Advanced Auditing & Assurance

1. Audit Types:

   • Internal Audit: Focuses on evaluating the effectiveness of internal controls and risk management.
   • External Audit: Conducted by independent auditors to provide an opinion on financial statements.
   • Forensic Audit: Investigates potential fraud or financial misconduct.

2. Audit Evidence:

   • Types: Physical inspection, observation, confirmation, recalculation, analytical procedures.
   • Reliability: Depends on the source (internal vs. external) and nature of evidence.

3. Risk Assessment:

   • Inherent Risk: The susceptibility of an account balance to misstatement before considering internal controls.
   • Control Risk: The risk that a misstatement could occur and not be prevented or detected by internal controls.
   • Detection Risk: The risk that the auditor’s procedures will not detect a misstatement.

4. Materiality:

   • Defined as the threshold above which missing or incorrect information could influence the economic decisions of users.

5. Sampling Techniques:

   • Statistical Sampling: Uses probability theory to evaluate risk and make inferences.
   • Non-statistical Sampling: Relies on the auditor’s judgment rather than statistical techniques.

Professional Ethics

1. Fundamental Principles:

   • Integrity: Being straightforward and honest in professional and business relationships.
   • Objectivity: Avoiding bias and conflicts of interest.
   • Professional Competence: Maintaining knowledge and skill at a level required to ensure competent service.
   • Confidentiality: Respecting the confidentiality of information acquired during the course of professional work.
   • Professional Behavior: Complying with relevant laws and regulations.

2. Code of Ethics:

   • Established by professional bodies (e.g., AICPA, ICAEW) to guide auditors in their ethical responsibilities.

3. Independence:

   • Auditors must remain independent in both appearance and fact to maintain trust in the audit process.

4. Quality Control:

   • Firms should have quality control policies and procedures to ensure compliance with ethical standards and auditing practices.