Why cant investors just read financial statements?
Bias, Complexity, Remoteness, Consequences
How are accounting and auditing different?
accounting - takes an event and turns into fin info
audtiting - verifies that fin info is representatitve of the t
What is an audit?
Objective to enable the auditor to express anopinion, based on evidence obtained, about a
matter of accountability, which is the responsibility ofanother party
Why have an audit?
Statutory requirement Co. Act 1993
AUDITOR'S STANDARD REPORT. What is an unqualified opinion?
The auditor's unqualified report states that the financial statements are presented fairly in all material
respects. The three-paragraph standard report includes all of the following:
Financial Statement Notes
Disclosures that provide additional information summarized in the financial statementing.
accounting methods, assumptions and estimates used by management
Are audited, whereas other disclosures such as supplementary schedules
Internal auditing is an independent, objective _ and _ acivity designed to add
value and improve an organization's objectives.
Internal Auditing helps an organization accomplish its objectives by bring a systematic, disciplined
Generally Accepted Auditing Standards (GAAS).
The standards by which the quality of the auditor's performance is judged.
Generally Accepted Accounting Principles (GAAP).
The standards by which the quality of the financial statements is judged.
internal control structure
policies and procedures established to provide management with reasonable assurance that the
objectives of an entity will be achieved
law passed by congress in 2002 that gives the SEC significant oversight
What is the primary function of the audit?
the primary function of the audit is to see if the financial statement assertions are fairly stated
according to GAAP consistently applied.
it isn't necessarily to detect fraud
to express an opinion stating whe
What are the nine categories of financial regulation?
1. government safety net
2. restrictions on assets
3. capital requirements
4. prompt and corrective action
5. chartering and examination
6. assessment of risk management
7. disclosure requirements
the risk that the auditor may unknowingly fail to appropriately modify the opinion on financial
statements that are materially misstated.
Evaluations of financial information made by a study of plausible relationships
Ch 1 Multiple Choice:
13. An independent audit aids in the communication of economic data because the audit
lends credibility to the financial statements.
14. Which of the following best describes the reason why an independent audito