Accounting

The Demand for Audit and Other Assurance Services

Chapter 1

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Sarbanes-Oxley Act

Enron WorldCom

The Act established the Public Company Accounting Oversight Board. It also requires auditors to report on the effectiveness of internal control over financial reporting. Tyco

Applies to Public firms

Adelphia

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Learning Objective 1

Describe auditing.

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Nature of Auditing

Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person.

Must obtain sufficient quality and volume of evidence and see if it correspond with criteria.

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Information and Established Criteria

To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information.

FASB

Criteria

IASB

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Accumulating Evidence and Evaluating Evidence

Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria.

Transaction data

Client inquiry

Oral Testimony

Written and electronic Communications with outsiders

Observations

by auditor

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Competent, Independent Person

Competence Independence Judgment and Experience

Evaluation of Evidence

Proper Conclusion

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