Introduction to financial accounting notes pdf
At the completion of an operational audit, management normally expects recommendations for improving operations. Operational (Performance or Management) audits An operational audit evaluates the efficiency and effectiveness of any part of an organization’s operating procedures and methods. Financial statement (FS) audits – A financial statement audit is conducted to determine whether the financial statements (the information being verified) are stated in accordance with specified criteria. Theoretical Framework of Auditing Data to be audited can be verified Independence No long-term conflict between the auditor and the management Effective internal control system reduces risk of material misstatement of the FSs Consistent application of GAAP results to fair presentation What was held true in the past will continue to hold true in the future in the absence of known conditions to the contrary An audit benefits the public Types of Audits 1. Remember, auditing begins where accounting ends. It is this expertise that distinguishes auditors from accountants. In addition to understanding and knowledge in accounting, the auditor must possess expertise in the accumulation and interpretation of audit evidence. Accounting is the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision-making while auditing pertains to gathering and evaluation of evidence regarding the fair presentation of financial statements. The confusion results because most auditing is usually concerned with accounting information, and many auditors have considerable expertise in accounting matters. Distinction between Auditing and Accounting Many financial statement users and the public confuse auditing with accounting. LECTURE NOTES Definition of Auditing An audit is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users. AUDITING THEORY AT.0104- Introduction to Audit of Financial Statements