AUDITINGCHAPTER 1.ppt

GBW 8th ed., Ch. 1 AUDITINGCHAPTER 1 Introduction to Audit Other Assurance Services By David N. Ricchiute TOPICS Nature audit attestation services Demand for financial statement audits Audit standard-setting process Influences on accounting auditing Other audits nonattest services Other attestation services Consulting other assurance services INTRODUCTION Audits reduce Information risk Cost of capital Professional challenges Rebuild confidence in auditor credibility Incorporate changes stemming from Sarbanes-Oxley Act ASSURANCE SERVICES Three-party contracts Common attestation services Agreed-upon procedures engagements Review engagements Financial statement audit ATTESTATION SERVICES Agreed-upon procedures engagements Uses procedures agreed by contracting parties Review engagements Limited assurance whether financial statements conform to GAAP PROFESSIONAL SERVICE FIRMS Attestation audit offered by public accounting firms Professional staff are certified public accountants Organized as limited liability partnerships (LLP) FINANCIAL STATEMENT AUDIT Performed by certified public accountants Auditor offers assurances about management’s financial statement assertions INFORMATION RISK MODEL Definition: risk that information is materially misstated Interested parties rely on information in decision making Audit provides assurance about quality of financial statement information Assurance offsets information risk DEMAND FOR AUDITS Minimize information risk Unbiased monitor reduces information risk Reports on quality of financial statement information VALUE OF AUDIT Reduces information risk to interested parties Investors, creditors, employees, suppliers, regulatory agencies, tax agencies, etc. Reduces cost of capital to company FINANCIAL STATEMENTS Representations of management Responsible for assertions embodied in financial statements Examined by auditor WHO IS AUDIT CLIENT? Board of directors Auditor is engaged by board of directors Board of directors Elect