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1、Chapter 1 Auditing and Assurance ServicesIf you want to be successful,its just this simple:Know what youre doing.Love what youre doing.And believe in what youre doing.-Will Rogers McGraw-Hill/IrwinCopyright 2008 by The McGraw-Hill Companies,Inc.All rights reserved.Chapter 1 Objectives1.Define inform
2、ation risk and explain how auditing and assurance services play a role in reducing this business risk.2.Define and contrast auditing,attestation,and assurance services.3.Describe and define the management assertions embodied in financial statements,and explain why auditors use them as a focal point
3、of the audit.4.Explain some characteristics of professional skepticism.5.Describe the organization of public accounting firms and identify the various services they offer.6.Describe the audits and auditors in governmental,internal,and operational auditing.7.List and explain the requirements for beco
4、ming a certified information professional.1-3User Demand for Reliable Information Business risk?Business risk?Todays informationTodays informationMore complexDemanded by remote usersDemanded in a more timely mannerHas far reaching consequences Information riskInformation risk the risk(probability)th
5、at the information(mainly financial)disseminated by a company will be materially false or misleading.users demand an independent third party assessment of the information.1-4Distinguish BetweenAuditing and AccountingAccounting is the recording,classifying,and summarizing of economic eventsfor the pu
6、rpose of providing financialinformation used in decision making.Auditing is determining whetherrecorded information properlyreflects the economic events thatoccurred during the accounting periodReview Checkpoints1.What is business risk?2.What conditions increase demand for relevant,reliable informat
7、ion?3.What risk creates a demand for objective outsiders to provide assurance to decision makers?Exhibit 1.2Overview of Financial Statement Auditing1-7Definition of AuditingAuditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions a
8、nd events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.Financial Statements(including footnotes)GAAPAuditors Report/Other ReportsPersons who rely on the financial reportsCreditorsInvestorsSource:American A
9、ccounting Association Committee on Basic Auditing Concepts.1973.A Statement of Basic Auditing Concepts,American Accounting Association(Sarasota,FL).1-8The Relationships Among Auditing,Attestation,and Assurance EngagementsAssurance ServicesAny InformationAttestation ServicesPrimarily Financial Inform
10、ationAuditingFinancial Statements1-9Assurance Services Assurance servicesAssurance services are independent professional services that improve the quality of information,or its context,for decision makers.ExamplesExamplesConsumer reportsUnderwriters laboratoriesCPA WebTrustPerformance ViewPrimePlus
11、Services1-10Attestation EngagementsAn attestation engagementattestation engagement -a practitioner is assesses and reports on“subject matter or an assertion about the subject matter that is the responsibility of another party.”Some financial attestation engagements(other than audits)Supplementary fi
12、nancial statisticsPro forma financial informationFinancial forecasts and projectionsSome non-financial attestation engagementsCompliance with contractual requirementsEffectiveness of internal control systemsInventory quantities and locations1-11Sarbanes-Oxley Act of 2002In response to several accoun
13、ting related corporate scandals Congress passed the Sarbanes-Oxley Act Sarbanes-Oxley Act The Acts major provisions include:Requirement of CEO/CFO certification of financial statementsRequirement of auditor examination of company internal controlsCreation of the Public Company Accounting Oversight B
14、oard(PCAOB)to serve as an auditing profession“watchdog.”Prohibition of certain client services by firms conducting a clients audit.1-12Sarbanes-Oxley:Sarbanes-Oxley:Managements Responsibility For Financial Managements Responsibility For Financial ReportingReportingOne of its most important provision
15、s(Section 302)states that the key company officials must certify the financial statements.The company CEO and CFO must sign a statement indicating:1.They have read the financial statements.2.They are not aware of any false or misleading statements(or any key omitted disclosures).3.They believe that
16、the financial statements present an accurate picture of the companys financial condition.Source:U.S.Congress,Sarbanes-Oxley Act of 2002,Pub.L.107-204,116 Stat/745(2002).1-13PCAOB Management Assertions Existence or occurrence Existence or occurrence Assets included in accounts exists and events that
17、give rise to transactions have taken place Rights and obligationsRights and obligations-Entity has a legal claim on all assets and revenues reported and has a legal responsibility for all liabilities and expenses Completeness Completeness-All transactions have been recorded Valuation or allocation V
18、aluation or allocation Transactions are recorded at the correct amount in the proper period Presentation and disclosure Presentation and disclosure All accounts are presented in the appropriate place and all information required has been disclosed in the statements and footnotes.1-14Management Asser
19、tions(SAS 106SAS 106)Transaction Assertions Occurrence Occurrence Events giving rise to transactions have taken place Completeness and cutoff Completeness and cutoff-All transactions have been recorded and are recorded in the appropriate period AccuracyAccuracy Transactions are recorded at the corre
