of anomalies and gather
the operations evidences of fraud that
compliance with may lead to criminal
organizational policies, conviction
legal obligations, ■ Increased in popularity
evaluation of
as a corporate
operational efficiency
governance tool
■ Helps accomplish
■ Investigated when
objectives by bringing
there is an expected
a systematic,
theft of assets or
disciplined approach to
financial fraud
evaluate and improve
the effectiveness of risk ■ May be initiated by
management, managers to
control,and governance investigate employees

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 ■ May be initiated by the that have
board to investigate direct bearing
management on the financial
■ CFE (Certified Fraud statements
Examiners) are the ➢ SUBSTANTIVE
ones who engage in TESTS are
this tests that
■ Guidance and determine
Certification by ACFE whether
database
○ External Auditing
contents fairly
(Attestation) is an
reflect the
independent attestation and
organization's
opinion (audit report)
transactions;
regarding financial statement
verification of
presentation.
FS accounts by
■ External examining the
auditors/financial related data
auditors that are in the
■ CPA is required databases
■ Public service ■ Final Output: Audited
■ ATTEST FUNCTION is financial statements
an independent ■ Most critical element is
auditor's responsibility auditor independence,
to opine as to the fair which means the
presentation of a client auditor is free from
firm's financial factors that might
statement. influence the audit
■ Requires auditors report.
(independent CPAS) to ■ Accounting firms are
test internal controls permitted to provide
and perform both advisory and
substantive tests of attest services only to
data. non-audit clients
■ Financial audit ● External VS Internal Auditor
■ Involves independent ○ External auditors represent
examination of a outsiders and internal auditors
company’s financial represent the interests of the
statements for the CPA organization.
to express their opinion
on its fairness SOX legislation restricts non-audit services
■ Only CPAs can do this that auditors may provide and prohibits
➢ TESTS OF them from providing:
CONTROLS ● Other accounting services including
are tests that bookkeeping financial information
establish systems design and implementation,
whether appraisal or valuation, actuarial, and
internal internal audit outsourcing
controls are ● Management or human resources,
functioning broker or dealer, investment adviser, or
properly; investment banking services.
internal ● Legal services and expert services
controls unrelated to the audit.
(embedded in
the system)

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