Escolar Documentos
Profissional Documentos
Cultura Documentos
• Provides confidence and trust to investors and public in the post-Enron era.
• Section 302 requires .the CEO (Chief Executive Officer) and CFO (Chief
Financial Officer) of a company to sign on a quarterly basis on financial
statement of that quarter, attesting fairness and internal control effectiveness.
They also must report any significant changes in internal controls since their
last evaluation.
• Section 906 is required to Section 302 and 404, and requires that CEOs and
CFOs ensure all financial reporting (including annual and periodic reports)
fairly presents, in all material respects, the financial condition and results of
operations of the issuer. It also provides for significant criminal penalties’ for
no-compliances.
• Section 201 prohibits a registered public accounting firm from peformig both
audit and non-audit services.
• Section 409 requires disclosure to the public on rapid and current basis
additional information concerning material changes in the financial condition
or operations of the issuer.
2 A. Bring out the importance of financial audit to companies.
Financial statements are ordinary prepared and presented annually and are directed
toward the common information needs or a wide range of users.
1. Shareholders
2. Investors/Stock Exchange
3. Financial Institutions
4. Government
5. General Public
Many of these users rely on the financial statement as their major source of
information because they do not have the power to obtain additional information to
meet their specific information needs.
We have already studied in earlier units how goal conflict might result in weakness in
internal controls. Managers may try to cash on immediate opportunities by neglecting
long term health of the company.
In these situations audit is a guard or control that tries to prevent such tendency of the
director’s managers of the business to neglect the long term goals of the company.
B. How does audit help in preventing frauds and errors?
Ans.
Because audit is based on Standards, there will be uniformity and quality in the
financial statement over the long run. Thus comparison between two sets or audited
financial statements is more meaningful than between two non-audited financial
statements.
Auditing and Assurance standards by the ICAI include the following standards:
AAS codify the existing best practices in the area of auditing. AASs are critical for
the proper discharge of functions as auditor. Statements on Audit are issued for
compliance by Members. General Clarifications to AAS are also issued in matter
where doubts exist.
Accordingly. While discharging their attest function, it will be the duly of the
members of the ICAI to ensure that these are followed I the audit of financial
information covered by their audit reports.
If, for any reason, a member has not been able to perform an audit in accordance with
such Standards, his report should draw attention to the material departures there from.
AASB may also publish Technical Guides, Studies and other papers.
Studies and other papers are aimed at promoting discussion or debate or creating
awareness on issues relating to quality control, auditing, assurance and related service,
affecting the profession.