20、ct amount Classifications Classifications Transactions have posted to the proper account1-15Management Assertions(SAS 106)Balance Assertions Existence Existence Balances include only assets exist Rights and obligations Rights and obligations Entity has legal claim on all assets and revenues reported
21、Entity has a legal responsibility for all liabilities and expenses CompletenessCompleteness Balances include all items Accuracy and valuation Accuracy and valuation Balances included items recorded in the proper period at the proper amount1-16Management Assertions(SAS 106)Presentation and Disclosure
22、 AssertionsPresentation and Disclosure Assertions Occurrence and rights and obligations Occurrence and rights and obligations items presented include information regarding ownership CompletenessCompleteness -All accounts are included Classification and understandability Classification and understand
23、ability All accounts are appropriately grouped Users can comprehend statements and disclosures Accuracy and valuation Accuracy and valuation Statements include proper measurements1-17Exhibit 1.5Example Assertions and their Relationships to the Financial Statements1-18Professional Skepticism Professi
24、onal skepticism Professional skepticism-auditors questioning,evaluative,attitude toward evidenceManagements assertions without sufficient corroboration.Financial trends need investigationDocuments are checked for authenticity or alterationAsk questions,get answers,then verify the answers.A potential
25、 conflict of interest 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 portray the company and its operations fairly.1-19Professional Service Firm OrganizationExecuti
26、ve CommitteeManaging PartnerPractice OfficesPartners-in-ChargeConsulting ServicesAudit,Assurance and Business Advisory ServicesTax ConsultingServicesPartnerManagerManagerManagerSenior(In-charge)AccountantsStaff Accountants(or Associates)PartnerManagerManagerManagerSenior(In-charge)AccountantsStaff A
27、ccountants(or Associates)1-20The Public Accounting Profession Assurance servicesAssurance servicesAudit engagementsAssurance engagementsAttestation engagementsCompilationsReviews Tax consulting servicesTax consulting services Consulting servicesConsulting services1-22Prohibited Services to Audit Cli
28、entsSarbanes-Oxley and the PCAOB prohibit professional service firms from providing any of the following services to an audit client:1)bookkeeping and related services2)design or implementation of financial information systems3)appraisal or valuation services4)actuarial services5)internal audit outs
29、ourcing 6)management or human resources services 7)investment or broker/dealer services 8)legal and expert services(unrelated to the audit)Professional service firms may provide client tax services(with some restrictions)and other non-prohibited services to audit clients if the companys audit commit
30、tee has approved them in advance.In summary,Sarbanes-Oxley prohibits professional service firms from performing any client services in which the auditors may find themselves making management decisions or auditing their own firms work.1-23Types of Audits and Auditors Financial(External Auditors/CPAs
31、)Financial(External Auditors/CPAs)Ensure that financial statements are accurate.Operational(Internal and Governmental Auditors/CIAs)Operational(Internal and Governmental Auditors/CIAs)Improve operational economyImprove operational efficiency Compliance(Internal and Governmental Auditors)Compliance(I
32、nternal and Governmental Auditors)Ensure compliance with company and/or governmental rules and regulations Forensic(Fraud Auditors/CFEs)Forensic(Fraud Auditors/CFEs)Most audits are a combination of financial,operational,and compliance audits.1-24Organization of the Profession“Big Four”Accounting Fir
33、ms“Big Four”Accounting Firms D&T,E&Y,KPMG,PwCD&T,E&Y,KPMG,PwC National National Grant Thornton,BDO SeidmanGrant Thornton,BDO Seidman Local/Regional Local/Regional Melton&Melton(Houston)Melton&Melton(Houston)Plante Moran Plante Moran(Michigan/Illinois/Wisconsin)(Michigan/Illinois/Wisconsin)Goodman&Co
34、mpany(Virginia)Goodman&Company(Virginia)Sole ProprietorSole Proprietor1-25Become Certified!EducationExaminationExperienceSkills sets and your education1-26Engagement OverviewOBTAIN(OR RETAIN)CLIENTRISK ASSESSMENTEVIDENCEGATHERING REPORTINGENGAGEMENTPLANNING 1-27Why are audits needed?Directors motiva
35、ted to show good resultDirectors motivated to show good result Shareholders need realismShareholders need realism Impractical for shareholders to check accountsImpractical for shareholders to check accounts Auditors also report on whether proper books and Auditors also report on whether proper books
36、 and records have been kept and on any weaknesses in the records have been kept and on any weaknesses in the accounting systems accounting systems 1、每一个成功者都有一个开始。勇于开始，才能找到成功的路。11月-2211月-22Tuesday,November 8,20222、成功源于不懈的努力，人生最大的敌人是自己怯懦。17:05:2617:05:2617:0511/8/2022 5:05:26 PM3、每天只看目标，别老想障碍。11月-2217
37、:05:2617:05Nov-2208-Nov-224、宁愿辛苦一阵子，不要辛苦一辈子。17:05:2617:05:2617:05Tuesday,November 8,20225、积极向上的心态，是成功者的最基本要素。11月-2211月-2217:05:2617:05:26November 8,20226、生活总会给你另一个机会，这个机会叫明天。08十一月20225:05:26下午17:05:2611月-227、人生就像骑单车，想保持平衡就得往前走。十一月225:05下午11月-2217:05November 8,20228、业余生活要有意义，不要越轨。2022/11/817:05:2617:05:2608 November 20229、我们必须在失败中寻找胜利，在绝望中寻求希望。5:05:26下午5:05下午17:05:2611月-2210、一个人的梦想也许不值钱，但一个人的努力很值钱。11/8/2022 5:05:26 PM17:05:2608-11月-2211、在真实的生命里，每桩伟业都由信心开始，并由信心跨出第一步。11/8/2022 5:05 PM11/8/2022 5:05 PM11月-2211月-22谢谢大家谢谢大家