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2018 | Buch

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Auditing, Assurance Services, and Forensics

A Comprehensive Approach

verfasst von: Prof. Dr. Felix I. Lessambo

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book provides a comprehensive presentation of auditing theory and practice. It simplifies audit concepts often considered abstract or vague to many. Written in a clear, concise, and understandable manner, the book covers the often uncovered and daring area of forensic auditing and analyses the approach thereof. Additionally, it covers the use of blockchain in audit through several illustrations and examples, and would be of interest to students, academics, and even junior auditors.

Inhaltsverzeichnis

Frontmatter

Audit Framework, Profession, and Standards

Frontmatter

Chapter 1. Overview, History, and Overall Objectives of Auditing

Abstract

The objectives of the audit have also evolved through time from the detection of fraud to its prevention through adequate safeguards and principles. An audit function plays a critical role in maintaining the welfare and stability of the society. Today, it is well accepted that the role or function of an audit consists of providing credibility to the financial statements prepared and released by company managers for their shareholders, including the detection, the report, as well as the assessment of the business’ risks.

Felix I. Lessambo

Chapter 2. The Audit Profession: The US Sarbanes-Oxley Act

Abstract

The SOX Act provides rules concerning the oversight of the auditors, the responsibility of corporate officers for the accuracy and completeness of corporate financial statements, the relationship between public company auditors and auditor-client, the enhancement of corporate financial statements disclosure, the enhancement of corporate governance standards. It extends the Securities and Exchange Commission powers, criminalizes auditing frauds, and protects whistleblowers against retaliation.

Felix I. Lessambo

Chapter 3. The International Auditing and Assurance Standards Board

Abstract

The IAASB aims to enhance the quality and consistency of practice throughout the world and to strengthen public confidence in the global auditing and assurance profession. The IAASB follows a rigorous due process in developing its pronouncements. Input is obtained from a wide range of stakeholders including the IAASB’s Consultative Advisory Group national auditing standard setters, IFAC member bodies and their members, regulatory and oversight bodies, firms, governmental agencies, investors, preparers, and the general public.

Felix I. Lessambo

Chapter 4. Generally Accepted Auditing Standards, Audit Planning and Engagement Quality Review

Abstract

Planning the audit includes establishing the overall audit strategy for the engagement and developing an audit plan, which includes, in particular, planned risk assessment procedures and planned responses to the risks of material misstatement. The auditing standards of the AICPA as well as those from the PCAOB must be strictly observed.

Felix I. Lessambo

Chapter 5. Other Engagements, Reports, and Accounting Services

Abstract

A common characteristic of these non-assurance services is that the professional accountant’s services are designed to provide technical skills, education, observations, experiences, and knowledge to subject matter for the direct use and benefit of the client. The services considered necessary are generally determined by agreement between the client and the practitioner, and the outcome of the work is not designed to provide any level of assurance to parties outside the client or responsible party.

Felix I. Lessambo

Chapter 6. Agreed-Upon Procedures

Abstract

An agreed-upon procedures engagement is one in which a practitioner is engaged by a client to issue a report of findings based on the specific procedures performed on the subject matter. The auditor should not report on an engagement when specified parties do not agree upon the procedures performed or to be performed and do not take responsibility for the sufficiency of the procedures for their purposes. The subject matter of an agreed-upon procedures engagement may take many different forms and may be at a point in time or covering a period of time.

Felix I. Lessambo

Chapter 7. Professional Standards: Independence, Integrity, and Objectivity

Abstract

The Auditor must be independent and objective. Independence means freedom from situations and influences, facts, and circumstances, where a reasonably informed third party would conclude that an external auditor’s objectivity is impaired. It is important for the external auditor to be independent in both fact and appearance. Objectivity is a fundamental ethical principle and a key element of audit quality. It requires that the external auditor’s judgment is not compromised because of bias, conflict of interest or the undue influence of others.

Felix I. Lessambo

Audit Planning

Frontmatter

Chapter 8. Audit Planning, Testing, and Materiality

Abstract

The auditor should establish an overall audit strategy that sets the scope, timing, and direction of the audit and that guides the development of the audit plan. The nature and extent of planning activities will vary according to the size and complexity of the entity, the key engagement team members’ previous experience with the entity, and changes in circumstances that occur during the audit engagement. To obtain reasonable assurance about whether the financial statements are free of material misstatement, the auditor should plan and perform audit procedures to detect misstatements that, individually or in combination with other misstatements, would result in material misstatement of the financial statements.

Felix I. Lessambo

Audit Evidence Processing

Frontmatter

Chapter 9. Audit Evidence and Documentation

Abstract

Audit evidence refers to Information used by the auditor in arriving at the conclusions on which the auditor’s opinion is based. Audit evidence includes both information contained in the accounting records underlying the financial statements and other information. Audit evidence to draw reasonable conclusions on which to base the auditor’s opinion is obtained by performing specific procedures.

Felix I. Lessambo

Chapter 10. Audit Risks: Identification and Procedures

Abstract

Risks of material misstatement at the financial statement level relate pervasively to the financial statements as a whole and potentially affect many assertions. Inherent risk and control risk are related to the company, its environment, and its internal control, and the auditor assesses those risks based on evidence he or she obtains.

Felix I. Lessambo

Chapter 11. Audit Sampling

Abstract

Sample items should be selected in such a way that the sample can be expected to be representative of the population. Therefore, all items in the population should have an opportunity to be selected. Random-based selection of items represents one means of obtaining such samples. Ideally, the auditor should use a selection method that has the potential for selecting items from the entire period under audit.

