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Learning Objectives LO1 Explain the importance of auditing. LO2 Distinguish auditing from accounting. LO3 Explain the role of auditing in information risk.

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Presentation on theme: "Learning Objectives LO1 Explain the importance of auditing. LO2 Distinguish auditing from accounting. LO3 Explain the role of auditing in information risk."— Presentation transcript:

1 Learning Objectives LO1 Explain the importance of auditing. LO2 Distinguish auditing from accounting. LO3 Explain the role of auditing in information risk reduction. LO4 Describe the other major types of audits and auditors. LO5 Provide an overview of international auditing and its impact on Canadian audit standards. 1

2 Demand for Reliable Information Accounting attempts to record and summarize a company’s transactions into financial statements for the benefit of users.  Accounting is a function of the organization’s management.  Users are removed from accounting due to complexity, remoteness or consequences. 2 LO2

3 Auditing Preparation of financial information by management creates a conflict of interest between users of financial information and management.  The auditor serves as an independent intermediary who lends credibility to the financial information.  Also called providing assurance as to the reliability of the information. 3 LO2

4 Auditing An external auditor is independent of management and of the production of the financial information.  This creates three-party accountability.  Auditee refers to the organization whose financial information is being audited.  Client refers to the person who hires the auditor and pays the fee. 4 LO2

5 Professional Judgement A professional reaching a complex decision by incorporating standards and ethics in a coherent manner.  Professional judgement is used widely in accounting and auditing.  Application of professional judgement requires critical thinking. 5 LO2

6 Definition of Auditing Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested parties. 6 LO2

7 Audit Objectives “The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.” CAS 200 7 LO2

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