D215 Auditing Complete Study Guide 2025-2026
Western Governors University
Unit 2 Overview of Audit and Assurance Services – Module 1 (5%)
o Differentiate between assurance, attestation, and audit services.
Assurance services involve an independent professional assessing information or processes to improve
the quality of information for decision makers. Attestation services are a subset of assurance services
where the professional provides a written conclusion about the reliability of a specific assertion made by
management. Audit services are a subset of attestation services focused specifically on providing an
opinion on the fairness of financial statements or the effectiveness of internal controls. All audits are
attestation services, and all attestation services are assurance services. However, not all assurance
services are audits or attestations.
o Describe the different types of assurance services.
Financial Statement Audits, Compliance Audits, Operational (Performance) Audits and Internal Audits
o Describe the demand for audit and assurance services.
Financial statement users and their needs are many and varied. There are a number of reasons why some or all of
these users would demand an audit of financial statements. These include remoteness, complexity, competing
incentives, and reliability.
o Differentiate between the roles of the financial statement preparer and the auditor.
It is the responsibility of management, with oversight from those charged with governance (generally the board of
directors), to prepare the financial statements. Specifically, management is responsible for the following:
Ensuring the information included in the financial statements is presented fairly and complies with the applicable
financial reporting framework, which in the United States is most often GAAP.
Designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the
financial statements.
Providing the auditors with access to all records, documentation, and personnel relevant to the preparation and
fair presentation of the financial statements, and any additional information the auditors may consider relevant
to complete the audit.
The auditor's responsibility is to provide an opinion on whether the financial statements are presented fairly
in accordance with the applicable financial reporting framework. It is important to emphasize the auditor is
,not responsible for preparing the financial statements. Preparation of financial statements is management's
responsibility. Auditors are responsible for the following:
Conducting the audit in accordance with the appropriate auditing standards. Auditing standards provide minimum
requirements and guidance for the performance of an audit.
Planning and performing the audit with professional skepticism. Professional skepticism is an attitude adopted by
auditors when conducting an audit. It means auditors remain independent of the entity, its management, and its
staff when completing the audit work. In a practical sense, it means auditors maintain a questioning mind and
thoroughly investigate all evidence presented by their client. Auditors must seek independent evidence to
corroborate, or confirm, information provided by their client.
,Planning and performing the audit with professional judgment. Professional judgment relates to the application of
relevant training, knowledge, and experience that auditors use while making informed audit decisions in
conducting an audit. Auditors must use their judgment throughout the entire audit.
o Identify the roles of different regulators and organizations that affect the audit profession.
Securities and Exchange Commission (SEC). The SEC is a federal government agency whose mission is to protect
investors, maintain fair and efficient markets, and facilitate capital formation (www.sec.gov). A primary task of the
SEC is to enforce and interpret securities laws.
Public Company Accounting Oversight Board (PCAOB). The PCAOB is a non-profit corporation established through
the SOX legislation in 2002. Its mission is to oversee the audits of public companies to protect the interests of
investors.
American Institute of Certified Public Accountants (AICPA). Some key activities of the AICPA include representing
the profession before rule-making bodies, acting as an advocate for the profession before legislative bodies,
providing educational materials to its members, and setting ethical standards for the profession. The AICPA is also
responsible for creating and grading the Uniform CPA Exam.
Financial Accounting Standards Board (FASB). The FASB is a privately funded organization whose mission is to
establish financial accounting and reporting standards for nongovernmental entities with the goal of providing
information that is useful for decision making
Committee on Sponsoring Organizations of the Treadway Commission (COSO). COSO is an independent private-
sector group that focuses on providing guidance to management and expertise in the areas of internal control,
enterprise risk management, and fraud deterrence
o Describe the concepts of reasonable assurance, materiality, and the unqualified report on the
audit of financial statements.
Reasonable assurance is a high, but not absolute, level of assurance (AU-C 200.06 ). In other words, the auditor
does not “guarantee” or “certify” that the financial statements are 100% accurate because that is considered
absolute assurance, which is not possible with content that is subjective.
Materiality refers to the significance of financial statement misstatements or omissions that could
influence the decisions of users of those statements. It acts as a threshold or benchmark for the auditor
when planning and performing an audit.
An unqualified audit report, also known as a clean opinion, is issued when auditors conclude
that financial statements are free of material misstatements and are prepared in accordance
with the applicable financial reporting framework.
o Describe the concept of reasonable assurance and the nature of an unqualified report on
internal controls over financial reporting.
Reasonable assurance in the context of an audit of internal controls over financial reporting (ICFR) refers
to the auditor's professional judgment that there is a high, but not absolute, level of confidence that
material weaknesses in internal controls, if they exist, would be detected.
An unqualified report on ICFR is issued when the auditor concludes that the company maintained, in all
material respects, effective internal controls over financial reporting as of the specified date.
