Chap001-LN - Chapter 01 What Is Auditing CHAPTER 01 What Is...

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Chapter 01: What Is Auditing? CHAPTER 01: What Is Auditing? After studying this chapter, you should be able to: 1. Describe auditing and explain why it is important. 2. Explain the unique characteristics of the auditing profession. 3. Understand management's incentive to misstate financial statements. 4. Explain the role of the auditor in the corporate governance process. 5. Describe auditing standards. 6. Explain the evidence requirements of the auditing standards. 7. Understand how the auditor uses business processes to structure the collection of evidence. 8. Explain how management's assertions about the financial statements are used in the audit process. 9. Describe the audit report. 10. Identify accounting regulatory bodies and describe their functions Chapter 1: What Is Auditing? Chapter Highlights This chapter begins with a discussion of the audit profession, explains the need for auditing in our society, provides a thorough explanation of auditing standards for private and public companies. It also provides an overview of the audit process with examples of Professional Standards (Exhibit 1-2) and an audit report by an Independent Registered Public Accounting Firm (Exhibit 1-3). The recent material found in sections “Management’s Incentive to Misstate Financial Statements” and “The Role of the Auditor in the Corporate Governance Process” are interesting and very current topics. Chapter Outline 1. What is Auditing? (Slide #1… see companion slide) Auditing can be described within several contexts: As a process of review In the framework of the principal-agent relationship As a major component of the corporate governance process A fundamental piece of the capital markets system 2. Unique Characteristics of the Auditing Profession (Slide #2) Accounting firms are structured as partnerships or limited liability corporations This means that someone in the accounting firm has personal liability for the firm’s decisions This differs from the corporate form of organization in which no one has personal liability for the company’s decisions There are four large accounting firms (The “Big Four”) in the world (Slide #3) KPMG Deloitte & Touche PricewaterhouseCoopers Types of Auditors (Slide #4) Government Auditors Tax Auditors Federal State Internal Auditors Types of Services (Slide #5) Audit Services Attests that financial statements are presented in accordance with the applicable financial reporting framework (GAAP or International Accounting Standards) 1-1
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Chapter 01: What Is Auditing? Assurance Services
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This note was uploaded on 12/03/2011 for the course HIST 101 taught by Professor M during the Spring '11 term at NJIT.

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Chap001-LN - Chapter 01 What Is Auditing CHAPTER 01 What Is...

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