Chapter 1 – The Demand for Audit and Other Assurance Services
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The Demand for Audit
and Other Assurance
Services
Chapter 1
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 1Sarbanes-Oxley Act
The Act established the Public Company
Accounting Oversight Board.
It also requires auditors to attest to
management reports on the effectiveness
of internal control over financial reporting.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 2Learning Objective 1
Describe auditing.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 3Nature of Auditing
Auditing is the accumulation and evaluation
of evidence about information to determine
and report on the degree of correspondence
between the information and established criteria.
Auditing should be done by a competent,
independent person.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 4Information and Established
Criteria
To do an audit, there must be information in a
verifiable form and some standards (criteria)
by which the auditor can evaluate the information.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 5Accumulating Evidence and
Evaluating Evidence
Evidence is any information used by the auditor
to determine whether the information being
audited is stated in accordance with the
established criteria.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 6Competent, 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.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 7Audit Report
The final stage in the auditing process is
preparing the Audit Report, which is the
communication of the auditor’s findings to users.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 8Audit of a Tax Return Example
Information
Competent, Federal tax
independent returns filed
person by taxpayer
Internal Report on results
Revenue
agent Determines Report on tax
correspondence deficiencies
Accumulates and
Established criteriaevaluates evidence
Examines cancelled Internal Revenue
checks and other Code and all
supporting records interpretations
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 9Learning Objective 2
Distinguish between auditing
and accounting.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 1 - 10
