audit lecture 1
TRANSCRIPT
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Welcometo22522AssuranceServicesandAudit1. SubjectIntroduction2. OverviewofAuditing3. TheImportanceofCorporate
Governance
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1.SUBJECTINTRODUCTION
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Whoisincharge?
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Classetiquette:Allstudentsareexpectedtobehaveinaprofessionalmanner.Thisincludesthefollowing: Allmobilephonesshouldbeturnedoffduringclass Bepunctual yourlecturer/tutorhasrighttorefuseentrytolatestudents Berespectfulofyourlectureranddonotpackupbeforetheclasshasended.
If something is in the subject outline and is not discussed in the lecture (perhaps because oftime limitations) it is still examinable and you must learn it! Homework policyThis policy states that any student that wishes to attend class must complete the
required homework. Your lecturer can randomly check homework at any time. Anystudent found in the class without completed homework may be asked to leave.Students may only return to the class when they can show that their homework hasbeen completed.
Coordinator Dr AmandaWhite
Office location CM05.C.3.13
Phone 95143637,0410650179
Email [email protected]
Consultation CheckUTSOnline fordetails
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Expectations
Assessmentformat Midsemester exam 15% Classpresentations 25%
WatchthevideoonUTSOnlinethatexplainshowtheClassPresentationassessmentworks.
BeginsinWeek2.VitalyouattendtutorialsinWeek1. Finalexam 60%
Workload _____hoursperweek Readingtextbook,auditingstandardsandpreparingtheclasspresentationseachweek
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Expectations
Thissubjectwillrequirestudentstodevelopthefollowingskills: Workingaspartofateam Problemsolving Criticalthinking Presentationandcommunication Timemanagement
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Modern Auditing and Assurance Services, 5thEdition Value Pack
Value Pack 1: = RRP $230.95Includes: Leung Print book with e-Text and iStudy, plus Auditing and Assurance Handbook 2014 with e-Text, and Cloud 9
OR
Value Pack 2: = RRP $166.95Includes: Leung e-Text and iStudy, plus Auditing and Assurance Handbook 2014 with e-Text, and Cloud 9
The above value packs are only available from your UTS Co-op bookshop.
Requiredtexts
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Animportantnoteabouthandbooks
2014editionsonlycanbebroughtintotheFINALexam(notthemidsemester)
Theycanbeannotated youcanwriteasmanynotesinthehandbookasyoulike!
Thehandbookcanbehighlightedandunderlined Youcantabpagesorstandardsofinterest YouCANNOTwriteonthetabs(tabsmustbeblanktobetakenintothefinalexam)
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2.ANOVERVIEWOFAUDITING
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Auditobjective
Toexpressan__________ aboutwhetherthe________________ispreparedinallmaterialrespectsinaccordancewitha________________framework (ASA200)
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Ademandforaudits
Agencytheory The_________________relationship
Informationhypothesis Improvingthequalityofmanagements_____________
Insurancehypothesis Shiftingsomeresponsibilityforthecorrectnessoftheaccountsontotheauditor
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Regulation
Annualauditsrequiredby: Companies,registeredschemes&disclosingentities(excludessmallproprietarycompanies)
Commonwealth&stategovernmentdepartments,statutoryauthorities,governmentcompaniesandbusinessundertakings,municipalities
Notforprofitorganisations
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Providersofaudits
Financialauditsprovidedby___________auditors
MustberegisteredwithASICtobeabletoperformauditsonreportingentities
Criteriasetoutins.1280CorporationsAct Educationalqualifications Workexperience MemberofICAAorCPAAustralia
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Assurance
Whereinformationispreparedbyonepartyandthenattestedtoitsaccuracybyanotherparty
Levelofassurancecanvaryaccordingtotheparticularengagement Reasonable,limitedandnoassuranceengagements
Maybefinancialornonfinancial Whatwearestudying:
Financialauditsimplyareasonablelevelofassurance Arethemostpopulartypeofassuranceengagement
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Auditingenvironment Professionalbodiesworktodevelopstandardsforpractice,
educationandqualifications. ASICenforcestheCorporationsAct
Responsibilityforaccountingandauditingstandardsettingsundergovernmentcontrol
Specificrulesforauditingandauditorindependence CompaniesAuditorsandLiquidatorsDisciplinaryBoard
(CALDB) EstablishedunderASICAct HearsbreachesunderCorporationsActofauditorsand
liquidators Auditingfirmsconductassuranceengagementsforclients
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Doestheauditmeetdemandsofusers?
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Doauditsprovidegoodvalue?
Assessingvaluecanbeexaminedbyasking: Howoftenaretheyassociatedwithcompanyfailure?
Doauditorsgettheauditreportcorrect? Howmuchdotheycost? Doauditsprovideeconomicvalueinthemarket?
