Audit

Assurance diffraction:

On assurance engagement is one in which a particular express a conduction designed to enhanced the
degree of confident of the intended user other than the responsible party about the subject matter or
financial statement

Financial statement:

1. income statement and now call statement of financial perform

2. balance sheet statement or financial position
3. cash flow statement
4. statement of change equity
5. statement where change not the financial statement underline item move the transaction

Practitioner:

Is the individual providing professional services that will review the subject matter or financial statement
and providing the assurance.

Intended users:

Or the persons or person for whom the practitioner prepare the assurance or audit report to individual
user

Responsibility party:

The party is responsible for the underling subject matter or for the preparation of financial statement

Evidence:

A document that supports the underling record or financial statement evidence should be sufficient
appropriate

Suitable credential:

The subject matter of financial statement is evaluated measured against criteria in order to reach an
opinion

1. accountable is the quality or state of being accountable that is expected to justify action and
decision
2. Stewardship is refer to the duties and obligation of the person who manage another person
properly
3. Agent are people employed or used to provide particular services
 Subject method: this is the data to be evaluated that has been prepare by the responsible party

Types of assurance

External audit: the objective of an audit of financial statement is to enable the auditor to express an
opinion on whether the financial statement or prepared in all material respect in accordance with an
applicable financial reporting framework (according to standard)

Truth and fair factor: truth information is a factual and conforms with reality in addition the
information conforms with required standards and law

Fair: information is free from discrimination and bias and in complains with expected standards and
rules (and working in under favorer of someone)

Reasonable assurance: the objective of reasonable assurance is a reduction in assurance

engagement risk to an acceptable low level in circumstance of the engagement situation

Of as the bases for the assurance practitioners conclusion usually express positively

Limited assurance: is a lower level of assurance the nature timing and extent of the procedure
curried out by the practitioners in a limited engagement assurance would be limited compared with
what’s required in a reasonable assurance engagement

Limitation of auditing:

 Auditor cannot be certify that the accounts are correct they can only ever express on
opinion
 Auditing is not objective judgment have to be made
 Limitation in an accounting and control system
 No all item in statement tested
 Audit report is issued after long time of balance show data
 Audit evidence sometime indicates what’s impossible no action estimates judgment

Internal control:

Is any process of tools used by entity in effectively and efficiently entity?

Materiality: a matter is material if its omission or misstatement would reasonably be expected to the
influence the economic decision of user taken on the base of the financial statement.

Audit opinion: in our opinion the financial statement of ABC for the year ending 31 DEC 2016 gives true
and fair view.

Removal of auditor:

1. Notice of removal
2. Presentation
 3. Is resolution is passed
4. Auditor right

Eligibility to act as auditor

1. Individual holding
2. Appropriate qualification
3. Firms controlled by qualified person

Ineligible: an employee or partner of company directors

Notice of removal: special notes with copy send to auditor or if elective resolution in place written
resolution to terminate auditors appointment

Representation: auditors can make representation on while they have to stay in office they may require
company to the state in notice that representation have been made and send copy to members

If resolution passed: a company must notify regulatory authority

A – Auditor must deposit statement of scarmantindes at company registered office

Auditor’s right: auditors can receive notice of speak that

A. general meeting at which there term of office would have expired

B. a general meeting where cash will receive cost by their removal is to be fill

Individual holding: not important

Corporate governance:

Corporate governance is a system by which companies are directed and controlled good corporate
governance is important because the owner of the company and the people who manage the company
are not always the same. Corporate governance is important because it ensure that stakeholders with
relevant interest in the company’s business or fully taken into account in order word it is necessary for
structures to be in place to ensure that every stakeholders in the company is not disadvantage as its
director that manage the company the burden of good governance falls on them it is important that
they manage the company in the best way for the shareholders, employees and other parties.

Principle of corporate governance:

1. the corporate governance from the work should remove promote transportation and efficient
market be consistent with rules of law protect
2. the corporate governance framework should protect rights of shareholders
3. the corporate governance should ensure the equitable treatment of all shareholder including
minority and foreign shareholders
4. The corporate governance framework should recognize the rights of shareholders established by
law or through mutual agreement.
5. The corporate governance framework should ensure that timely and accurate disclosure Is made all
material, matter, regarding the corporation
6. The corporate governance should ensure the static guiding of the company the effective monitoring
of management by the board

Audit committee:

Roles and function of the audit committee

1. To monitor the integrity of the financial statement

2. To review the company’s internal financial control
3. To monitor and review the effectiveness of the company’s internal audit functions
4. To make recommendations to the board for it to put to share holder for their approval and
general meeting in the relation to the appointment reappointment and removal of the external
auditor and to approve and the remuneration (Fees) in terms of engaged of the external
auditors
5. To review and monitor the external auditors independent, objectivity in the effectiveness of the
audit process

Fundamental principle of professional ethics

1. Integrity: members shell be straight forward and honest an all professional and business
relationship
2. Objectivity: member should not allow bias conflict and influence of other to over rights
business judgment
3. professional competence and newcomer members have continue duty to maintain professional
skill at that level require to ensure that a client or employer receive competent professional
services based on current development and practice, legislation and techniques
4. Confidentiality: member shall respect the confidentiality information acquire as result of
professional and other for again not disclose
5. Professional behavior: member shall comply with relevant lost and regulation and avoid and
reaction that discredit a professional

Threat to independence and objectivity

1. Self-interest threat: is a threat that a financial or other interest will improperly influence that a
professional accountant judgment or behavior self-interest threat may arise as result of the
financial or other interest of member or of immediate or close family member example:
financial interest
2. Close business relationship:
3. Overdue fees
4. Loans and guarantees
5. Percentage of Contingent fees
Intimidation threat: on intimidation threat arise with members of the auditors may be dithered form
acting objectively by threat actual perceived

These could arise from family and personal relation and litigation or close business relation these also
examples are self-interest largely become intimidation only arise significantly and auditing form as
something to lose

Internal auditing

Internal auditing: is an appraisal is monitoring activity establish within an entity as a service to the entity
it is function by among other thing examining evaluating and reporting to management and the director
advocacy and effectiveness of components of the accounting and internal control system internal
auditing feature it is a function, provided either by the employees entity or sources from external
organization to assist a management and achieving corporate objective

Distinction between internal and external auditing

Internal auditing

1. Object, design to add value and improve and organization operation

2. Reporting: report to the board of director
3. Scope: work relate to the operation of the organization
4. Relationship: often employees of the organization all those something the function outsources
5. Planning carried out to achieve objective regarding truth and fairness of financial statement
materiality levels set during audit planning evidence collect using rights of procedure per ISA to
obtain sufficient appropriate audit evidence

External auditing

1. Objective and expertise to enable auditors to express an opinion on the financial statement
2. Report to the shareholder or members of the company
3. y work related to financial statement
4. Independent of company and its management usually appointed by share holder
5. Planning and collection of evidence: strategic long term planning carried out to achieve
objective of assignment with no materiality level being set evidence mainly from interviewing
staff inspecting document