Auditing and Accounting Information
Systems
Inhoudsopgave
Hoorcollege 1 – intro auditing & AIS, the nature of auditing ........................................................................... 3
Homework .......................................................................................................................................................... 5
Hoorcollege 2 – Demand for auditing Services ................................................................................................ 6
Preparation lecture 3 – Audit pricing ................................................................................................................ 12
Guest lecture – Van Oers Accountancy and Advice .......................................................................................... 14
Hoorcollege 3 – Audit quality........................................................................................................................ 15
Hoorcollege 4 – Audit engagements ............................................................................................................. 21
Hoorcollege 5 – Materiality – Risk – Evidence ............................................................................................... 26
Materiality ........................................................................................................................................................ 26
Audit Risk .......................................................................................................................................................... 28
Audit evidence .................................................................................................................................................. 31
Hoorcollege 6 – Guestlecture BDO ................................................................................................................ 32
Hoorcollege 7 – Guest talk & Audit reports ................................................................................................... 37
Preparation Lecture 8 – Accuracy vs precision ................................................................................................. 42
Hoorcollege 8 – Introduction to accounting information systems ................................................................. 42
Preparation Lecture 9 ....................................................................................................................................... 45
Hoorcollege 9 – Internal control and SOX...................................................................................................... 46
Preparation lecture 10 – Data flow diagrams and flow charts ......................................................................... 50
Hoorcollege 10 – COSO Framework .............................................................................................................. 52
Hoorcollege 11 – Revenue Cycle ................................................................................................................... 61
Preparation lecture 12 ...................................................................................................................................... 66
Hoorcollege 12 – Expenditure cycle .............................................................................................................. 67
Case: Baxter Medical Supplies .......................................................................................................................... 68
Preparation lecture 13 ...................................................................................................................................... 68
Case X-Ray ........................................................................................................................................................ 68
Hoorcollege 13 – The risk and control matrix ................................................................................................ 70
,Hoorcollege 14 – Internal control and management control ......................................................................... 76
Wrap-up AIS...................................................................................................................................................... 82
,Hoorcollege 1 – intro auditing & AIS, the nature of auditing
The accounting system
Accounting = the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information. It is
collecting all the kind of information.
The environment within which accounting exists is known as the accounting information
systems.
Accounting is an information-providing activity, so accountants need to understand:
- How the system that provides that information is designed, implemented and used.
- How financial information is reported
- How information is used to make decisions
Everything starts with a transaction, this information can be used to stakeholders, but also
for intern auditors and firm management. Auditor is someone who is doing the check.
An example: the book store chain Bookworm BV
Transaction: Sale of pair of shoes
AIS: recording transactions
Firm management: how many pairs did we sell in location X and location Y? do we need to
close a location?
Auditor: was the transaction recorded correctly? How did the Trento make sure that the
transaction is recorded correctly?
Stakeholders: does the company make a profit?
Auditing
We have audits because we have companies. These companies have some rules, companies
are guided by human beings, and they sometimes make mistakes. So we have auditors
because companies have to follow rules and this not always go smoothly.
Layman’s definition of Auditing; auditing is a process in which a business requests an audit
firm to examine its accounting records and certify whether the numbers reported in the
financial statements are accurate.
, There is a problem: audit firms want to earn money. They get paid to control someone’s
work. If people paid more, maybe they can audit a little less strict.
Not all companies need to be audited. Just the big companies and not the small companies.
Parties involved in organization
Management:
- Prepares & presents FS
- Designs, implements & maintains IC over financial reporting
- Provides information (on FS & IC) to auditors
Internal audit function
- Gives assurance on IC to managers and audit committee
Audit committee
- Subcommittee of BoD
- Oversees managers & internal audit
- Hire external auditor
External auditor
- Provides independent audit of IC & FS
IC = Internal Control
Formal definition of auditing
Assurance = they assure that some information is reliable
Reporting = audit report is added to the financial statements
Assurance role of Audit
Attestation services = they make a statement for
example about future projections. Auditor can make
a certificate about some objects. Other analyses
about new markets and future.
Assurance services = they add credibility to any type
of information that is provided to them. No official
certification, but auditor is there to improve the
quality of the information that is shared.