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Auditexpectationgap thedifference
betweenwhatauditorsactuallydowhentheyconductanauditandwhatshareholdersandothersthinkauditor'sdo,orshoulddo,inconductingtheaudit(ReportofHIHRoyalCommission)
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Auditexpectationgap
Remediestoaddressunrealisticexpectations: _______________ofstakeholdersaboutwhatanauditprovides
Remediestoaddressdeficientstandards: Reportingoninternalcontrol Detectionoffraud Evaluationofgoingconcern
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GOVERNANCEANDTHEAUDITOR
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WhatisGovernance?
Theexerciseofeconomicandadministrativeauthoritytomanageanentitysaffairs
Concernedwithprocessesbywhichdecisionsaremadeandimplemented
Applicabletoallentities characterisedbyparticipation,transparency,accountability,ruleoflaweffectiveness,equity..Goodgovernancereferstothemanagementofgovernmentinamannerthatisessentiallyfreeofabuseandcorruption,andwithdueregardfortheruleoflaw(OECD)
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Governance
Agencystructure Separationofownershipand_____________ Members(shareholders)replyonmanagement(agents)
Agentsconductthebusinessonbehalfofmembers Authorityofgoverningbodyunderpinnedbytransparencyandaccountability
Independentauditoraddstothecredibilityoftheconductoftheagent
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EnterpriseGovernance
thesetofresponsibilitiesandpracticesexercisedbytheboardandexecutivemanagementwithgoalofprovidingstrategicdirection,ensuringtheobjectivesareachieved,ascertainingthatrisksaremanagedappropriately,andverifyingthattheorganisationsresourcesareusedresponsibly.
CIMA&IFAC
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EnterpriseGovernance
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EnterpriseGovernance Basedonorganisation'sentireaccountabilityframework
Includes: rolesofchairoftheboardandtopmanagement composition,skill,remuneration&trainingoftheboardanditscommittees
adequacy&reasonablenessofexecutivecompensationschemes
internalcontrolstructure,riskmanagement&roleofinternalaudit
financialreportinganddisclosureregime independenceoftheauditfunction
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AuditorsandGovernance
Overallobjectiveoftheauditor: toobtainreasonableassuranceaboutwhetherthefinancialreportasawholeisfreefrommaterialmisstatement,whetherduetofraudorerror..(ASA200)
Effectivenessoftheauditfunctiononauditorsrelationshipwiththeentitysmanagementandgovernancebody
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AuditorsroleinEnterpriseGovernance
Providesassuranceofverifiability,complianceandaccountabilityoftheorganisation
Mayalsoberequiredtoensuretheorganisationandboardofdirectorshavecompliedwithrelevantlegislationandregulations
Performancedimensionincludessettingstrategicdirections,managingriskandkeyperformancedriversanddecisionmakingprocesses
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CorporateGovernanceandAuditing
Corporategovernance Frameworkofrules,relationships,systemsandprocessesbywhichauthorityiscontrolled
Includesstructure,systemsandrelationshipsbetweenboardofdirectors,management,auditorsregulatorsshareholders&thepublic
Encouragecompaniestocreatevalueandprovideaccountabilityandcontrolsystemscommensuratewithrisksinvolved
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AuditTrinityConcept
Externalaudit,internalauditandauditcommitteeasatripartite
Auditfunctionistoperformspecificdutiesthatcomplementandinterlockwiththeothermembers
Internalauditincludescorporategovernanceandaccountabilitymatters
Auditcommitteesoverseeinternalauditandexternalauditfunctions
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IssuesinGovernance
Internalcontrolandriskmanagement Effectivegovernanceandaccountabilitybasedoneffectivefunctioningofinternalcontrolandriskmanagement
Riskmanagementistheculture,processandsystemestablishedtomanageopportunitiesandminimise/controladverserisks
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Otherformsofauditing Internalauditing
Assuranceoveracompanysfinancialinformationandoperations
Toimproveefficiencyandeffectiveness InternalauditorsgainindependencebyreportingtotheAuditCommittee
Operationalauditing Evaluatesuseofresourcestowhethertheyarebeingusedinthemostefficientandeffectivemanner
Threeapproaches Riskbasedauditapproach Valueformoneyapproach Processauditapproach
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Whenauditingpublicsectorentities
Specialistauditorsarerequired Arangeofauditsandengagementsareconducted Financialstatement Performance _____________withlawsandregulations
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AuditCommittees
Enhanceeffectiveinternalaccountability Facilitatesparticipationofindependentdirectorsingovernanceprocess
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WhatdoyouneedtodoforWeek2?
GetintoaClassPresentationGroup Purchaseyourtextbookpack PreparehomeworkANDPRESENTATIONSreadyforWeek2(evenifyouvemissedoutonformingagroup)
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