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The Demand for Audit and Other Assurance Services
Chapter 1
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley
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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
1-2
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley
Learning Objective 1
Describe auditing.
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley
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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.
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 1-4
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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©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley
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
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley
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Competent, Independent Person
Competence Independence Judgment and Experience
Evaluation of Evidence
Proper Conclusion
©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley 1-7...