Systems
Inhoudsopgave
Hoorcollege 1 – intro auditing & AIS, the nature of auditing ........................................................................... 3
Homework .......................................................................................................................................................... 5
Hoorcollege 2 – Demand for auditing Services ................................................................................................ 6
Preparation lecture 3 – Audit pricing ................................................................................................................ 12
Guest lecture – Van Oers Accountancy and Advice .......................................................................................... 14
Hoorcollege 3 – Audit quality........................................................................................................................ 15
Hoorcollege 4 – Audit engagements ............................................................................................................. 21
Hoorcollege 5 – Materiality – Risk – Evidence ............................................................................................... 26
Materiality ........................................................................................................................................................ 26
Audit Risk .......................................................................................................................................................... 28
Audit evidence .................................................................................................................................................. 31
Hoorcollege 6 – Guestlecture BDO ................................................................................................................ 32
Hoorcollege 7 – Guest talk & Audit reports ................................................................................................... 37
Preparation Lecture 8 – Accuracy vs precision ................................................................................................. 42
Hoorcollege 8 – Introduction to accounting information systems ................................................................. 42
Preparation Lecture 9 ....................................................................................................................................... 45
Hoorcollege 9 – Internal control and SOX...................................................................................................... 46
Preparation lecture 10 – Data flow diagrams and flow charts ......................................................................... 50
Hoorcollege 10 – COSO Framework .............................................................................................................. 52
Hoorcollege 11 – Revenue Cycle ................................................................................................................... 61
Preparation lecture 12 ...................................................................................................................................... 66
Hoorcollege 12 – Expenditure cycle .............................................................................................................. 67
Case: Baxter Medical Supplies .......................................................................................................................... 68
Preparation lecture 13 ...................................................................................................................................... 68
Case X-Ray ........................................................................................................................................................ 68
Hoorcollege 13 – The risk and control matrix ................................................................................................ 70
,Hoorcollege 14 – Internal control and management control ......................................................................... 76
Wrap-up AIS...................................................................................................................................................... 82
,Hoorcollege 1 – intro auditing & AIS, the nature of auditing
The accounting system
Accounting = the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information. It is
collecting all the kind of information.
The environment within which accounting exists is known as the accounting information
systems.
Accounting is an information-providing activity, so accountants need to understand:
- How the system that provides that information is designed, implemented and used.
- How financial information is reported
- How information is used to make decisions
Everything starts with a transaction, this information can be used to stakeholders, but also
for intern auditors and firm management. Auditor is someone who is doing the check.
An example: the book store chain Bookworm BV
Transaction: Sale of pair of shoes
AIS: recording transactions
Firm management: how many pairs did we sell in location X and location Y? do we need to
close a location?
Auditor: was the transaction recorded correctly? How did the Trento make sure that the
transaction is recorded correctly?
Stakeholders: does the company make a profit?
Auditing
We have audits because we have companies. These companies have some rules, companies
are guided by human beings, and they sometimes make mistakes. So we have auditors
because companies have to follow rules and this not always go smoothly.
Layman’s definition of Auditing; auditing is a process in which a business requests an audit
firm to examine its accounting records and certify whether the numbers reported in the
financial statements are accurate.
, There is a problem: audit firms want to earn money. They get paid to control someone’s
work. If people paid more, maybe they can audit a little less strict.
Not all companies need to be audited. Just the big companies and not the small companies.
Parties involved in organization
Management:
- Prepares & presents FS
- Designs, implements & maintains IC over financial reporting
- Provides information (on FS & IC) to auditors
Internal audit function
- Gives assurance on IC to managers and audit committee
Audit committee
- Subcommittee of BoD
- Oversees managers & internal audit
- Hire external auditor
External auditor
- Provides independent audit of IC & FS
IC = Internal Control
Formal definition of auditing
Assurance = they assure that some information is reliable
Reporting = audit report is added to the financial statements
Assurance role of Audit
Attestation services = they make a statement for
example about future projections. Auditor can make
a certificate about some objects. Other analyses
about new markets and future.
Assurance services = they add credibility to any type
of information that is provided to them. No official
certification, but auditor is there to improve the
quality of the information that is shared.
