1. Auditing Theory and practice
References:
1-Auditing
Alan Millichap & John Taylor 9th ediition
2-ACCA manual

2. Corporate Governance (CG)
CG refers to the system of structures, rights, duties and obligations by which corporations
are directed and controlled.
The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as Board, Managers, Shareholders, Creditors, Auditors, Regulators and other stakeholders and specifies the rules

3. And procedures for making decision in corporate affairs
And procedures for making decision in corporate affairs. Governance involves the alignment of interests among the stakeholders. There had been reviewed governance practices particularly in accountability, due to the following: 1-The high collapse in a number of large organizations most of them involved accounting fraud

4. 2- The recent financial crisis in 2008.

5. Principles of Corporate Governance
1-Rights and equitable treatment of shareholders by openly and effectively communicating information and encouraging shareholders to participate in general meeting 2-Interest of other stakeholders: Organizations should recognize that they have legal, contractual, social market driven obligations to non shareholders, stakeholders including

6. Employees, investors, creditors, suppliers, a stores and policy makers 3- Role and Responsibility of Board: The board needs sufficient relevant skills and understanding to review and challenge management performance. Also needs adequate size of independence and commitment.

7. 4-Integrity and ethical behaviour: Code of conduct that promotes ethical and responsible decision making for the company’s directors and executives. 5- Disclosure and Transparency: Organization should clarify and make publicly known the roles and responsibilities of the Board and Management to provide shareholders with the level of accountability. All investors should have access to clear factual information

8. Introduction to Auditing
An audit has been defined as (The indenedent examination of,and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.
This definition shows that the Auditor must:
1-Be Independent

9. 2-An auditor conducts an examination of the financial statement
3- An auditor must express an opinion on the financial statement presented to him

10. Evolution of Auditing
In Industrial REVLOUTION LIMITED LIABILITY COMPANY WERE INTRODUCED.
Modern Company came into being in 1856.
Companies ACT 1900 placed an obligation on directors to produce annual accounts.

11. Financial STATEMENTS
Financial statements are the basic mechanism by which activities of the company managers are monitored They include:
Income statement
Statement of Financial position
Cash flow statement
Directors report

12. OBJECTIVES OF AUDITING
Primary :To produce a report by the auditors of their opinion of the truth and fairness of the financial statements.
Secondary:
1- To adivse management
2- To detect fraud and error.
3- To prevent fraud and error through deterrent and moral effect of audit

13. Parties to financial statements(stakeholders)
A-Actual or potential:
1-Owners.
2-Lenders
3-Employees
4- customers
5- Suppliers
B- Parties who advise the above

14. C-The Government (Taxation-ZAKAT,Local authorities, and various Government units for managing the economy.
D- The public (Consumer protection)
E-Regulatory Organisations

15. Agency Theory
Agency is the name given to the practice by which productive resources owned by one person or group are managed by another person or group of persons.

16. The statutory framework for auditing-Accounting requirement of the Companies ACT
1-Every company must keep adequate accounting records.
2- Adequate accounting records means sufficient records to:
A- Show and explain transactions.(Understandable)
B-To disclose with reasonable accuracy and at any time the financial position (full disclosure and reliability)

17. C- Enable directors to ensure that accounts comply with the Act requirements.
3-The account must in particular contain cash receipts and payments and record of assets and liabilities(Accrual bases of accounting).
4- If the company assets include inventory (stock), the records must show:
A-Inventory (Stock) held B- Statement of stock taking

18. Note that for retail trade stocks are identified from sales and purchases records.
Minimum Records are therefore:
Cash record & record of assets and liabilities.
OTHER STATUTORY RECORD INCLUDE:
A- List of directors B-Register of charges (fixed and floating. C- Minute register of company directors meetings.D-Register of members.

19. F-For Public companies they must register information received from any person to whom they have sent a notice requiring them to disclose whether or not they have an interest in the company’s voting shares.
The above listed registers are important to the auditor because they relate to the accounts and constitute audit evidence.

20. Accounting requirements and Principles
A-Accounting reference date.
B-Form and content of Company accounts
C-Procedure on completion of the accounts
D-Modified accounts
F-Publication of full and abridged accounts

21. Principles:
A- Going concern.
B-Consistency
C-Prudence
D-Accruals basis
(Postulates(broad basic assumptions)-Principles- Techniques)

22. Auditing and Accounting Standards and Guidelines
Auditing Practices Board (APB) is authoritative body that:
1. Issues international standards on auditing.
2. Practice Notes which helps and indicates good practice.
3. Bulletins which comment on items of current interest.

23. International Standards on Auditing
Each standard contains two types of material:
1. Basic principles and essential procedures.
2. Explanatory and other material
Non compliance with basic principles can bring an action against the auditor ( Negligence) .
For examples of current ISAs refer to the reference page

24. Practice Notes
Practice Notes are designed to assist the auditor in following basic standards and applying auditing standards to particular circumstances and industries.
They are convincing rather than descriptive.
It may be included in ISAs.
For current practice notes refer to the refernce page

25. Bulletins
Bulletins advice auditors on current and new issues they resemble practice notes.
For examples of current Bulletins refer to the reference page

26. Rules of Professional Conduct
Fundamental Principles:
1- Integrity
2-Obiectivity
3- Independence
4-Competency
5-Courtesy and consideration

27. Ethics-General Rules 1-Profession independence is very important
2-Integrity is vital
3- Avoidance of matters that may affect objectivity approach to the audit
4- If there is ethical difficulties or if the auditor is unsure of what course of conduct to follow they should consult their professional body or take legal advice ( refer to page 68 of the text book

28. Quality Control in audit firms
Quality control can be seen in several stages:
1-Proper organisation of the firm and its procedures
2-Planning for each audit
3- Control of each audit
4- Working papers
5- Review of work done
6-Review of organization and procedures

29. Second course work Question One:
List the purpose and principal content of an engagement letter specifying the procedures connected with that letter