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Accounting 456 Ch. 1

The Auditing Profession

The difference between auditing and accounting: Accounting is a process where financial information is recorded, classified, summarized and then reported to interested readers who use that information in making decisions with respect to the allocation of scarce resources.
The difference between auditing and accounting: Auditing is a process where information is examined by a competent, independent person who expresses an opinion on whether the information complies with pre-established criteria.
The audit process consists of the following key ingredients: information being audited, pre-established criteria, evidence accumulation and evaluation, a competent and independent auditor, and issuance of a report.
The information that is being audited must be in a verifiable form For example, the information being audited in a typical year-end audit consists of an entity’s year-end financial statements and corporate income tax returns.
In completing an audit, the auditor compares the information being audited against pre-established criteria. For a typical year-end audit the auditor assesses whether information is in accordance with generally accepted accounting principles.
In completing an audit, the auditor compares the information being audited against pre-established criteria. An income tax audit determines compliance with the Income Tax Act
In completing an audit, the auditor compares the information being audited against pre-established criteria.An operational audit determines compliance with policies established by management.
to support the opinion expressed the auditor needs to accumulate sufficient, appropriate evidence and document how that evidence has been evaluated against pre-established criteria.
information asymmetry where managers usually have more information about the entity than owners and may use that information for their own personal benefit rather than acting in the best interests of the owners.
An assurance engagement is defined by the CICA as an engagement where, pursuant to an accountability relationship between two or more parties, a practitioner is engaged to issue a written communication expressing a conclusion concerning a subject matter for which the accountable party is responsible.
An assurance engagement includes providing services in the area of electronic commerce (CA WebTrust), information systems reliability (CA Systrust), performance measurement (CA Performance View), risk assessment and CA ElderCare.
Attest engagements are a subset of assurance engagements.
Examples of attest engagements include reports on internal controls, financial information other than financial statements, future-oriented financial information (FOFI) and compliance with statutory, regulatory or contractual obligations.
Audits are a subset of attest engagements that focuses on assertions about economic actions and events.
Created by: mmontagu