Overview Audit

Kuliah 1
Overview of Auditing
©2015 FAKULTAS EKONOMI DAN BISNIS UNIVERSITAS PADJADJARAN 1-1

Topik Bahasan
1 Definition of Auditing
2 Auditing vs. Accounting
3 Auditing and Information Risk
4 Types of Audits and Auditors
5 Assurance Services
6 Audit of Financial Statements - Overview

Tujuan Pembelajaran
Setelah mengikuti kuliah ini mahasiswa diharapkan mampu:
1. Menjelaskan definisi auditing
2. Menjelaskan perbedaan antara auditing dan akuntansi
3. Menjelaskan peran auditing dalam mengurangi risiko informasi
4. Mengidentifikasi jenis-jenis audit dan auditor
5. Menjelaskan jasa asurans dan mengidentifikasi jasa lainnya
yang diberikan oleh akuntan publik
6. Menjelaskan garis besar audit laporan keuangan yang
merupakan bahasan utama dalam mata kuliah Auditing.

Describe auditing.

Auditing Defined
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 interested users.
American Accounting Association Committee on Basic Auditing

Concepts,“A Statement of Basic Auditing Concepts”,
American Accounting Association, Sarasota, Florida, 1971, p. 2.

Auditing Defined
A systematic process
A logical, structured, and organized series of steps or
procedures.
Objectively obtaining and evaluating evidence

Examining the bases for the assertions (evidence) and
evaluating the results without bias or prejudice.
• Evidence is any information used by the auditor to
determine whether the information being audited is
stated in accordance with the established criteria
• Almost the entire of the auditing process relate to the
activities of obtaining and evaluating evidence.

Auditing Defined
Asssertions about economic actions and events
Assertions are the representations made by the entity or
individual.
• The basis of evidence-gathering objectives, what the
evidence must prove.
• In an audit of financial statements, they are
representations by management, explicit or otherwise,
that are embodied in the financial statements.
• Example : assertion about existence is that all the assets
reported on the statement of financial position actually
exist at the balance sheet date

Auditing Defined
Established Criteria
To do an audit, there must be assertions in a verifiable form
and some standards by which the auditor can evaluate the
assertions.
Example :
Assertions Criteria
- Financial Statements IFRS, SAK, US GAAP, SAP
- SPT Pajak Penghasilan UU & Peraturan Pajak
- Laporan Biaya Produksi Anggaran Biaya Produksi

Auditing Defined
Reporting
The final stage in the auditing process is preparing the
Audit Report, which is the communication of the auditor’s
findings to users.
Audit report is writed up in a specific form regulated by

professional standards (standards on auditing).

Auditing Defined
Performed by a competent, independent person
 The auditor must be qualified to understand the criteria
used and must be competent to know the types and
amount of evidence to accumulate to reach proper
conclusion after the evidence has been examined.
 The competence of the individual performing the audit
is of little value if he or she is biased in the
accumulation of evidence.
 In an audit of financial statements, auditors essentially
lend credibility to the financial statements presented by
management.
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Competent, Independent Person
Judgment and
Competence
Experience
Independence
Evaluation of
Evidence
Proper
Conclusion
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Example –
Audit of Financial Statements
Information
Competent,
independent Assertions in the
person Financial statements
Report on results
Independent
Auditor Determines Independent
correspondence Auditors’
Report
Accumulates and
evaluates evidence Established criteria
Examine evidence
Financial Reporting
underlying of
Framework
financial statements

Distinguish between
auditing and accounting.

Distinguish Between
Auditing and Accounting
Accounting is the recording, classifying, and summarizing

. economic events for the purpose of providing financial
of
information used in decision making
Auditing is determining whether recorded information

properly reflects the economic events that occurred during
the accounting period.

Distinguish Between
Auditing and Accounting
A
c financial
A
reports
c u
o d
u i
n construct analyze t
t i
i n
n source g
g documents

Explain the importance
of auditing in reducing
information risk

The Importance of Auditing
Information risk
Information risk reflects the
possibility that the information
Risk
upon which the business
decision was made was
inaccurate
unaudited audited
Auditing can have a significant

effect on information risk
(reduced significantly)

The Importance of Auditing
The function of auditing is to lend credibility to

the financial statements.
- Financial statements are the responsibility of
management and the auditor’s responsibility is
to lend them credibility.
- By the audit process, the auditor enhance the
usefulness and the value of the financial statements.

List the causes of information risk,
and explain how this risk may be
reduced.

Causes of Information Risk
Remoteness of information
Biases and motives of the provider
Voluminous data
Complex exchange transactions

Reducing Information Risk
User verifies information.
User shares information risk with management.
Audited financial statements are provided.

