AUDIT

AN OVERVIEW
OBJECTIVES
1)
Explain what an audit is, what it provides and
why it is demanded
2)
Know what are the different types of audits
and auditors
3)
Understand the role of management and the
independent auditor
4)
What is the theoretical framework of auditing
What is an AUDIT?
PSA 200
- To enable auditor to express an opinion
whether the financial statements are
prepared, in all material respects, in
accordance with the applicable financial
reporting framework.
What is an AUDIT?
American Accounting Association (AAA)
Types of Audits
Financial statement audit -> fairness of
FS
Compliance audit -> review of an
organizations’s procedures
Operational audit -> performance or
management audit
Types of Auditors
1. External Auditors
2. Internal Auditors
3. Government Auditors
Independent Financial Statement
Audit
Responsibility for the Financial Statements
- management and those charge with
governance
- design, implementation and maintenance
of internal control
- unrestricted access for the auditor
Independent Financial Statement
Audit
Assurance provided by the auditor
- in accordance with Philippine Standards
on Auditing
- reasonable assurance that financial
statements are free from material
misstatements
Limitations
1)The use of testing / sampling risk
2)Error in application of judgement / non-
sampling risk
3)Reliance on management’s representation
4)Inherent limitations of the client’s accounting
and internal control systems
5)Nature of evidence
 General Principles PSA 200
1) The auditor should comply with relevant ethical
requirements
2) The auditor should conduct an audit in accordance with
the Philippine Standards on Auditing
3) The auditor should exercise professional judgement
4) The auditor should obtain sufficient appropriate audit
evidence
5) The auditor should plan and perform the audit with an
attitude of professional skepticism
Why is it demanded?
1. Conflict of interest
2. Expertise
3. Remoteness
4. Financial consequences
Theoretical Framework of
Auditing
V All financial data are verifiable
I Maintain independence
N No long-term conflict
E Effective internal control system
C Consistent compliance
P Held true in the past will continue to hold in the future
P Benefits the public