Introduction and Purpose of Auditing
Review of Auditing: Week One, Part One
Introduction and Purpose of Auditing
At the end of the two weeks, there will be an exam covering this review.
In addition to reading/mastering the materials I have provided, you are
also required to read the related sections in the auditing textbook you
have. At the end of each section, I will provide the section titles and
page numbers for the latest editions of the Messier, et al. and Arens, et
al. textbooks (further referred to as “Messier” and “Arens”,
respectively). If you have an earlier edition of either book or you are
using a different textbook, the section titles will likely be the same or
similar while the page numbers will not. You will need to use the book’s
index to help you locate the material. Please note: my materials are only
a summary of the material…you MUST read the detailed information in
the textbook to have an understanding of all that you need to remember.
In this week’s review, we will cover (1) the purpose of auditing, (2) the
standard setters and standards related to auditing, (3) the audit risk
model, and (4) materiality and tolerable misstatement. To break up the
reading a bit, I have put together a separate document for each topic. I
recommend you read them in the order listed above. In next week’s
review, we will cover (1) the accounting cycles, (2) management’s
assertions and audit objectives, and (3) audit evidence.
Purpose of Auditing
Seems like we should know the purpose of an audit if we’re going to
study it all semester, right? Let’s start right in with the formal definition,
taken from Arens, et al. (2012), page 4:
“Auditing is the accumulation and evaluation of evidence about
information to determine and report on the degree of
correspondence between the information and established criteria.
Auditing should be done by a competent, independent person.”
That’s a whole lot of words, I’d say. Let me interrupt myself for just a
second to talk about the learning of auditing: The thing about auditing
classes in general is that they don’t usually play to the strengths of most
accounting students. I think most of us get onto this career path because
we love numbers and mathematical analyses…we love right and wrong