19-20_FI305E_B Fundamentals of AuditingBook: Auditing & assurance services – 17thedition (By: Randal J.Elder; Mark S: Beastley; Chris E.Hogan)CPA: certified public accountant-Providing financial statement to public and private companies, government unit, non-profit organisation is a primary task of the auditing. 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. Performed by a competent, independent person. The final stage in the auditing process is preparing the audit report, which communicates the auditor’s findings to users. Distinction between auditing and accounting Accounting is the recording, classifying, and summarizing of economic events to provide financial information for decision making. Auditors focus on determining whether recorded information properly reflects the economic events that occurred during the accounting period. The Importance Of Auditing In Reducing Information Risk Information risk reflects the possibility that the information upon which a business decision was made was inaccurate. Auditing of financial information reduces information risk to the users of financial information. Reasons that increase the likelihood of decision makers receiving unreliable information: KeywordsCompetent, independent personAccumulating and evaluating evidenceInformation and established criteria Reporting
Remoteness (syrjäisyys, etäisyys) of informationBiases and motives of the provider Voluminous (valtava, runsas, laaja) dataComplex exchange transactions There are three main ways to reduce information risk: User verifies informationUser shares information risk with management (lawsuit by user incase of inaccurate information)Audited financial statements are provided Assurance Services An assurance service is an independent professional service that improves the quality of information for decision makers. An attestation (lausunto, todiste) service is a type of assurance service in which the CPA (CERTIFIED PUBLIC ACCOUNTANT) issues a report about a subject matter or assertion that is made by another party. Audits of historical financial statementsAudits of internal control over financial reportingReviews of historical financial statementsOther attestation that may be applied to a broad range of subjects (loans) Other Assurance and Nonassurance Services Other assurance services are services that do not meet the definition of attestation services CPA is not required to issue a written reportNonassurance services are services rendered (palkita,aiheuttaa, tehdä) by CPA firms that generally fall outside the scope of assurance services such as: Accounting and bookkeeping services Tax servicesManagement consulting services Primary types of audits Operational audit—Evaluates the efficiency (tehokkuus) and effectiveness (vaikuttavuus) of any part of an organization’s operating procedures and methods.