Auditing 2

(AUD2141)

2024
 Introduction

oMr C. MUNKULI CA {SA}; RA;CFE;MCom(Tax)

o Charles.munkuli@univen.ac.za
 How to master the subject
o STUDY! STUDY! STUDY!
o Teaching and learning philosophy
o You need to KNOW the basics and APPLY!!!!
o Attend lectures and tutorials!!!
o Do assignments
o Objective tests (Learn from them)
o Ask immediately if you don’t understand
o Do a lot of practical examples (At the end of each chapter there are
questions- come and get the solutions from the lecturers when you show
your attempts)
Very important info
The Auditor, The Process and The
Qualification

UNIT 1
2024
 Unit 1: Resources and support

Lecture attendance
Chapter 1 of textbook
Slides
Tutorial attendance
Application of theory by doing questions at end
of chapter
 Learning outcomes
8

Display an understanding of the concept of

“auditing”
Show an appreciation for the development of the
auditing profession
Discuss the benefits of an audit
Identify the different types of auditors
 Learning outcomes
9

Describe the functions of the IRBA

Describe the professional bodies governing the
accountancy profession
Provide background on the International Standards
on Auditing (ISA)
List the fundamental principles of the theory of
Auditing
Describe the career path of an auditor.
 Development of auditing
10

International South Africa

 Romans – to hear
 Arabic notation
 double entry system
 Regulated auditing
profession (statutory
requirement)
 1800’s – US
 Mid 1900’s in UK
 Ownership vs. Management
 1894-1909 Society of
Accountants and Auditors in
each Provinces
 1927 CA designation Act
 1934 service under articles
 1951 PAA Act unified Societies
 1980 SAICA established
 1991 New PAA Act
 2006 AP Act ( under IRBA)
 Definition
11

Audit in general
 Investigation/examination/verification
 By an Independent body

Audit in terms of AFS

 Express an opinion
 AFS = fair presentation of results and financial position
 Definition – IAASB
12

“to enable an auditor to express an opinion

as to whether or not the financial statements fairly
present, in all material respects,
the financial position of the entity at a specific date, and
the results of its operations and cash flow information
for the period ended on that date,
 in accordance with an identified financial reporting
framework
and/or statutory requirements.”
 Role of the Auditor
13
Companies must BoD -
prepare AFS Responsible

Shareholders, etc
relies on AFS
Companies GAAP/IFRS
Act (MUST) (HOW)
Most important
function of an
Auditor

Law vs Enhancement of credibility

 Benefits of an audit
14

Stakeholders Benefits

Shareholders and potential investors Reliable AFS: improving credibility of

AFS

Revenue services Identify tax issues

Financial institutions Sound financial information for lending
decisions
Management Sound control environment & systems
Customers Good corporate governance –
Suppliers improved reputation
Society
 Types of Auditors
15

INTERNAL AUDITOR EXTERNAL AUDITOR

• Within an organisation • Final responsibility for external
• Appraisal activity- examining, audit
evaluating, monitoring effectiveness • Statutory audit
• Serve the public interest • Objective opinion on F/S
• Accounting and internal control • Consider statutory/ other
systems requirements

Other: Forensic, government, IT Auditor

 Regulation of the accounting profession
16

Professional
Legal
PROFESSIONAL
BODIES
IRBA
• Statutory body
• AP Act of 2006
IFAC (int SAICA ACCA (Ass
• Public Accounting (attest function) federation for
• CA(SA)
of Chartered
accountants) Certified
• Registered Auditor (RA) • AGA(SA) Accountants)
• Global
• AAT(SA) UK/Ireland
• IAASB

Other – CIMA,SAIPA,IIA
 IRBA
17

IRBA functions:
• Regulatory framework for education and training of
accountants and auditors
• Serve needs of South Africa
• Maintenance and improvement of standards of RA
• Protect and support RA

Auditing Profession Act of 2006 – replaced PAA Act of 1991

 Professional bodies governing the accountancy
profession
18

International Federation of Accountants (IFAC):

