AUDIT

• Auditing


  The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria
• Auditor


  • Competent
  • Independent
• Evidence


  Any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria
• Examples of evidence


  • Oral testimony of the auditee (client)
  • Written communication with outsiders
  • Observations by the auditor
  • Electronic data about transactions
• The auditor must obtain a sufficient quality and volume of evidence
• Reporting


  The final stage in the auditing process, where the auditor's findings are communicated to users
• Audit report


  Informs readers of the degree of correspondence between information and established criteria
• Objectives of a financial statement audit

  • Primary: To form and express an independent expert opinion that the financial statements are free from material misstatements
  • Secondary: To form and express an opinion on compliance with statutory requirements, provide assistance in improving financial controls and reporting, and detect/prevent fraud and error
• Financial accounting function


  1. Transactions identification

  2. Documentation

  3. Recording

  4. Collation

  5. Allocation

  6. Valuation

  7. Communication
• Management prepares financial statements

  Auditor tests management assertions against criteria and issues audit report
• Accounting


  The process of identifying, recording, classifying and summarising economic events to provide financial information for decision making
• Responsibilities


  • Auditor: State opinion on financial statements, provide reasonable assurance, perform audit with due care
  • Management/Board: Prepare financial statements, maintain accounting records and internal controls, safeguard assets, prevent/detect errors and fraud
• Demand for auditing


  • Regulations
  • External parties: Shareholders, bondholders, potential investors
• Types of audits


  • Financial statement audits
  • Compliance audits
  • Operational (management/performance) audits
  • Forensic audits
  • Tax audits
  • Shariah audits
  • Public sector audits
• Financial statement audit


  Audit conducted to determine whether financial statements are stated in accordance with MFRS
• Audited items in financial statement audit

  • Statement of financial position
  • Statement of profit or loss and other comprehensive income
  • Statement of changes in equity
  • Statement of cash flows
  • Notes and accounting policies
  • Comparative information
• Compliance audit


  Audit conducted to determine whether the auditee is following specific procedures, rules or regulations
• Operational (management/performance) audit


  Systematic review of an organization's activities to evaluate the efficiency and effectiveness of resource use
• explanatory information; comparative information in respect of the preceding period as specified in paragraphs 38 and 38A; and10SB-FRS 1
• An entity may use titles for the statements other than those used in this Standard. For example, an entity may use the title 'statement of comprehensive income' instead of 'statement of profit or loss and other comprehensive income'
• Types of audits


  • Compliance Audits
  • Operational (Management /Performance) Audits
  • FORENSIC AUDITS
  • Tax Audits
  • Shariah Audits
  • Public Sector Audits
• Compliance audit


  Conducted to determine whether the auditee/client is following the specific procedures, rules or regulations set by some higher authority
• Compliance audit


  • In private or government organization, a compliance audit may be required to check whether the organization has complied with the prescribed policies, contractual agreement or legal requirement
• Operational (Management /Performance) Audits

  Involves a systematic review of an organization's activities, or a part of them, in relation to the efficient and effectives use of resources. It also provide recommendation to the management for improving the operations
• FORENSIC AUDITS


  The purpose is for the detection or deterrence of a wide variety of fraudulent activities
• FORENSIC AUDITS


  • Business or employee fraud
  • Criminal investigation
  • Shareholder and partnership disputes
  • Business economics losses
  • Matrimonial disputes
• Tax Audits


  Conducted by personnel from the tax authority, which involves compliance as well as tax evaluation and to determine whether tax is paid in accordance with the regulations
• Shariah Audits


  Involves any business categorized as Shariah-compliant. Conducted by authorities to ensure compliance with Shariah requirements
• Public Sector Audits


  Carried out by public sector auditor or government auditor who is personnel from the Auditor General's office. Audit of expenditures are conducted similar to audits of financial statements
• Types of Auditors


  • External Auditors (Audit Firm)
  • Internal Auditors
  • Government Auditors
  • Forensic Auditors
• External Auditors (Certified Public Accounting Firms/ Chartered Accountant Firm)

  Approved company auditor under Section 263 of the Company Act 2016 to audit every company incorporated under the act. Responsible for auditing the published historical F/S of all publicly traded companies, most other reasonably large companies, and many smaller companies and non-commercial organisations
• Internal Auditor


  Employed by individual companies to audit for management. Reported to an audit committee, board of directors or higher level of management
• Government Auditor


  Auditor working for the Auditor General Department, a non-partisan agency in the legislative branch of the federal government. Responsible for performing the audit function for all federal and states as well as statutory bodies and public authorities
• Forensic Auditors


  Trained in detecting, investigating, deterring fraud and white-collar crime. May be employed by corporations, government agencies, public accounting firms, or consulting and investigative services firms
• Chartered Accounting(CA) Firm


  Accounting firms that conduct public accounting practice. Ranges from smallest firm (sole practitioner), medium firm and larger firm (Big 4). Big 4 normally offer services such as tax services, management advisory services, general accounting and corporate secretarial services
• Staff positions and duties in a public accounting firm

  • Partners
  • Managers
  • Audit seniors
  • Junior employees
• Partners


  Concern themselves with public relations and making new client contacts. May review final audit report, audit working papers and signing the audit report
• Managers


  Less experience than partners but may have developed a specialisation. Normally they meets with client's official for audit planning and discuss with the client about the audit report
• Audit seniors


  Normally qualified as professional accountants through examinations and the requisite practical experience. They have day-to-day contacts with the client on routine matters
• Junior employees


  Classified as audit assistant. They follow instructions of the superior who has the responsibility for closely reviewing their work and making constructive criticism