Auditing and Assurance

Services

CTRL 505
Winter 2019
Chapter 1 (Cont’d) & Ch.2
Outline
Types of Audits and Auditors

GAAS (Generally Accepted

Auditing Standards)
 Then,…….
Financial audit is concerned with determining whether
the overall financial statements are prepared in
accordance with GAAP (Generally Accepted
Accounting Principles).

Operational Audit is concerned with reviewing any part

of an organization’s operation procedures (especially
those used to produce its goods or services to customers)
and making recommendations to managers on how to
improve their operations.

Compliance Audit is concerned with determining

whether an organization (auditee) is following or
complying with a set of procedures, rules and regulations
set down by some higher.
Guess which type of
audit?
 When an auditor wants to determine whether the
financial statements are prepared in accordance to
the GAAP, this is called………
Financial Audit
 When an auditor wants to determine whether Mc.
Donald’s Egypt is coping with the quality, Hygiene
and service standards of Mc Donald’s International,
this is called,………….
Compliance Audit
 When an auditor wants to determine the degree of
customer satisfaction of FedEx. Co. through
evaluating the degree of efficiency and
effectiveness in the process of distribution of letters
and packages of FedEx using the number and the
content of the customers’ complaints., this
called………..
Operational Audit
Guess which type of
Auditors?
 AnAuditor who is responsible for expressing an audit
opinion on whether the financial statements of a
publically listed companies are prepared in
accordance with GAAP.
◦ Certified Public Accountant (CPA)
 An Auditor who is responsible for auditing
governmental entities.
◦ Government Accountability Office Auditor (GAO)
 An Auditor who is responsible for auditing thetax
return forms for individuals and private companies.
◦ Internal Revenue Service Agents (IRS):
 An auditor who is employed by a private company
itself to audit the management.
◦ Internal Auditor
Which type of Auditor ?
Which type of Audit?
Internal
CPA GAO IRS
Auditor

Mainly
Financial ALL Types ALL Types
Only
Audit for of Audit for of Audit
Complianc
publicly governmen for the
e Audit
listed tal entities Mgmt
companies
Question 2
1- A

2-B

3-D

4-C
Question 3
Type of Type of
Information
Auditor Audit
  GAO Operational
1. Disbursements made by a branch of the federal government for a
special research project to determine whether it would have been possible
to accomplish the same results at a lower cost to the taxpayers.
  CPA Operational
2. Computer operations of a corporation by external auditor to evaluate
whether the computer center is being operated as efficiently as possible.
  Internal Financial
3. Assessing annual statements for the use of management. Auditor
 
  GAO Operational
4. Operations of the Internal Revenue Service Agency to determine
whether the internal revenue agents are using their time efficiently in
conducting audits.
 
  IRS Compliance
5. Examining Income tax returns of a corporation to determine whether
the tax laws have been followed.
 
 GAAS ( Generally Accepted
Auditing Standards)
Auditing standards are general
guidelines to aid auditors in
fulfilling their professional
responsibilities in the audit of
historical financial statements.

They include consideration of

professional qualities such as
Competence and Independence,
Reporting Requirements, and
Evidence.
 GAAS
The 10 GAAS fall into three
categories:

1- General Standards

2- Standards of Field Work
3- Reporting Standards
1- General Standards
•Stress the important personal
qualities that the auditor should
possess.
1) Adequate technical training
and proficiency.
Formal basic education in auditing and accounting + adequate
relevant practical experience

2) Independence in mental attitude.

An auditor shouldn’t be biased whether in fact or in appearance by
not having either relatives or financial interests

3) Due professional care.

Proper audit documentation + Proper type of audit report
2- Standards of Field Work
Concern evidence accumulation
and other activities during the
actual conduct of the audit.
◦ 1) Proper planning and supervision.
◦ Sufficient audit plan + Proper supervision of the assistants
(junior auditors)

◦ 2) Internal control understanding.

◦ Understand the client’s business industry + Identify the
significant client’s business risks + Understand the client’s
internal control system

◦ 3) Sufficient competence evidence.

◦ Accumulate enough in terms of quantity (Sufficient) and of
high quality in terms of quality (Competence) audit evidence.
3- Standards of Reporting
1) Statements prepared in
accordance with GAAP .
2) Circumstances when GAAP not
followed consistently.
3) Informative disclosures.
Presence of Footnotes in the financial statements.

4) Expression of opinion on
financial statements.