, Reasonable Assurance as a Basis: The unqualified report relies on the auditor achieving reasonable
assurance through sufÏcient and appropriate audit evidence about the design and operational
effectiveness of internal controls.
Material Weakness Threshold: If any material weaknesses are found, the assurance level is
compromised, and an unqualified report cannot be issued; instead, an adverse report would be
provided.
o Explain the audit expectation gap.
The audit expectation gap refers to the difference between what the public (including stakeholders and
financial statement users) believes auditors are responsible for and what auditors actually do as per
their professional standards.
Unit 3 Professionalism and Professional Responsibilities– Modules 2 and 3 (10%)
a. Describe what it means to be a professional and how these traits apply to auditors.
Being a professional goes beyond simply having technical skills in a field. It encompasses a set of traits,
behaviors, and ethical standards that ensure high-quality work, integrity, and trustworthiness.
Professionals are expected to adhere to established standards, prioritize the interests of stakeholders,
and demonstrate accountability in their actions. Auditors must stay updated on accounting and auditing
standards. Auditors must provide unbiased opinions, avoiding conflicts of interest and undue influence
from clients. Auditors must evaluate evidence based solely on its merits, without being influenced by
personal relationships or external pressures. Auditors must protect sensitive financial and operational
data, ensuring it is used only for the audit purpose. Auditors must critically assess evidence, especially
when information seems inconsistent or unusual. Auditors are responsible for the quality of their work
and the opinions they express. Auditors follow codes of conduct (e.g., the AICPA Code of Professional
Conduct) that outline principles like integrity, objectivity, and due care.
b. Describe the structure of the AICPA Code of Professional Conduct.
The AICPA Code of Professional Conduct provides a comprehensive framework of principles and rules
designed to guide the ethical and professional behavior of members of the American Institute of
Certified Public Accountants (AICPA). The structure of the Code is organized into several key parts:
While the Code includes detailed rules and guidance, its foundation lies in six fundamental principles:
1. Responsibilities: Members should act with sensitivity to their professional responsibilities.
2. The Public Interest: Members must honor the public trust and serve the public interest.
3. Integrity: Members should be honest and forthright.
4. Objectivity and Independence: Members must avoid conflicts of interest and
maintain independence.
5. Due Care: Members must continually strive for excellence in their professional work.
6. Scope and Nature of Services: Members should ensure their services comply with
professional standards and the spirit of the Code.
c. Describe the conceptual framework approach to ethical decision-making for members in public
practice.
Western Governors University
Unit 2 Overview of Audit and Assurance Services – Module 1 (5%)
o Differentiate between assurance, attestation, and audit services.
Assurance services involve an independent professional assessing information or processes to improve
the quality of information for decision makers. Attestation services are a subset of assurance services
where the professional provides a written conclusion about the reliability of a specific assertion made by
management. Audit services are a subset of attestation services focused specifically on providing an
opinion on the fairness of financial statements or the effectiveness of internal controls. All audits are
attestation services, and all attestation services are assurance services. However, not all assurance
services are audits or attestations.
o Describe the different types of assurance services.
Financial Statement Audits, Compliance Audits, Operational (Performance) Audits and Internal Audits
o Describe the demand for audit and assurance services.
Financial statement users and their needs are many and varied. There are a number of reasons why some or all of
these users would demand an audit of financial statements. These include remoteness, complexity, competing
incentives, and reliability.
o Differentiate between the roles of the financial statement preparer and the auditor.
It is the responsibility of management, with oversight from those charged with governance (generally the board of
directors), to prepare the financial statements. Specifically, management is responsible for the following:
Ensuring the information included in the financial statements is presented fairly and complies with the applicable
financial reporting framework, which in the United States is most often GAAP.
Designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the
financial statements.
Providing the auditors with access to all records, documentation, and personnel relevant to the preparation and
fair presentation of the financial statements, and any additional information the auditors may consider relevant
to complete the audit.
The auditor's responsibility is to provide an opinion on whether the financial statements are presented fairly
in accordance with the applicable financial reporting framework. It is important to emphasize the auditor is
,not responsible for preparing the financial statements. Preparation of financial statements is management's
responsibility. Auditors are responsible for the following:
Conducting the audit in accordance with the appropriate auditing standards. Auditing standards provide minimum
requirements and guidance for the performance of an audit.
Planning and performing the audit with professional skepticism. Professional skepticism is an attitude adopted by
auditors when conducting an audit. It means auditors remain independent of the entity, its management, and its
staff when completing the audit work. In a practical sense, it means auditors maintain a questioning mind and
thoroughly investigate all evidence presented by their client. Auditors must seek independent evidence to
corroborate, or confirm, information provided by their client.
,Planning and performing the audit with professional judgment. Professional judgment relates to the application of
relevant training, knowledge, and experience that auditors use while making informed audit decisions in
conducting an audit. Auditors must use their judgment throughout the entire audit.
o Identify the roles of different regulators and organizations that affect the audit profession.
