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Group 1
RELATIONSHIP BETWEEN
ACCOUNTING AND AUDITING
The relationship of accounting and auditing is
close, the task of accounting is to reduce a
tremendous mass of detailed information to
manageable and understandable proportions.
The other hand, the task of auditing is to review
the measurements and communications of
accounting for propriety.
Auditing is analytical, not constructive , it is
critical , investigative, concerned with the basis
for accounting measurement and assertions.
How can auditor can understand there is condition
of organization weakness on IC
What happen if the auditors give the wrong opinion
without reason, so what the responsibility of auditor
How the way the company told the shareholders if
there is a fraud will impact the company bankrupt
How should auditors do, if there is misapprotiation
of asset?
What characteristic could make illegal acts influence
on auditors responsibility?
How the auditors responsible to detect illegal acts
well performing financial statement?
IMPORTANT FUNDAMENTAL CONCEPTS
Verifiability
Data are verifiable when two or more qualified individuals,
working independenty, reach essentially simillar
conclutions from an examination of the data. Verifability is
primarily concerned with the avaibility of evidence attsting
to the validity of the information being considered
Professional Jugment
Materiality
Auditors is only designed to look for misstatement in financial
statements that are materail, orsignificant, to financial statement
users. Auditors may not attempt to verify items that are so small,
or immaterial, that they have no significance for financial
statement users
Independent Auditor Relationship
Management
In an auditing context, management refers to the company
officers, controller, and key supervisory personnel. During
the course of audit, there is extensive interaction between
the auditor and management. To obtain the audit evidence,
the auditor often requires confidential data about; the
entity. It is, therefore, imperative to have relationship
based on mutual trust and respect.
Board of Directors & Audit committee
Act on behalf of owners becaus the board of directors of an
entity is responsible for seeing that the entity operates in
the best interests of the shareholders.
control environment. As an independent unit within the
entity, the internal auditor examines, evaluates and
monitors the adequacy and effectiveness of the internal
control structure.
Users of audited financial statement expect auditors to:
Auditor Independence
Reasonable Assurance
2. The auditor must plan and perform an audit to respond to identified risk
3. The auditor shuold conduct the audit with due professional care and an
attitude of professional skepticism.
DETECTING AND REPORTING FRAUD
Responsibility to Report Fraud
When the auditor conclude that the financial statements are materially misstated
and the financial statement are not prepared in accordance with GAAP, the auditor
should insist that the financial statement be revised by management.
Detecting and Reporting Illegal Acts
The determination of whether an act is
Responsibility to
illegal is dependent on legal judgment
Detect Illegal Acts
that normally is beyond the auditor’s
professional competences
The auditor’s primary responsibility is for fair
1. Evaluating internal control over financial reporting
The auditor’s consideration of an entity’s ability to continue as a going
concern, provide that the auditor has a responsibility to evaluate whether
there is substantial doubt about the entity’s ability to continue as a going
concern for a resionable period of time, not to exceed one year beyond the
date of the financial statement being audited.
The standard report on financial
statement
Title and Adress
Introductory Paragraph
Scope Paragraph
Opinion Paragraph
Additional Explanation Wording
Departures from the standard report
Standard report with explanatory language
Other types opinion
Qualified opinion
Adverse opinion
Disclaimer opinion
Key Terms
1st: Public company auditors report on
management’s financial statements as discussed in
the preceding section
Effective internal controls over
financial reporting serve to
safeguard public resources against
material loss due to waste, abuse,
mismanagement, errors, fraud,
omissions, or other irregularities.