Unformatted text preview: rvices. Fundamental Concepts in Conducting a Financial
LO 6 FIGURE 1–3 Figure 1–3 presents a simpliﬁed overview of the process for a ﬁnancial statement
audit. Take a moment to stop and think through the steps in this ﬁgure. The
auditor gathers evidence about the business transactions that have occurred. The
auditor uses this evidence to compare the assertions contained in the ﬁnancial
statements to the criteria used by management in preparing them (i.e., GAAP).
The auditor’s report communicates to the user the degree of correspondence
between the assertions and the criteria.
The conceptual and procedural details of a ﬁnancial statement audit build
on three fundamental concepts: materiality, audit risk, and evidence relating to
management’s ﬁnancial statement assertions. The auditor’s assessments of audit
risk and materiality inﬂuence the nature, timing, and extent of the audit work to
be performed (referred to as the scope of the audit). This section brieﬂy discusses
the concepts of mater...
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- Auditor's report, ﬁnancial statement auditing