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Auditing Theory and Practice: Overview
Jul 22, 2024
Auditing Theory Concept and Practice
Introduction to Services and Statements
Financial Statements
Typically prepared in accordance with standards.
Filipino services related to financial statements must be fairly presented by management.
Categories include: audited historical financial statements, reviewed historical financial statements, and other assurance engagements.
Compliance and Assurance
Compliance
: Financial statements must comply with Philippine Financial Reporting Standards (PFRS).
Assurance Levels
:
Reasonable Level of Assurance
: Positive assurance, gathering sufficient evidence.
Limited or Moderate Level of Assurance
: Negative assurance, based on limited procedures.
Auditing and Related Services
Audit of Financial Statements
: Ensures statements are fairly presented in all material respects.
Review of Historical Financial Statements
: Provides a negative assurance based on limited procedures.
Agreed-Upon Procedures
: Related services with no direct assurance.
Compilation Services
: Collection, classification, and summarization of financial information without assertions.
Types of Audits
Operational Audit
: Assesses the effectiveness and efficiency of entity operations.
Integrated Audit
(for publicly listed and public companies): Combines financial audit with audit of internal controls.
Forensic Audit
: Investigates and detects fraud.
Types of Auditors
Independent or External Auditors
: Must be certified public accountants (CPAs). Responsible for auditing the financial statements of businesses.
Internal Auditors
: Employees of the entity who help achieve business goals through internal control improvements and compliance audits.
Government/Internal Revenue Agents
: BIR agents check compliance with the National Internal Revenue Code.
Industry Specialization of Auditing Firms
Firms may specialize in various industries such as manufacturing, banking, merchandising, etc.
Firms offer additional services like taxation, consulting, and forensic audits.
Roles in Auditing Firms
Managing Partners
: Develop firm policies and oversee daily management.
Managers
: Supervise specific audit engagements.
Seasonal Dynamics
: Peak auditing season from December to April due to regulatory reporting deadlines.
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