Definition: Auditing
- systematic process
- gather & evaluate evidence and information objectively to make an evaluation
- on the assertions about economic actions and situations (made by the management of the entity)
- determine a correlation (of assertions) with predefined criteria
- quantitative and qualitative
- communicate results: in writing
- to users
Auditor’s job
They are external or internal parties that check that the financial records compiled by employees are accurate.
AUDIT PROCESS OVERVIEW:
- Pre-engagement
- Planning
- Obtain Evidence
- Evaluation, conclusion and reporting
Inherent Limitations
-Use of judgment in preparing financial statements
-IFRS can be manipulated in a manner that makes it difficult for auditors to catch out
-Practical and legal limitations on audit
-Management provides documentation and explanation on which to base conclusions → intentionally or unintentionally incorrect
-Management may try to hide fraud
- Being able to Audit statements on time
- Managing reliability of evidence versus cost
Types of Audits standards
- Clean audit= Everything is done properly
- Unqualified audit with findings= not bad but there could be issues but not enough info, time or resources to confirm
- Qualified= Did not account or manage for finances
- Adverse Audit= Lots of problems everywhere and incorrect rules were used
- Disclaimer= Statements were so bad that no reliable evidence was given to prove statements
Auditing Structure
- Minister of Finance
- Auditing Professions Act
- Independent Regulatory Board for Auditors (IRBA)
- South African Institute of Chartered Accountants (SAICA)
- International Federation of Accountants (IFAC)
- International Auditing and Assurance Standards Board (IAASB
Auditing Engagements
Assurance:
Reasonable= Audit (Compliance with laws and regulations)
Limited= Review
Non-Assurance:
others services- I.e = Tax Consultations
Types of Auditors
- External Auditor (independent auditor)
- Internal Auditor
- employee renders service to co - Auditor General – Public auditors/Government auditors
- e.g. Auditor General, SARS - Forensic Auditor
- e.g. investigates fraud - Special purpose Auditors
- e.g. whether particular provisions of a contractual agreement,
such as a loan agreement, have been complied with
Public Vs Private Audits
Private:
- Audit of entities
(Companies, CC’s, Trusts
etc.)
- In terms of The Auditing
Profession Act 26 of 2005
- Audit of:
1. Financial statements
Public:
- Audit of government
(National, provincial, local)
- In terms of The Public Audit
Act 25 of 2004
- Audit of:
1. financial statements
2. compliance with laws and regulations
3. performance in terms of predetermined objectives
Types of Auditors
*Financial statement audit
* Compliance audit
* Operational or Performance audit
