Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems Advanced Auditing Lecture 1 Assurance and Attestation Services

COURSE DESCRIPTION The advanced auditing course aims at completing the previous audit and control course through integrating the previously learned outcomes with real life problems like fraud and with real life cases using financial statements and financial cycles. Also this course demonstrates the main features of Auditing in computerized environment.

Reference Book Auditing and Assurance Services; An Integrated Approach Alvin A Arens (Author), Randal J. Elder (Author), Mark S. Beasley (Author)Randal J. ElderMark S. Beasley

COURSE ASSESSMENT CONTINUOUS ASSESSMENT and Presentations 20% MIDTERM 20% FINAL EXAM 60%

INTENDED LEARNING OUTCOMES Define information risk and explain how auditing and assurance services play a role in reducing this business risk. Define and contrast auditing, attestation, and assurance services. Describe and define the management assertions included in financial statements and explain why auditors use them as a focal point of the audit. Explain some attributes of professional skepticism (problems). Explain the main characteristics of IS auditing

Auditing overview Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent and independent person.

Main objective of Auditing the main objective of an audit of financial statements is to express an opinion of the fairness with which they present fairly, in all respects, financial position, and the result of operations in accordance with the established criteria.

Criteria The criteria for evaluating information also vary depending on the information being audited. In the audit of historical financial statements by CPA firms, the criteria may be U.S. Generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). This means that in an audit of Boeing’s financial statements, the CPA firm will determine whether Boeing’s financial statements have been prepared in accordance with GAAP.

9. DEFINITION THE KEY WORD OF AUDITING ARE: True and fair view of the financial statement and the assets Verification of the financial situation of the company or body audited, Verification of the results of its operations, To comply and accordance with the generally accepted accounting principles and rules.

Evidence : Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. Evidence takes many different forms, including: Electronic and documentary data about transactions Written and electronic communication with outsiders Observations by the auditor Documentations

MAIN Phases of Auditing There are main four auditing phases 1. Plan and design the audit approach 2. Perform tests of controls and transactions 3. Perform analytical auditing 4. Complete the audit and Issue the Auditing report

GENERALLY ACCEPTED AUDITING STANDARDS The broadest guidelines available to auditors in the U.S. and the world are the 10 generally accepted auditing standards Generally accepted auditing standards (GAAS), which were developed by the AICPA. Generally accepted auditing standards fall into three categories: 1. General standards 2. Standards of field work 3. Reporting standards

Assurance Service Assurance service is an independent professional service that improves the quality of information for decision makers. Such services are valued because the assurance provider is independent. Individuals who are responsible for making business decisions seek assurance services to help improve the reliability and relevance of the information used as the basis for their decisions

Assurance services can be done by CPAs or by a variety of other professionals. For example, Consumers Union, a nonprofit organization, tests a wide variety of products used by consumers and reports their evaluations of the quality of the products tested in Consumer Reports

Attestation service One category of assurance services provided by CPAs is attestation services. An attestation service is a type of assurance service in which the CPA firm issues a report about the reliability of an assertion that is made by another party. Attestation services fall into these categories: 1. Audit of historical financial statements 2. Audit of internal control over financial reporting 3. Review of historical financial statements 4. Attestation services on information technology

Attestation Services on Information Technology WebTrust services. The AICPA and the Canadian Institute of Chartered Accountants (CICA) jointly created the WebTrust attestation service. assurance to users of Web sites through the CPA’s electronic WebTrust seal displayed on the Web site. This seal assures the user that the Web site owner has met established criteria related to business practices, transaction integrity, and information processes.

Attestation Services on Information Technology SysTrust services. The AICPA and CICA jointly created the SysTrust attestation service to evaluate and test system reliability in areas such as security and data integrity. WebTrust assurance service is primarily designed to provide assurance to third-party users of a Web site,.

Types of audits CPAs perform three primary types of audits, 1. Operational audit 2. Compliance audit 3. Financial statement audit

Operational audit An operational audit evaluates the efficiency and effectiveness of any part of an organization’s operating procedures and methods. At the completion of an operational audit, management normally expects recommendations for improving operations. For example, auditors might evaluate the efficiency and accuracy of processing payroll transactions in a newly installed computer system.

A compliance audit A compliance audit is conducted to determine whether the auditor is following specific procedures, rules, or regulations set by some higher authority. Following are examples of compliance audits for a private business. Determine whether accounting personnel are following the procedures pre -scribed by the company controller. Review wage rates for compliance with minimum wage laws. Examine contractual agreements with bankers and other lenders.

A financial statement audit A financial statement audit is conducted to determine whether the financial statements are stated in accordance with specified criteria. Normally, the criteria are U.S. or international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organization

In determining whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements. The primary focus of this course is on financial statement audits.

Certified public accountant CPA To become a CPA, three requirements must be met.

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