• Global organisation for accounting profession
• Objectives:
• Serve public interest
• Strengthen worldwide accounting profession
• International convergence of professional standards
• Speaking on public interest issues regarding professions expertise
• IAASB - International Auditing & Assurance Standards Board –
uniformity of accounting practices worldwide
 South African Institute of Chartered Accountants (SAICA)
19

• Services – on going professional education, technical advice and workshops to

members
• Member of:
• IFAC Council
• IASC – International Accounting Standards Committee
• Designations:
• CA(SA) – 3yr degree, honours, CTA, 3yr training contract, ITC 1, APT and
APC
• AGA (Associate General Accountant) – accounting function
• 3yr degree, 3 yr training contract and QE
• AAT – Associate Accounting Technician -2yr training plus QE
 Association of Chartered Certified Accountants (ACCA)
20

• International accounting body

• Statutory recognition in UK & Ireland
• Members – Chartered Certified Accountants
• Work as Registered Auditors in UK and Ireland
• Provide global access to accounting profession
 Other Professional Bodies
21

CIMA –Chartered Management Accountant – UK qualification

SAIPA– Professional Accountant (SA)
IIA – Institute of Internal Auditors of SA
Etc
 22

Focusing on
External Auditors
(Chartered Accountants)
 Auditing Pronouncements
23

South Africa International

Before = Statements of
generally accepted auditing
standards (SAAS)
Issued by Auditing Services
Board (ASB) of the IRBA
Now Auditing and
Assurance Services Board
(AASB) of IRBA adopted
ISA’s for use in SA
 International Standards
of Auditing (ISA)
 Issued by IAASB of IFAC
International pronouncements:
ISA - Auditing
ISRE – Review engagements
ISAE – Assurance Engagements
ISQC – Quality Control
 ISA
(Will cover in detail in Unit 9)
24
Statements of generally accepted auditing standards
Applied in audit of
 F/S

 Other information
 Related services
Practice statements provide practical assistance
Departure from a statement of ISA in order to achieve the
objective of an audit more effectively:
 the auditor should be prepared to justify reason for departure.
Statements of ISA need only be applied to material matters.
 Fundamental principles of the theory of Auditing
25

Principles/Assumptions:
Financial data can be verified.

Conflict of interest does not necessarily exist between the

auditor and management of the audited company.

The financial statements and other information presented

for review is free from conspiracies and other irregularities.

Internal control procedures reduce the possibility of errors

and irregularities.
 Fundamental principles of the theory of Auditing (continued)
26

The consistent application of International Financial Reporting

Standards (IFRS) results in a reasonable account.

In the absence of clear evidence to the contrary, what was true
in the past will remain true in the future.

When an auditor investigates financial data in order to express

an objective opinion, he acts exclusively in his capacity as the
auditor.

The professional status of the independent auditor implies

certain professional responsibilities.
 Study Route for a prospective CA(SA)
B.Acc B.Com
(3 years) (3 Years)
BCTA
CTA (1 year)
(1 year)
January : ITC
(articles start in Feb after
CTA) FAIL: Another chance at ITC in June of the same year
(max 5 attempts)
PASS: 6 months refresher course (APT)
during 2nd year of articles

APC after minimum of 18 months of

articles in Nov
Register as CA(SA)
Another year of articles to conclude all the
Register as RA (if
SAICA competencies articles were done inside public
practice)
 Chartered Accountant (CA(SA))
28

CA(SA)
Public Practice (Audit) Other disciplines
 Big 4 & smaller audit firms
(commerce)

CA(SA) Register with SAICA

Register with SAICA

RA
Register with IRBA
(sign off AFS/
CA(SA)RA
perform attest function)
 SAICA Competency Framework
Compulsory skills
oEthics and professionalism
oPersonal attributes
oFinancial and non-financial
reporting
oProfessional skills
Advanced experience
Comprehensive
understanding and application
of concepts and techniques in
complex environment
29
Elective skills Residual skills
oStrategy, risk and oNot selected under elective
governance skills option
oFinancial management
oAuditing and assurance
oTaxation
oManagement decision
making
Comprehensive Basic experience, general
understanding and application awareness of vocab and
of concepts and techniques in related concepts of discipline
complex environment in uncomplicated situations.