Felix I. Lessambo

Chapter 12. Auditing Accounting Estimates, Including Fair Value Accounting Estimates

Abstract

For accounting estimates that give rise to significant risks, the auditor should obtain sufficient appropriate audit evidence about whether: (a) management’s decision to recognize or not recognize the accounting estimates in the financial statements and (b) the selected measurement basis for the accounting estimates are in accordance with the requirements of the applicable financial reporting framework.

Felix I. Lessambo

Chapter 13. Related Party Transactions

Abstract

The economic substance of a related party transaction may differ materially from its form. Thus, the objective of the auditor is to obtain sufficient appropriate audit evidence to determine whether related parties and relationships and transactions with related parties have been properly identified, accounted for, and disclosed in the financial statements.

Felix I. Lessambo

Chapter 14. Significant Unusual Transactions

Abstract

Significant unusual transactions as significant transactions that are outside the normal course of business for the company or that otherwise appear to be unusual due to their timing, size, or nature. A company’s significant unusual transactions can create complex accounting and financial statement disclosure issues that could pose increased risks of material misstatement.

Felix I. Lessambo

Chapter 15. Subsequent Events; and Going Concern

Abstract

Subsequent events are events or transactions that occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements that have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. Two types of subsequent events require consideration by management and evaluation by the independent auditor. Likewise, the auditor should evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.

Felix I. Lessambo

Chapter 16. Reporting on Condensed Financial Statements, Selected Financial Data, and Supplemental Information

Abstract

The objective of the auditor of the financial statements, when engaged to perform audit procedures and report on supplemental information that accompanies audited financial statements, is to obtain sufficient appropriate audit evidence to express an opinion on whether the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Felix I. Lessambo

Chapter 17. Consideration of Fraud and of Internal Control Over Financial Reporting Audit

Abstract

Effective internal control over financial reporting (“internal control”) helps assure that companies produce reliable published financial statements that investors can use in making investment decisions. In identifying risks of material misstatement due to fraud, it is helpful for the auditor to consider the information that has been gathered in the context of the three conditions present when a material misstatement due to fraud occurs—that is, incentives/pressures opportunities, and attitudes/rationalizations.

Felix I. Lessambo

Chapter 18. Financial Statements’ Audit

Abstract

The examination of an entity’s financial statements and related disclosures is the essence of a financial audit. The auditor shall examine the assertions made by the management and performed audit procedures to provide credibility to the users of these financial statements.

Felix I. Lessambo

Chapter 19. The Integrated Audit Process

Abstract

In an integrated audit of internal control over financial reporting and the financial statements, the auditor should design his or her testing of controls to accomplish the objectives of both audits simultaneously. The auditor’s evaluation of entity-level controls can result in increasing or decreasing the testing that the auditor otherwise would have performed on other controls. The purpose of the audit of a company’s financial documents is to determine whether the financial statements are recorded and reported in accordance with the applicable financial reporting framework.

Felix I. Lessambo

Chapter 20. Audits of Group Financial Statements

Abstract

While auditing a group financial statements, the group engagement partner is responsible for the direction, supervision, and performance of the group audit engagement. To that end, the group engagement partner is required to be satisfied that those performing the group audit engagement, including component auditors, collectively possess the appropriate competence and capabilities. Therefore, he should assess materiality, including performance materiality, for the group financial statements as a whole when establishing the overall group audit strategy.

Felix I. Lessambo

Chapter 21. Communications with Audit Committees

Abstract

The communication between the auditor and the audit committee is meant to encourage effective two-way communication between the auditor and the audit committee throughout the audit to assist in understanding matters relevant to the audit. Unless otherwise states, such a communication can either be oral or in writing. In either case, the auditor shall document the communication in the work papers.

Felix I. Lessambo

Chapter 22. Audit Tools: Financial Ratios Analysis

Abstract

Ratio analysis is a diagnostic tool that helps to identify problem areas and opportunities within a company. However, there is considerable subjectivity involved, as there is no correct number for the various ratios. Further, it is hard to reach a definite conclusion when some of the ratios are favorable and some are unfavorable.

Felix I. Lessambo

Chapter 23. Corporate Governance, Accounting, and Auditing Scandals

Abstract

A management team facing the pressure to make the number or to defeat market expectations would be inclined to cook the books in order to achieve the short-term goal assigned to it. This is often facilitated when there the institutions has no sound corporate governance. Pressure, opportunity, and rationalization are the soul of all accounting frauds.

Felix I. Lessambo

Chapter 24. Auditor Legal Liability

Abstract

Auditors are liable both civilly and criminally. Auditors common law liability arises from negligence, breach of contract, and fraud. Statutory law liability is the obligation that comes from a certain statute or a law, which is applied, to society.

Felix I. Lessambo

Chapter 25. Forensic Auditing

Abstract

Forensic auditing is the integration of specialized accounting knowledge and positive mental attitude to resolve legal issues. Although forensic audits examine financial reporting and internal control matters, the objective of a forensic audit is not expressly articulated in an established set of standards. Instead, users of forensic audits establish their objectives on a case-by-case basis.

Felix I. Lessambo

Backmatter

Titel: Auditing, Assurance Services, and Forensics
verfasst von: Prof. Dr. Felix I. Lessambo
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-90521-1
Print ISBN: 978-3-319-90520-4
DOI: https://doi.org/10.1007/978-3-319-90521-1