Advance Audit

Submitted To:Tarik HossainAssistant ProfessorDepartment of Accounting and Information SystemsComilla university, Comilla Submitted By:

Mehedi Hassan 0906045Kazi Ayesha Akter 0906019Hasnan Imtiaz Emon 0906021Shahinur Islam 0906023Kazi Mahmud Mohiuddin 0906026Md. Shahidul Islam Apu 0906029Abu Azad 0906030Prince Mahbub 0806030

Department of Accounting and Information SystemsComilla University, Comilla

Chapter 1: Introduction to Auditing Policy

An audit policy describes the standards and guidelines a company uses when conducting internal audits or going through an external audit by a public accounting firm.

AUDIT POLICY

Internal

Audit policy

•The internal audit is usually an informal process used for business management purposesExtern

al Audit Policy

•External audits are usually formal accounting processes meant to assure external investors or stakeholders regarding the company’s overall financial health

Audit methodologyAudit methodology is a particular set of processes or procedures used to assess a company’s financial and business risk.

Preliminary risk

assessment

•A preliminary risk assessment normally begins with an interview of company management.

Planning

stage

•The planning stage of audit methodology introduces auditors to each business area they will be auditing.

Testing

phase

•Auditors actively review financial information or business processes to determine any violations of the GAAP or internal operational standards.

Exit meeting

•This meeting allows auditors and company management to review the audit results and discuss any major violations or failures discovered during the testing phase.

Postulates of Auditing Auditing postulates are matters which are assumed to be true and are taken for granted. It is often considered that it is useful to examine a discipline and to see what, if any, are its postulates

Financial statements and financial data are

verifiable

There is no conflict of interest between the

auditor and management of the entity

The financial statements are free from collusive

and other unusual irregularities

The existence of a satisfactory system of

internal control eliminates the probability of

irregularities

Eight postula

tes are-

Eight postulates are-

(continued)

Consistent application of generally accepted

accounting principles results in fair presentation of the

results and positions.

In the absence of clear evidence to the contrary, what

has held true in the past for the entity will hold true in the

future.

When examining financial data, the auditor acts

exclusively in the capacity of auditor.

The professional status of an independent auditor imposes commensurate professional obligations.

Postulates of Auditing

Chapter 4:The Audit Process

AUDIT PROCESSAn audit process is a well-defined methodology for organizing an audit to ensure that the evidence gathered is both sufficient and competent and that all appropriate audit objectives are both specified and met.

The audit process described in this text has five specific phases. These are:

Audit Process

Audit Planning

Audit programme

Understanding and evaluation

of Clients Systems

Audit Chronology

Audit Report

Phase-1: Audit planningAudit planning is the process of deciding in advance what is to be done, who is to do it, how it is to be done and when it is to be done by the auditor in order to have an effective and efficient completion of audit.

The audit plan should cover the following areas:

1. Clear fixings of what the audit engagement is about, what the objectives and scope of the audit are.

2. Gaining knowledge of the client’s business.3. Gaining knowledge about client’s internal control system.4. Consideration of laws governing the entity of the client.5. Considerations as to initial engagement.6. Obtaining terms of engagement.7. Planning of nature and extend of audit procedures, audit programming & scheduling.8. Man power planning and quality control plan.9. Coordinating the work to be performed by others.10. Documentation.

Audit program is a plan of action translated into specific areas of audit works with check list of actions to be performed. An audit program becomes well-knit when time units and personal responsibility are embroidered on to the specific areas of work assigned.

Phase-2: Audit programming

An audit program entitles the following:

1. Specific listing of audit area components in terms of related procedures

2. Staff positioning3. Timing built4. Sequencing5. Responsibility fixing6. Documentation

UNDERSTANDING THE CLIENTS SYSTEMS AND ITS EVALUATION

AAS 20 sets a standard that in auditing of financial statements, the auditor should have or obtain knowledge of the business sufficient to enable the auditor to identify and understand the events, transaction and practices that, in the auditor’s judgement, may have significant effect on the financial statement or on the examination or audit report.

For understanding and evaluating of clients systems auditor should have access to following three steps-

Using the Knowledge

Source of obtaining the knowledge

Level of knowledge of client systems

General Economic Facts

The Indus

tryThe

Client

• Ownership and management characteristics

• The client’s business

• Financial performances

Level of Knowledge of Clients Systems

Source of Obtaining the Knowledge

Sources

Experiences

Discussion• People• Internal

Audit Dept.• Knowledgea

ble persons

Documents

Using the Knowledge

Uses of Knowled

ge

Assessing risks and

identifying problems

Planning and performing the audit

effectively

Evaluating audit

evidencesProviding better service to the client

AUDIT CHRONOLOGY

Planning and Fieldw

orkExit

Conference and

Audit Reports

Planning•The purpose of the planning stage is to define the subject and scope of the audit, establish customer expectations, and identify the criteria used to evaluate the audit subject

Fieldwork

•Fieldwork means executing the planned audit, and if required updating the audit plan based on information learned during the course of the audit

Exit Conference

•The Exit Conference is an opportunity for the auditor, department management, process owners, and other stakeholders to review and validate audit outcomes

Audit Report

•The actual audit report format should be functional and provide management with an efficient method of reviewing and responding to recommendations therein and to expedite implementation of recommendations.

AUDIT CHRONOLOGY

AUDIT REPORT

The document through which the auditor conveys

his opinion about the fairness of the

financial statements is called

auditor’s report.

Basic Elements of an Audit Report

Introductory Paragraph

Scope Paragraph

Auditor Farm & Signature area

Date

Client

Opinion Paragraph

Title

Addressee

Kinds of Audit ReportClean or Unqualified Report A clean report indicates that the auditor is satisfied with all the points required to be states them in affirmative, adding no reservation anywhere.

Qualified Report Auditors reports with reservation or states anything in negative , but it does not materially affects true and fair view of the accounts.

Adverse Report

Auditor expresses an adverse or negative opinion in report

Disclaimer report When auditor is unable to express an opinion due to certain reasons and states in his report.

Piecemeal Report• W

hen report made on part of the financial statements.

Thank You For Your Patience