Module: Audit and Assurance
Lecture 1 – Introduction: External Audit
Definition of an external audit
People define audit in a number of ways
An examination of financial statements
The financial statements are being presented to an auditor to examine to see
whether you can rely on those financial statements.
Those financial statements consists of income statements, financial position,
cash flow statements and statements on changes in equity together with
notes attached.
After looking at the financial statements, the auditor will express an opinion on
whether those financial statements reflect a true and fair view of the affairs in
the entity.
Audit
When we do auditing work, we are guided by standards.
ISA (International Standard of Auditing)
All material respects = also known as true and fair view
True & Fair View
“Material respects” = that there aren’t a lot of errors in it
“True” = that it is honest information; that nothing important has been taken
out; contains correct information. Example: that you have an invoice to back it
up.
“Fair” = is that judgement reasonable? Are those estimates fairly judged? Is it
without bias?
One auditor’s judgement may not be the same as the judgement of another
auditor.
Auditors can’t give complete assurance, but must give a reasonable
assurance.
Fair Presentation
Faithful representation = means that the information is correct and nothing has been
taken out.
External Auditing
The shareholders who are running the business appoints a director to use
their resources to run the business on the shareholder’s behalf. The director
has to account back to the shareholders.
External auditors is someone who comes from outside. They come to
examine the financial statements prepared by the director.
Lecture 1 – Introduction: External Audit
Definition of an external audit
People define audit in a number of ways
An examination of financial statements
The financial statements are being presented to an auditor to examine to see
whether you can rely on those financial statements.
Those financial statements consists of income statements, financial position,
cash flow statements and statements on changes in equity together with
notes attached.
After looking at the financial statements, the auditor will express an opinion on
whether those financial statements reflect a true and fair view of the affairs in
the entity.
Audit
When we do auditing work, we are guided by standards.
ISA (International Standard of Auditing)
All material respects = also known as true and fair view
True & Fair View
“Material respects” = that there aren’t a lot of errors in it
“True” = that it is honest information; that nothing important has been taken
out; contains correct information. Example: that you have an invoice to back it
up.
“Fair” = is that judgement reasonable? Are those estimates fairly judged? Is it
without bias?
One auditor’s judgement may not be the same as the judgement of another
auditor.
Auditors can’t give complete assurance, but must give a reasonable
assurance.
Fair Presentation
Faithful representation = means that the information is correct and nothing has been
taken out.
External Auditing
The shareholders who are running the business appoints a director to use
their resources to run the business on the shareholder’s behalf. The director
has to account back to the shareholders.
External auditors is someone who comes from outside. They come to
examine the financial statements prepared by the director.