Securities and Exchange Commission (SEC). The SEC is a federal government agency whose mission is to protect
investors, maintain fair and efficient markets, and facilitate capital formation (www.sec.gov). A primary task of the
SEC is to enforce and interpret securities laws.
Public Company Accounting Oversight Board (PCAOB). The PCAOB is a non-profit corporation established through
the SOX legislation in 2002. Its mission is to oversee the audits of public companies to protect the interests of
investors.
American Institute of Certified Public Accountants (AICPA). Some key activities of the AICPA include representing
the profession before rule-making bodies, acting as an advocate for the profession before legislative bodies,
providing educational materials to its members, and setting ethical standards for the profession. The AICPA is also
responsible for creating and grading the Uniform CPA Exam.
Financial Accounting Standards Board (FASB). The FASB is a privately funded organization whose mission is to
establish financial accounting and reporting standards for nongovernmental entities with the goal of providing
information that is useful for decision making
Committee on Sponsoring Organizations of the Treadway Commission (COSO). COSO is an independent private-
sector group that focuses on providing guidance to management and expertise in the areas of internal control,
enterprise risk management, and fraud deterrence
o Describe the concepts of reasonable assurance, materiality, and the unqualified report on the
audit of financial statements.
Reasonable assurance is a high, but not absolute, level of assurance (AU-C 200.06 ). In other words, the auditor
does not “guarantee” or “certify” that the financial statements are 100% accurate because that is considered
absolute assurance, which is not possible with content that is subjective.
Materiality refers to the significance of financial statement misstatements or omissions that could
influence the decisions of users of those statements. It acts as a threshold or benchmark for the auditor
when planning and performing an audit.
An unqualified audit report, also known as a clean opinion, is issued when auditors conclude
that financial statements are free of material misstatements and are prepared in accordance
with the applicable financial reporting framework.
o Describe the concept of reasonable assurance and the nature of an unqualified report on
internal controls over financial reporting.
Reasonable assurance in the context of an audit of internal controls over financial reporting (ICFR) refers
to the auditor's professional judgment that there is a high, but not absolute, level of confidence that
material weaknesses in internal controls, if they exist, would be detected.
An unqualified report on ICFR is issued when the auditor concludes that the company maintained, in all
material respects, effective internal controls over financial reporting as of the specified date.
, Reasonable Assurance as a Basis: The unqualified report relies on the auditor achieving reasonable
assurance through sufÏcient and appropriate audit evidence about the design and operational
effectiveness of internal controls.
Material Weakness Threshold: If any material weaknesses are found, the assurance level is
compromised, and an unqualified report cannot be issued; instead, an adverse report would be
provided.
o Explain the audit expectation gap.
The audit expectation gap refers to the difference between what the public (including stakeholders and
financial statement users) believes auditors are responsible for and what auditors actually do as per
their professional standards.
Unit 3 Professionalism and Professional Responsibilities– Modules 2 and 3 (10%)
a. Describe what it means to be a professional and how these traits apply to auditors.
Being a professional goes beyond simply having technical skills in a field. It encompasses a set of traits,
behaviors, and ethical standards that ensure high-quality work, integrity, and trustworthiness.
Professionals are expected to adhere to established standards, prioritize the interests of stakeholders,
and demonstrate accountability in their actions. Auditors must stay updated on accounting and auditing
standards. Auditors must provide unbiased opinions, avoiding conflicts of interest and undue influence
from clients. Auditors must evaluate evidence based solely on its merits, without being influenced by
personal relationships or external pressures. Auditors must protect sensitive financial and operational
data, ensuring it is used only for the audit purpose. Auditors must critically assess evidence, especially
when information seems inconsistent or unusual. Auditors are responsible for the quality of their work
and the opinions they express. Auditors follow codes of conduct (e.g., the AICPA Code of Professional
Conduct) that outline principles like integrity, objectivity, and due care.
b. Describe the structure of the AICPA Code of Professional Conduct.
The AICPA Code of Professional Conduct provides a comprehensive framework of principles and rules
designed to guide the ethical and professional behavior of members of the American Institute of
Certified Public Accountants (AICPA). The structure of the Code is organized into several key parts:
While the Code includes detailed rules and guidance, its foundation lies in six fundamental principles:
1. Responsibilities: Members should act with sensitivity to their professional responsibilities.
2. The Public Interest: Members must honor the public trust and serve the public interest.
3. Integrity: Members should be honest and forthright.
4. Objectivity and Independence: Members must avoid conflicts of interest and
maintain independence.
5. Due Care: Members must continually strive for excellence in their professional work.
6. Scope and Nature of Services: Members should ensure their services comply with
professional standards and the spirit of the Code.
c. Describe the conceptual framework approach to ethical decision-making for members in public
practice.
