D215 Auditing Study Guide 2025-2026 Western Governors
University
Unit 2 – Overview of Audit s Assurance Services
Public Company Accounting Oversight Board: Framework for Audits of Public Companies
AS 2201: An audit of internal control over financial reporting that is integrated with an audit of financial
statements
AS 3101: The auditor’s report of an audit of financial statements when the auditor expresses unqualifie
opinion
Auditing Standards Board: Framework for Audits of Private Companies
AU-C 200: Overall objectives of the independent auditor and the conduct of an audit in
accordance with Generally Accepted Auditing Standards (GAAS)
AU-C 700: Forming an opinion and reporting on financial statements
Assurance, Attestation s Auditing: Common processes of an independent accounting firm taking
information prepared by someone else and comparing that information to an established set of criteria.
Audit Services enhance the degree of confidence that intended users (usually investors/creditors)
can place in the financial statements.
2 Primary Types of Auditing Services:
1. Audits of Financial Statements (FS): Historical financial statement audits provide FS uses with
an opinion by an independent auditor that the FS are prepared in accordance with the applicable
framework and are free of material misstatements.
a. Applicable Financial Reporting Framework: Refers to set of standards used in preparing the
historical FS such as GAAP in the United States, the International Financial Reporting Standards
(IFRS), or the federal income tax basis of accounting.
2. Audits of Internal Controls over Financial Reporting (ICFR): ICFR audits provide FS users with
an opinion by the auditor on the design and operating effectiveness of ICFR
Attestation Services: Performed when an independent practitioner, or CPA, is engaged to issue a report on
subject matter that is the responsibility of another party. The term practitioner is used rather than Auditor
because attestation services encompass more than just the audit of historical financial statements and
internal controls.
Financial Statement Review (FSR):
1. Limited Assurance (FSR) – When a practitioner expresses that no material modifications need to be
made to the financial statements. Often completed for small/private companies who do not need or
want an extensive audit that provides reasonable assurance.
, 2. Reasonable Assurance (Audit) – A full scope and in depth audit that performs substantive tests that
provide reasonable assurance to the fair presentation of the financial statements.
Assurance Services: Independent professional services that improve the quality of information, or its conte
for decision makers.
Quality: Refers to the relevance and reliability of the information
Information: Refers to the subject matter than can be financial or non-financial, historical or
prospective, standalone data or entire systems of data, internal or external to a company.
AUDITS
Financial Statement Audits:
Purpose – To provide Financial Statement users with an opinion that the financial statements are:
1. Presently fairly in accordance with an applicable financial reporting framework
2. Free of material misstatement
3. Prepared in a consistent manner from prior years
Limitations – Caused by:
1. The nature of financial reporting
2. The nature of audit procedures
3. need for an audit to be c o n d u c te d w i t h i n a at a reasonable cost
The D o w n lo a d e d by S m a r t z o n e
r e a s o n a b l e p e r io d o f t im
( ka ri s hs m a rt z on e @ g m ail .c o m )
,Compliance Audits: Involve gathering evidence to determine whether the person/entity under review has
followed the rules, policies, procedures, laws and regulations with which they must conform.
Internal Revenue Service (IRS) may conduct an audit of an individual or company to determine if tax
laws have been followed and the correct amount of tax is paid.
Operational (Performance) Audits: Concerned with the economy, efficiency, and effectiveness of an
organization’s activities.
Economy: Refers to the cost of inputs, including wages and materials.
Efficiency: Refers to the relationship between inputs and outputs, or the use of the minimum
amount of inputs to achieve a given output.
Internal Audits: Conducted by the employees of an organization to provide assurance about
various aspects of the organization’s activities.
Conducts operational and compliance audits, internal control assessments and reviews.
Financial Statement Users (and their purpose of reading a company’s Financial Statements):
1. Investors: Interested in return on investment, want to make sure the company appears profitable for
foreseeable future
2. Suppliers: Interested in whether or not a company can pay for goods and services received.
3. Customers: To determine if a company they rely on is likely to stay in business, based on profit.
4. Lenders: To determine if a company is creditworthy enough to qualify for a loan and pay the
interest/principal as due.
5. Employees: To determine if the company they work for will be able to pay wages, health ins., retiremen
C benefits.
6. Government: To determine if company is complying with regulations, paying fair amount of taxes and
following activity
7. General Public: To determine whether they should associate with the company and to get a better
understanding of the company as a whole, what it does and its plan for the future. (For example, if a
company utilizes a celebrity endorsement, and the celebrity becomes involved in a scandal, the
company will drop the celebrity to ensure the public sees that they are not involved with any crimina
associates or those who deal in bad taste).
Management Responsibilities (Financial):
1. Preparing the financial statements fairly and in compliance with the applicable financial reporting
framework (in United States, most often the GAAP).
2. Designing, implementing, maintaining and certifying that internal controls provide reasonable
assurance that the financial statements are fairly represented, free of material misstatements, and
prepared in a manner consistent with prior years.
3. Providing the auditors access to all records, documentation and personnel relevant to the
preparation and fair presentation of the financial statements.
Auditor Responsibilities:
1. Conducting the audit in accordance with appropriate auditing standards.
2. Planning and Performing the audit with professional skepticism.
a. Professional Skepticism: An objective and questioning attitude developed by auditors.
3. Planning and Performing the Audit with professional judgment
a. Professional Judgement: Relates to the application of relevant training, knowledge, and
experience that auditors use while making informed audit decisions in conducting an
audit.
