1. Chapter 1 The Demand for Audit and Other Assurance Services

2.  Word association: what do you think of when you hear the word, “auditing?”

3.  Understand the nature of auditing  Understand the distinction between auditing and accounting  Understand the economic factors that create a demand for auditing and the role it plays in the economy  To be familiar with types of audits and how they relate to the definition of auditing.  To be familiar with other types of assurance services

4.  Auditing is the accumulation and evaluation of _________ about information to determine and report on the ______of ___________ between the information and __________ __________. Auditing should be done by a _____________ and ______________ person.

5.  What are some ways that auditors might accumulate evidence  What is the key to effectively evaluating evidence?

6.  What is the purpose of accounting?  What is the purpose of auditing?  What is the purpose of this class?

7.  Why does auditing exist? Agency theory  Principal =  Agent =  Does the agent have the same goals as the principal?  Do the two parties have the same information?  Information ___________  Information ________

8.  _____________ of information  _____________ data  ______________ exchange transactions  ____________of the ____________  P1-17, 18

9.  _____________ the accumulation and evaluation of evidence to determine and report on the degree of correspondence between the assertions and established criteria.  Let’s look at that definition of auditing again (slightly modified): the accumulation and evaluation of evidence to determine and report on the degree of correspondence between the assertions and established criteria.

10.  Example: Annual audit of WorldCom Inc. financial statements  Assertions  Established Criteria  Evidence  Report  Competence  Independence

11.  Example: Efficiency and effectiveness of computerized payroll system  Assertions  Established Criteria  Evidence  Report  Competence  Independence

12.  Example: IRS audits of tax returns  Assertions  Established Criteria  Evidence  Report  Competence  Independence  P1-8, 15  Additional examples: debt covenant audit for loan continuation, compliance with EEO laws or minimum wage laws, grant audits, Audit of a school district.

13. Other Assurance Services CertainManagementConsulting Other Attestation Services (e.g., WebTrust, SysTrust) ATTESTATION SERVICES Audits Reviews Internal Control over Financial Reporting ASSURANCE SERVICES

14.  Career paths involving auditing  Large public clients—highly specialized  Small private clients—generalist and other services.  Industry—internal auditor  Governmental—LLA, GAO, etc.  P1-20