NATURE of AUDITING, ATTESTATION AND ASSURANCE SERVICES
Let us understand a few terminologies before going further in the discussion of the details of auditing and assurance since these terms will be used often throughout the text. Auditing, attestation and assurance services are often used interchangeably because they encompass the same decision-process: defining the decision problem, defining the alternative choices, identifying and obtaining information relevant to the decision problem, evaluating the alternatives in light of available information, and selecting the best option.
AUDITING is a systematic process of objectively obtaining and evaluating evidence regarding selected assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users. This broad definition identifies key elements: Systematic process — audits are structured activities;
Objectivity — freedom from bias;
Obtaining and evaluating evidence — allows the auditor to determine the support for assertions or representations; Assertions about economic actions and events — describes the subject matter of an audit; representations by management comprising internal control assertions and financial statement assertions Degree of correspondence … established criteria — the purpose of the audit is to determine conformity with some specified criteria; degree of correspondence refers to the closeness with which the assertions can be identified with established criteria such as applicable financial reporting framework (Philippine Accounting Standards/Philippine Financial Reporting Standards), Philippine Standards on Auditing, specific rules and regulations established by a legislative body or those set by management Communicating results — the results must be communicated to interested parties through a written report which could either enhance or weaken the credibility of the representations made by another party Interested users – stakeholders (both internal and external users) who rely on the auditor’s findings Auditing should be done by a competent, independent person
. The auditor must be qualified to understand the criteria used and must be competent to know the types and amount of evidence to accumulate to reach the proper conclusion after the evidence has been examined. The competence of the individual performing the audit is of little value if he or she is biased in the accumulation and evaluation of evidence. In the Philippines, a CPA in Public Practice needs to be accredited by the Professional Regulation Commission/Board of Accountancy prior to engaging in external or independent audits.
Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria (for example, the financial reporting framework in a financial statement audit or rules and regulations in a compliance audit). Auditing is determining whether recorded information properly reflects the economic events that occurred during the accounting period. Accordingly, the auditor must have a thorough understanding of the entity and its environment. The final stage in the auditing process is preparing the Audit Report, which is the communications of the auditor’s findings to users.
ATTESTATION generally refers to an expert’s written communication of a conclusion about the reliability of someone else’s assertions. It occurs when a practitioner is engaged to issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. Ordinarily, attestation focuses on a specific assertion that is made in writing. Assertions, however, need not be quantitative to be subject to attestation. Qualitative assertions can be the used as long as objective criteria exist for evaluating the accuracy of...
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