Aantekeningen / Notes
-
Auditing Theory
(EBM156A05)
Lecturers: Semester 1A year 2022/2023
- Drs. Ing. G.H. Keppes RA
Index
Lecture 1 - concepts of auditing & laws and legislations (ISA’s) – Chapter 4, 1.2, 2.6, 7.2 & 7.4 ............................................... 2
Concepts of Auditing ............................................................................................................................................................. 2
Walking through the audit..................................................................................................................................................... 5
Laws and legislations (ISAs) ................................................................................................................................................... 7
Lecture 2 – planning & Materiality – Chapter 7, 8 & ISA315 ...................................................................................................... 8
Planning the audit ................................................................................................................................................................. 8
Understanding the entity ...................................................................................................................................................... 8
Risk assessment (1)................................................................................................................................................................ 9
Audit Risk model .................................................................................................................................................................. 10
Risk Assessment (2) ............................................................................................................................................................. 10
Risk response ....................................................................................................................................................................... 11
Internal Control ................................................................................................................................................................... 12
Materiality ........................................................................................................................................................................... 12
Recap ................................................................................................................................................................................... 12
Lecture 3 – Assessed risk & Audit evidence – Chapter 9 & 10 ................................................................................................. 13
Lecture 4a- The impact of IT on an audit of financial statements ............................................................................................ 17
Lecture 4b- Risk in the Audit: Identify & response to risk ........................................................................................................ 25
Guest Lecture (5) – Director Investor Relations & Finance Director Sustainability FrieslandCampina..................................... 28
Lecture 6 – Corporate Governance bodies, Group audits & Internal audit and experts – Chapter 12.8, 13.4 & 6.6 ............... 28
Introduction & Recap .......................................................................................................................................................... 28
Theory ................................................................................................................................................................................. 29
Communication with governance ....................................................................................................................................... 29
Group Audit ......................................................................................................................................................................... 30
Use of Experts...................................................................................................................................................................... 33
Lecture 7 – Fraud and the auditor& Service organizations on the audit – Chapter 5 & 7.7 ..................................................... 35
Fraud ................................................................................................................................................................................... 35
Service organization ............................................................................................................................................................ 36
Recap ................................................................................................................................................................................... 38
1
,Lecture 1 - concepts of auditing & laws and legislations (ISA’s) –
Chapter 4, 1.2, 2.6, 7.2 & 7.4
Topcis:
- Introduction to the course Auditing Theory
- Brief Summary of the concepts of auditing
- Laws and legislations (ISA’s)
Learning objectives for today
- Reproduce the basic knowledge of Introductoin of Auditing and Auditing Practices
- Recognize what is needed to successfully pass the course Auditing Theory
- Interpret the audit standards relating to an audit of financial statements
Concepts of Auditing
A sort of definition of auditing
An Audit is a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence between
these assertions and established criteria, and communicating the results to interest users.
The function of auditing is to lend credibility (reasonable assurance) to the (financial) statements.
Audits could also apply to operations or compliance.
Auditing Theory
- The way you find materiality
- Financial statements are assurance
Assurance framework
- Three parties client, auditor, society
- Subject matter / Assurance object has to be clear
- Suitable criteria what is good, what not; IFRS, GAAP -criteria
- Sufficient appropriate evidence
- Written assurance report The conclusion
Different theories describe the demand for the audit function:
- Agency Theory (information asymmetry)
- Theory of inspired confidence (Limperg)
- Policeman theory (fraud)
- Insurance theory Function of the auditor
Concepts of auditing →
2
,Concepts of auditing
There are high expectations from the society that (could) lead to expectation gaps:
- Broader scope than historical financial information
- Error’s and inherent limitations
- Fraud (going concern)
What topics regarding unreasonableness gap can you think of?
What kind of engagements do we know:
The past
In our opinion the financial statements give a true and fair view of the financial position of the
company as at 31 December 2021, and of its result for the year then ended in accordance with Part 9
of Book 2 of the Dutch Civil Code.
Be satisfy which accounts and riks
Risk is a chance, %;
Materiality is a amount
Always account, assertion on a risk
General risk, is not directly a auditor risk,
Audit do control, audit risk, What is not is detection risk
3
, Society, Organization, Audit
Reliability
Assertions
Account level
Currency All together
The lower materiality, the higher the audit risk
- Materiality
- Risk
- Assertions
More war Ukraine:
- Lower materiality X
- Adjust Risks
Inherent +Business risk to control/audit Risks
Concepts of Auditing
Systematic versus substantive audit approach:
- AR = IHR x ICR x DR Risk formule
- AR = Audit risk
- IHR = Inherent risk / business risk (which branch)
- ICR = Internal Control risk
- DR = Detection risk
Choice made when planning the audit
You have to choose am I reduce ICR or DR.
