ACC 3600_ Lecture Summary_2018S2_Full.docx - 3600 Lecture...

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3600 Lecture notes summary Week 1 Introduction and overview of audit and assurance 1. Assurance engagement An assurance engagement is defined as ‘an engagement in which an assurance practitioner (Such as Auditor) expresses a conclusion designed to enhance the degree of confidence of the intended users (Such as clients) other than the responsible party (Such as management) about the outcome of the evaluation or measurement of a subject matter (Such as financial statements) against criteria (such as Corporations Act, AASB and Listing rules of the ASX)’ 2. Financial statement Audit An engagement designed to express an opinion about whether the financial report is prepared in all material respects in accordance with a financial reporting framework, accounting standard and Corporation Act. Auditor cannot guarantee that financial report is free from error or fraud. Auditor cannot provide absolute assurance. 3. The duties of an independent auditor engaged to perform a financial report audit Report to members and express opinion whether the financial report is prepared in all material respects in accordance with a financial reporting framework, accounting standard and Corporation Act; 4. The responsibility of management for financial report The management is responsible for maintaining the accounting systems and preparing the financial reports in accordance with accounting standards. 5. The Level of Assurance Services Reasonable assurance is the highest level of assurance. It means that the auditor has conducted audit procedures and gathered sufficient and appropriate evidence to provide an opinion on the truth and fairness of the financial reports. The auditor provides an opinion stated in the positive form. Such as financial statement audit. Limited assurance is a lower level of assurance. The auditor performs limited audit procedures and gathers less evidence. The auditor provides an opinion stated in the negative form. Such as review half year financial report. No assurance: The auditor does not report an opinion on the findings and the client determines the nature, timing and extent of evidence gathered and then draws their own conclusions about these findings. Such as agreed-upon procedures engagement 6. Audit Expectation Gap Definition: The audit expectation gap occurs when there is a difference between the expectations of assurance providers and the users of the financial reports. The gap is caused by unrealistic user expectations such as: the auditor is providing complete assurance an unqualified audit opinion is an indicator of complete accuracy 1
the auditor will definitely find any fraud and the auditor has checked all transactions The expectation gap can be reduced by: Auditors performing their duties appropriately and greater attention to the risk of material fraud occurring.

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