Professional Documents
Culture Documents
Chapter 01
Auditing and Assurance Services
Our system of capital formation relies upon the confidence of millions of savers to invest in companies. The auditors opinion is critical to that trust." -- James R. Doty, Chairman Public Company Oversight Board (PCAOB)
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Learning Objectives
Define information risk and explain how the financial statement auditing process helps to reduce this risk, thereby reducing the cost of capital for a company. Define and contrast financial statement auditing, attestation, and assurance type services. Describe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of the audit. Define professional skepticism and explain its key characteristics. Describe the organization of public accounting firms and identify the various services that they offer. Describe the audits and auditors in governmental, internal, and operational auditing. List and explain the requirements for becoming a certified information professional.
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Information risk
The risk that the information disseminated by a company will be materially false or misleading. Users demand an independent third party assessment of the information
Business risk
The risk that an entity will fail to meet its stated business objectives
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Source: U.S. Congress, Sarbanes-Oxley Act of 2002, Pub. L. 107-204, 116 Stat/ 745 (2002).
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Professional Skepticism
Refers to an auditors questioning mindset towards representations made by management and evidential matter gathered
Inquiry alone is never enough. The auditor must obtain sufficient corroborative evidence. Unusual financial trends need investigation Documents are always checked for authenticity or possible alteration Ask questions, get answers, then verify the answers.
Must be skeptical because a potential conflict of interest always exists between the auditor and the client.
Management wants to portray the company and its operations in the best possible light. Auditors want to make sure that this portrayal is fair and accurate.
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