The lower ICR the more control to have evidence
Low DR, more substantive precarious to have the right conclusion DR is low
4
-
Auditing Theory
(EBM156A05)
Lecturers: Semester 1A year 2022/2023
- Drs. Ing. G.H. Keppes RA
Index
Lecture 1 - concepts of auditing & laws and legislations (ISA’s) – Chapter 4, 1.2, 2.6, 7.2 & 7.4 ............................................... 2
Concepts of Auditing ............................................................................................................................................................. 2
Walking through the audit..................................................................................................................................................... 5
Laws and legislations (ISAs) ................................................................................................................................................... 7
Lecture 2 – planning & Materiality – Chapter 7, 8 & ISA315 ...................................................................................................... 8
Planning the audit ................................................................................................................................................................. 8
Understanding the entity ...................................................................................................................................................... 8
Risk assessment (1)................................................................................................................................................................ 9
Audit Risk model .................................................................................................................................................................. 10
Risk Assessment (2) ............................................................................................................................................................. 10
Risk response ....................................................................................................................................................................... 11
Internal Control ................................................................................................................................................................... 12
Materiality ........................................................................................................................................................................... 12
Recap ................................................................................................................................................................................... 12
Lecture 3 – Assessed risk & Audit evidence – Chapter 9 & 10 ................................................................................................. 13
Lecture 4a- The impact of IT on an audit of financial statements ............................................................................................ 17
Lecture 4b- Risk in the Audit: Identify & response to risk ........................................................................................................ 25
Guest Lecture (5) – Director Investor Relations & Finance Director Sustainability FrieslandCampina..................................... 28
Lecture 6 – Corporate Governance bodies, Group audits & Internal audit and experts – Chapter 12.8, 13.4 & 6.6 ............... 28
Introduction & Recap .......................................................................................................................................................... 28
Theory ................................................................................................................................................................................. 29
Communication with governance ....................................................................................................................................... 29
Group Audit ......................................................................................................................................................................... 30
Use of Experts...................................................................................................................................................................... 33
Lecture 7 – Fraud and the auditor& Service organizations on the audit – Chapter 5 & 7.7 ..................................................... 35
Fraud ................................................................................................................................................................................... 35
Service organization ............................................................................................................................................................ 36
Recap ................................................................................................................................................................................... 38
1
,Lecture 1 - concepts of auditing & laws and legislations (ISA’s) –
Chapter 4, 1.2, 2.6, 7.2 & 7.4
Topcis:
- Introduction to the course Auditing Theory
- Brief Summary of the concepts of auditing
- Laws and legislations (ISA’s)
Learning objectives for today
- Reproduce the basic knowledge of Introductoin of Auditing and Auditing Practices
- Recognize what is needed to successfully pass the course Auditing Theory
- Interpret the audit standards relating to an audit of financial statements
Concepts of Auditing
A sort of definition of auditing
An Audit is a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence between
these assertions and established criteria, and communicating the results to interest users.
The function of auditing is to lend credibility (reasonable assurance) to the (financial) statements.
Audits could also apply to operations or compliance.
Auditing Theory
- The way you find materiality
- Financial statements are assurance
Assurance framework
- Three parties client, auditor, society
- Subject matter / Assurance object has to be clear
- Suitable criteria what is good, what not; IFRS, GAAP -criteria
- Sufficient appropriate evidence
- Written assurance report The conclusion
Different theories describe the demand for the audit function:
- Agency Theory (information asymmetry)
- Theory of inspired confidence (Limperg)
- Policeman theory (fraud)
- Insurance theory Function of the auditor
Concepts of auditing →
2
,Concepts of auditing
There are high expectations from the society that (could) lead to expectation gaps:
- Broader scope than historical financial information
- Error’s and inherent limitations
- Fraud (going concern)
What topics regarding unreasonableness gap can you think of?
What kind of engagements do we know:
The past
In our opinion the financial statements give a true and fair view of the financial position of the
company as at 31 December 2021, and of its result for the year then ended in accordance with Part 9
of Book 2 of the Dutch Civil Code.
Be satisfy which accounts and riks
Risk is a chance, %;
Materiality is a amount
Always account, assertion on a risk
General risk, is not directly a auditor risk,
Audit do control, audit risk, What is not is detection risk
3
, Society, Organization, Audit
Reliability
Assertions
Account level
Currency All together
The lower materiality, the higher the audit risk
- Materiality
- Risk
- Assertions
More war Ukraine:
- Lower materiality X
- Adjust Risks
Inherent +Business risk to control/audit Risks
Concepts of Auditing
Systematic versus substantive audit approach:
- AR = IHR x ICR x DR Risk formule
- AR = Audit risk
- IHR = Inherent risk / business risk (which branch)
- ICR = Internal Control risk
- DR = Detection risk
Choice made when planning the audit
You have to choose am I reduce ICR or DR.
The lower ICR the more control to have evidence
Low DR, more substantive precarious to have the right conclusion DR is low
4
