FUNDAMENTALS OF AUDITING ACC311
Lecture 03
Lesson 03
1. If the controls are
likely to lead to a true and fair set of financial statements the auditor will
test
likely to lead to a true and fair set of financial statements the auditor will
test
those controls.
2. If they appear weak
he will not rely on the controls but carry out extensive testing of the
he will not rely on the controls but carry out extensive testing of the
transactions and
balances which appear in the financial statements by means of substantive
balances which appear in the financial statements by means of substantive
procedures.
3. If the controls are
operating effectively, the auditor can reduce the amount of substantive testing
operating effectively, the auditor can reduce the amount of substantive testing
described above and
adopt a reliance approach.
adopt a reliance approach.
4. If not then the
auditor will be forced into a extensive substantive approach
auditor will be forced into a extensive substantive approach
What are the features of
auditing profession?
auditing profession?
In Pakistan auditing
profession is allied with the Institute of Chartered Accountants of Pakistan
(ICAP). It
profession is allied with the Institute of Chartered Accountants of Pakistan
(ICAP). It
is an autonomous body
incorporated under the Chartered Accountants Ordinance 1961.
incorporated under the Chartered Accountants Ordinance 1961.
ICAP is a regulatory
body that enjoys a self regulatory status. Its affairs are run by a council
which is elected
body that enjoys a self regulatory status. Its affairs are run by a council
which is elected
by its member (Chartered
Accountants).
Accountants).
Only those members of
the ICAP are eligible of doing audit who have obtained license for the purpose,
the ICAP are eligible of doing audit who have obtained license for the purpose,
these are known are
practicing members.
practicing members.
Management of ICAP
The President is the
Chief Executive of the Institute. The administrative head of the Institute is
the
Chief Executive of the Institute. The administrative head of the Institute is
the
Executive
Director/Secretary who functions under the directions of the Council, Executive
Committee,
Director/Secretary who functions under the directions of the Council, Executive
Committee,
The President and the
Vice Presidents
Vice Presidents
The Executive Director
in performance of his functions is assisted by:
in performance of his functions is assisted by:
• Secretary
• Director Technical
Services
Services
• Director Professional
Standards Compliance
Standards Compliance
• Director Education
& Training
& Training
• Director
Examinations
Examinations
The prime
responsibilities of Executive Director include Personnel Management; Financial
Management;
responsibilities of Executive Director include Personnel Management; Financial
Management;
Office Administration;
Publications; Information Systems; Conducting and performing Secretarial
functions
Publications; Information Systems; Conducting and performing Secretarial
functions
for the Council and
Executive Committee Meetings.
Executive Committee Meetings.
Knowing the audit
profession and other services?
profession and other services?
Auditing firms do not
describe themselves as auditors. They describe themselves as Chartered
Accountants.
describe themselves as auditors. They describe themselves as Chartered
Accountants.
Auditing firms are
composed of accountants who perform audits for their clients. They also perform
other
composed of accountants who perform audits for their clients. They also perform
other
services. The small
chartered accountant firms especially may spend more time on other services
than on
chartered accountant firms especially may spend more time on other services
than on
auditing.
The other services
may include:
may include:
a. Writing up books of
accounts (Book keeping)
accounts (Book keeping)
b. Balancing books of
accounts (Extracting trial balance)
accounts (Extracting trial balance)
c. Preparing final
accounts
accounts
d. Tax management
e. Statutory form
filling
filling
f. Financial consultancy
g. Management and system
consultancy
consultancy
h. Liquidation and
receivership work
receivership work
i. Investigations (Fraud
audit)
audit)
