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Comprehensive Guide to Auditing & AIS Evaluation: Standards, Reports, and Best Practices

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  1. Chapter 17 Auditing and Evaluating the AIS

  2. Outline • Learning objectives • Types of audits • Audit Clarity Project • Generally accepted auditing standards • Financial statement audit steps

  3. Learning objectives • Describe the various kinds of audits you might encounter in your accounting career. • Explain the purpose of the Audit Clarity Project and summarize its essential components. • Explain ten generally accepted auditing standards & their role in a financial statement audit. • Discuss the basic steps associated with a financial statement audit. • Explain the connection between auditing and accounting information systems.

  4. Types of audits • Financial audit Express an opinion on the fairness of a company’s financial statements • Operational audit Determine if a company’s business processes & policies “make sense” • Systems audit Ascertain whether information technology is producing expected results

  5. Types of audits • Compliance audit Examine the AIS and financial statements of GNFP entities • Management audit Determines the way management decisions are supported • Investigative audit Investigates the AIS and related data to determine if fraud has occurred • International audit Applies and combines one or more of the other types in international contexts

  6. Audit Clarity Project Four main change areas to financial statement audit standards • Format • Terminology • Additional requirements • Audit report The ACP’s goals were to make audit standards easier to read and to converge them with international audit standards.

  7. Audit Clarity Project

  8. Audit Clarity Project • Terminology • Applicable financial reporting framework • US GAAP • IFRS • Emphasis of matter paragraph Calls attention to something in the statements and / or the disclosures

  9. Audit Clarity Project • Additional requirements • Ensure appropriateness of applicable financial reporting framework if other than US GAAP • Obtain agreement from management regarding their responsibilities for financial statements & internal control • Adhere to quality control standards throughout the audit

  10. Audit Clarity Project

  11. Generally Accepted Auditing Standards Figure 17.3

  12. Financial statement audit steps Figure 17.4

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