Big 4 Accounting Firms
1. Deliotte
2. Ernst C Young (EY)
, 3. KPMG
4. Pricewaterhousecoopers (PwC)
University
Unit 2 – Overview of Audit s Assurance Services
Public Company Accounting Oversight Board: Framework for Audits of Public Companies
AS 2201: An audit of internal control over financial reporting that is integrated with an audit of financial
statements
AS 3101: The auditor’s report of an audit of financial statements when the auditor expresses unqualifie
opinion
Auditing Standards Board: Framework for Audits of Private Companies
AU-C 200: Overall objectives of the independent auditor and the conduct of an audit in
accordance with Generally Accepted Auditing Standards (GAAS)
AU-C 700: Forming an opinion and reporting on financial statements
Assurance, Attestation s Auditing: Common processes of an independent accounting firm taking
information prepared by someone else and comparing that information to an established set of criteria.
Audit Services enhance the degree of confidence that intended users (usually investors/creditors)
can place in the financial statements.
2 Primary Types of Auditing Services:
1. Audits of Financial Statements (FS): Historical financial statement audits provide FS uses with
an opinion by an independent auditor that the FS are prepared in accordance with the applicable
framework and are free of material misstatements.
a. Applicable Financial Reporting Framework: Refers to set of standards used in preparing the
historical FS such as GAAP in the United States, the International Financial Reporting Standards
(IFRS), or the federal income tax basis of accounting.
2. Audits of Internal Controls over Financial Reporting (ICFR): ICFR audits provide FS users with
an opinion by the auditor on the design and operating effectiveness of ICFR
Attestation Services: Performed when an independent practitioner, or CPA, is engaged to issue a report on
subject matter that is the responsibility of another party. The term practitioner is used rather than Auditor
because attestation services encompass more than just the audit of historical financial statements and
internal controls.
Financial Statement Review (FSR):
1. Limited Assurance (FSR) – When a practitioner expresses that no material modifications need to be
made to the financial statements. Often completed for small/private companies who do not need or
want an extensive audit that provides reasonable assurance.
, 2. Reasonable Assurance (Audit) – A full scope and in depth audit that performs substantive tests that
provide reasonable assurance to the fair presentation of the financial statements.
Assurance Services: Independent professional services that improve the quality of information, or its conte
for decision makers.
Quality: Refers to the relevance and reliability of the information
Information: Refers to the subject matter than can be financial or non-financial, historical or
prospective, standalone data or entire systems of data, internal or external to a company.
AUDITS
Financial Statement Audits:
Purpose – To provide Financial Statement users with an opinion that the financial statements are:
1. Presently fairly in accordance with an applicable financial reporting framework
2. Free of material misstatement
3. Prepared in a consistent manner from prior years
Limitations – Caused by:
1. The nature of financial reporting
2. The nature of audit procedures
3. need for an audit to be c o n d u c te d w i t h i n a at a reasonable cost
The D o w n lo a d e d by S m a r t z o n e
r e a s o n a b l e p e r io d o f t im
( ka ri s hs m a rt z on e @ g m ail .c o m )
,Compliance Audits: Involve gathering evidence to determine whether the person/entity under review has
followed the rules, policies, procedures, laws and regulations with which they must conform.
Internal Revenue Service (IRS) may conduct an audit of an individual or company to determine if tax
laws have been followed and the correct amount of tax is paid.
Operational (Performance) Audits: Concerned with the economy, efficiency, and effectiveness of an
organization’s activities.
Economy: Refers to the cost of inputs, including wages and materials.
Efficiency: Refers to the relationship between inputs and outputs, or the use of the minimum
amount of inputs to achieve a given output.
Internal Audits: Conducted by the employees of an organization to provide assurance about
various aspects of the organization’s activities.
Conducts operational and compliance audits, internal control assessments and reviews.
Financial Statement Users (and their purpose of reading a company’s Financial Statements):
1. Investors: Interested in return on investment, want to make sure the company appears profitable for
foreseeable future
2. Suppliers: Interested in whether or not a company can pay for goods and services received.
3. Customers: To determine if a company they rely on is likely to stay in business, based on profit.
4. Lenders: To determine if a company is creditworthy enough to qualify for a loan and pay the
interest/principal as due.
5. Employees: To determine if the company they work for will be able to pay wages, health ins., retiremen
C benefits.
6. Government: To determine if company is complying with regulations, paying fair amount of taxes and
following activity
7. General Public: To determine whether they should associate with the company and to get a better
understanding of the company as a whole, what it does and its plan for the future. (For example, if a
company utilizes a celebrity endorsement, and the celebrity becomes involved in a scandal, the
company will drop the celebrity to ensure the public sees that they are not involved with any crimina
associates or those who deal in bad taste).
Management Responsibilities (Financial):
1. Preparing the financial statements fairly and in compliance with the applicable financial reporting
framework (in United States, most often the GAAP).
2. Designing, implementing, maintaining and certifying that internal controls provide reasonable
assurance that the financial statements are fairly represented, free of material misstatements, and
prepared in a manner consistent with prior years.
3. Providing the auditors access to all records, documentation and personnel relevant to the
preparation and fair presentation of the financial statements.
Auditor Responsibilities:
1. Conducting the audit in accordance with appropriate auditing standards.
2. Planning and Performing the audit with professional skepticism.
a. Professional Skepticism: An objective and questioning attitude developed by auditors.
3. Planning and Performing the Audit with professional judgment
a. Professional Judgement: Relates to the application of relevant training, knowledge, and
experience that auditors use while making informed audit decisions in conducting an
audit.
Big 4 Accounting Firms
1. Deliotte
2. Ernst C Young (EY)
, 3. KPMG
4. Pricewaterhousecoopers (PwC)
