Auditing

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CHAPTER 1

INTRODUCTION AND

OVERVIEW OF AUDIT AND

ASSURANCE

Prepared by:

Daniella Juric

RMIT University

LEARNING OBJECTIVES

After studying this chapter you should be able to:

1.

2.

3.

4.

5.

Define an assurance engagement

Differentiate between different types of assurance services

Differentiate between different levels of assurance

Verify different audit opinions

Differentiate between the different role of the preparer and the auditor, and

discuss the different firms that provide assurance services

6. Justify the demand for audit and assurance services

7. Discuss the different regulators and regulations surrounding the

assurance process

8. Verify the audit expectation gap.

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AUDITING AND ASSURANCE

DEFINED

An assurance engagement is defined as ‘en

engagement in which an assurance practitioner

expresses a conclusion designed to enhance the

degree of confidence of the intended users other

than the responsible party about the outcome of

the evaluation or measurement of a subject matter

against criteria.’

AUDITING AND ASSURANCE

DEFINED

• ‘intended users’ - the people for whom the auditor prepares

their report.

Example: shareholders, creditors, employees

• ‘responsible party’ - the person or organisation responsible

for preparing the financial statements. Example: company

management

• ‘subject matter’ – that which the auditor is expressing a

conclusion on. Example: financial reports

• ‘criteria’ – the rules or principles by which the subject matter

is being evaluated. Example: Accounting standards and

interpretations and Corporations laws

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DIFFERENT ASSURANCE SERVICES

THE MOST COMMON ASSURANCE SERVICES ARE:

1. FINANCIAL REPORT AUDITS

an engagement designed to express an opinion

about whether the report is prepared in all material

respects in accordance with a financial reporting

framework (ASA 200, para. 11; ISA 200, para 11.

DIFFERENT ASSURANCE SERVICES...