Audit and Assurance

Session #1 – The Profession of Auditing

Jeremy C Bradley, MBA

Learning Objectives

• Appreciate how auditing developed, and describe the impact of

historical factors and the regulatory and professional
framework on the role of auditors.
• Explain the scope of auditing within the assurance framework,
and the nature of audit activities including the relationship of
auditing with non-audit services and quality procedures.
 Auditing Roles

• The conformance role of auditing

– Detection of fraud and errors in business accounting
– Ensuring that ‘reasonable care and skill’ are taken in a company’s
financial planning and reporting processes
• The credibility roles of auditing
– Enhancing the credibility of financial information
– Providing assurance that the business’ financial reports are reliable
 Assurance vs.
Non-assurance

• Assurance
– Audits and reviews of financial information
– Internal control mechanisms
– Ensuring the reliability of systems
– Ensuring business compliance with federal and international
regulations
• Non-assurance
– Procedures outside the scope of standard auditing / assurance
– Management consulting and advisement
– Business recovery from debt
 The Assurance
Framework
• Relationships between shareholders, clients,
management, and the auditor
• Degrees of assurance …
– Audit engagements involve high but not absolute (positive)
assurance
– Review engagements provide reasonable (negative) assurance
• Relationships are important because they determine the
amount of assurance required in the auditing process. In
any case the report of the auditor will be based on actual
findings.
 Regulation

• Accounting professional organisations and auditing bodies

– Aim to maintain standards of qualifications, practice, and
professional conduct
– Private sector
• ICAEW, ICAS, ACCA, LSE
– Public / government bodies
• FRC, IASB, IFAC
• You should make yourself aware of the governing bodies
and professional organisations unique to your jurisdiction.
Financial Reporting
Council (FRC)

• Represents the interests of users and preparers of

financial statements in the United Kingdom
• Also appoints members to
– Accounting Standards Board (ASB)
– Auditing Practices Board (APB)
– Board for Actuarial Standards (BAS)
– Financial Reporting Review Panel (FRRP)
– Professional Oversight Board (POB)
– Accountancy and Actuarial Discipline Board (AADB)
– Committee on Corporate Governance
 International
Standards

• International Accounting Standards Board (IASB)

– Sets mandates for EU-listed companies
• International Federation of Accountants (IFAC)
– Represents the worldwide accountancy profession
– Monitors business ethics
Companies Act 2006

• Auditors must be:

– A member of a recognised supervisory body (RSB)
– ‘Properly supervised’ and ‘appropriately qualified’
– Follow RSB rules and standards to ensure technical and ethical
standards of conduct
 The Auditor’s Job

• Three types of Auditors

– External (independent)
– Internal
– Government
• Types of Audit Activities
– Financial statement audits
– Internal control effectiveness
– Compliance audit
– Value for money audit
– Environmental audit
– Internal audit (self-checks)
 Summary

• Two main auditing roles

– Conformance
– Credibility
• Assurance is different from non-assurance
• Relationships between levels of stakeholders is important
• Public and private bodies govern audit activities
• Three types of auditors
– Internal
– External (independent)
– Government