1. An Introduction to Assurance and Financial Statement Auditing
Chapter 1
An Introduction to Assurance and Financial Statement Auditing
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Analytical and logical skills Much more conceptual in nature
The Study of Auditing
The study of auditing is different from other accounting courses that you have taken in college because …
OTHER COURSES
AUDITING
Rules, techniques and computations to prepare and analyze financial information
Analytical and logical skills
Much more conceptual in nature
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3. LO# 2
The Role of Auditing Figure 1-1 Overview of the Principal-Agent Relationship Leading to the Demand for Auditing
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4. Relationships among Auditing, Attest, and Assurance Services
LO# 4
Relationships among Auditing, Attest, and Assurance Services
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5. Auditing, Attest, and Assurance Services Defined
LO# 5
Auditing, Attest, and Assurance Services Defined
Attest
Assurance Services
Auditing
A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
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6. Auditing, Attest, and Assurance Services Defined
LO# 5
Auditing, Attest, and Assurance Services Defined
Assurance Services
Auditing
Attest
Attest services occur when a practitioner is engaged to issue ... a report on subject matter, or an assertion about subject matter, that is the responsibility of another party.
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7. Auditing, Attest, and Assurance Services Defined
LO# 5
Auditing, Attest, and Assurance Services Defined
Attest
Assurance Services
Auditing
Independent professional services that improve the quality of information, or its context, for decision makers.
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8. Fundamental Concepts in Conducting a Financial Statement Audit
LO# 6
Fundamental Concepts in Conducting a Financial Statement Audit
Materiality
Audit
Risk
Evidence
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9. Overview of the Financial Statement Audit Process
LO# 6
Overview of the Financial Statement Audit Process
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10. Sampling: Inferences Based on Limited Observations
LO# 7
Sampling: Inferences Based on Limited Observations
Auditors use (1) their knowledge about the transactions and/or (2) a sampling approach to examine the transactions.
It would be too costly for the auditor to examine every transaction.
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11. Major Phases of the Audit
LO# 8
Major Phases of the Audit
Client acceptance/continuance
Preliminary engagement activities
Plan the audit
Consider and audit internal control
Audit business processes and related account (e.g. revenue generation)
Complete the audit
Evaluate results and issue audit report
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12. LO# 9
Issue the Audit Report
The title line of the audit report includes the word “Independent,” and usually, the report is addressed to the stockholders of the company.
The audit report includes an introductory paragraph, a scope paragraph, an opinion paragraph, an explanatory paragraph referring to the audit of internal control, the name of the auditor or audit firm, and the date of the audit report.
Unqualified
Qualified
Adverse
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13. Auditing Demands Logic, Reasoning, and Resourcefulness
An auditor needs to understand more than just the accounting concepts and techniques.
Auditing is a fundamentally logical process of thinking and reasoning – so use your common sense and reasoning skills! As you learn new auditing concepts, take some time to understand the underlying logic and how the concepts interrelate with other concepts.
Being a good auditor sometimes requires imagination and innovation.
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14. End of Chapter 1
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