Jenevieve Limqueco (11117818)

February 12, 2014

Auditing is the systematic process of obtaining & evaluating evidence regarding assertions about economic actions & events in order to determine how well they respond with established criteria & communicating the results to interested users. In auditing, there are 2 types of auditors: 1) internal auditors are directly responsible for helping mgt improve organizational efficiency & effectiveness. They assist in designing & implementing AIS that contributes to the entitys goals. 2) External auditors are primarily responsible to shareholders & investors. They are indirectly concerned with AIS effectiveness. There are 5 types of internal audits: 1) financial examine reliability & integrity of financial transactions, accounting records & FS. 2) Information Systems reviews the controls of a AIS to assess compliance with IC policies & procedures & effectiveness in safeguarding assets. 3) Operational concerned with economical & efficient use of resources & accomplishments of established goals & objectives. 4) Compliance 5) Investigative

Nature of auditing: 1) Planning is to determine why, how, when & by whom the audit will be performed. The first step is to establish the scope & objectives of the audit. An audit team with the necessary experience & expertise is formed. Work targeted in area with greater risk: preventive, detective & corrective. 2) Collecting evidence is a much audit effort is spent collecting evidence. The most commonly used evidence collection methods: a) Observation b) Review of documentation c) Discussion d) Physical examination e) Confirmation f) Vouching g) Analytical review. Not everything can be examined so samples are collected. Observation activities matters to be audited. An audit designed to evaluate AIS internal controls would make greater use of: a) Observation b) Review of documents c) Discussions d) Re-performance. An audit of financial information would focus on: a) Physical examination b) Confirmation c) Vouching d) Analytical review. 3) Evaluating evidence is where an auditor evaluates the evidence gathered in the light of the specific objective & decides if it supports a favorable or unfavorable conclusion. Two important factor when deciding how much audit work is necessary & in evaluating audit evidence are: a) Materiality focuses on those that have a significant impact on managements interpretation of audit findings. b) Reasonable assurance. 4) The communicating audit result is where the auditors prepare a written & oral report summarizing audit findings & recommendations. The report is reported to: a) Management b) Audit committee. At all stages of audit, findings & conclusions are carefully documented in the working papers