Relationships Among Auditors, Client, and
External Users in Auditing of Financial
Statements
Client or audit Auditor Auditor issues

committee hires report relied
auditor upon by users
External
Client
Users

Differentiate the three
main types of audits.

Types of Audit
• Operational Audits
• Compliance Audits
• Audits of Financial Statements

Operational Audits
An operational audit is a study of a specific unit of an
organization for the purpose of measuring its performance
(effectiveness, efficient & economy).
Evaluate computerized payroll system

Example
for efficiency and effectiveness
Information/ Number of records processed, costs of
assertions the department, and number of errors
Established Company standards for efficiency and
Criteria effectiveness in payroll department
Available Error reports, payroll records, and payroll
Evidence processing costs

Compliance Audits
A compliance audit is a review of an organization’s
procedures performed to determine whether the organization
is following specific procedures, rules , or regulations set out
by some higher authority.
Determine whether bank requirements

Example
for loan continuation have been met
Information/
Company records
assertions
Established
Loan agreement provisions
Criteria
Available Financial statements and calculations by the
Evidence auditor

Audits of Financial Statement
Audits of financial statements examine financial statements
to determine if they give a true and fair view or fairly present
the financial statements in conformity with specified criteria.
Example Annual audit of Boeing's financial statements
Information/
Boeing's financial statements
assertions
Established
International financial reporting standards
Criteria
Available Documents, records, and outside
Evidence sources of evidence

Identify the primary
types of auditors.

Types of Auditors
• Certified public accounting (CPA)
Auditor independen (akuntan publik)
• Government accountability office (GAO)

Auditor negara (BPK)
• Internal revenue agents (USA)

Auditor pajak - KPP (Ina)
• Internal auditors (CIA)
• Certified fraud examiners (CFE)

Describe assurance services
and distinguish audit services
from other assurance and
related services provided by CPAs.

Assurance
Services

Assurance Services
IAASB - IFAC
Assurance engagement —
An engagement in which a practitioner expresses a
conclusion designed to enhance the degree of confidence
of the intended users other than the responsible party
about the outcome of the evaluation or measurement of
a subject matter against criteria.

Assurance Services
Assurance services are independent professional

services designed to improve the quality of
information for decision making.
• Independent
• Professional
• Quality
Assurance services can be performed by CPAs or by

a variety of other professionals

Assurance Services
Two types of Assurance Services :
Reasonable assurance engagement
The objective is to reduce assurance engagement risk to
an acceptably low level in the circumstances of the
engagement.
• Express a positive form of expression of the
practitioner’s conclusion
• Example : Audit of historical financial statements
Assurance engagement risk —The risk that the practitioner expresses

an inappropriate conclusion when the subject matter information is
materially misstated

Assurance Services
Limited assurance engagement
The objective is to reduce assurance engagement risk to
a level that is acceptable in the circumstances of the
engagement, but where that risk is greater than for a
reasonable assurance engagement.
• Express a negative form of expression of the
practitioner’s conclusion
• Example : Review of historical financial statements
Explain positive vs negative form of conclution

Assurance Services
Quality of
reasonable information
assurance
limited
assurance
no
assurance Evidence

Assurance Services
Elements of an Assurance Engagement :
1. A three party relationship involving a practitioner, a
responsible party, and intended users;
2. An appropriate subject matter;
3. Suitable criteria;
4. Sufficient appropriate evidence; and
5. A written assurance report in the form appropriate to a
reasonable assurance engagement or a limited assurance
engagement.
See definition of auditing in previous slide

Assurance Services
Three Party Relationship
Assurance engagements always involve three separate
parties :
• A practitioner gathers evidence to provide a conclusion to
intended users about whether a subject matter conforms to
identified criteria.
• A responsible party is one who responsible for the subject
matter, choosing the suitable criteria, and engaging the
practitioner.
• Intended users – The person, persons or class of persons for
whom the practitioner prepares the assurance report.

Assurance Services
Subject Matter
Subject matter of an assurance engagement can take many
form, such as:
• Information about historical or prospective financial performance
or physical characteristics (e.g. statistical information, capacity
of facility, non-financial performance indicators).
• Systems and process (e.g. internal control, IT systems).
• Behavior (e.g. corporate governance, human resource practices,
compliance with regulation).

Assurance Services
Suitable Criteria
Suitable criteria are the benchmarks–standards, objectives,
or set of rules–used to evaluate evidence or measure the
subject matter of an assurance engagement.
For example,
Infornation/Subject Matter Criteria
- Financial Statements IFRS, SAK, US GAAP, SAP
- SPT Pajak Penghasilan UU & Peraturan Pajak
- Laporan Biaya Produksi Anggaran Biaya Produksi

Process of an Assurance Engagement
Suitable 1. Determine
criteria criteria
3. Generate
subject matter
information
Responsible 2. Determine
party Subject matter
6. Issue
4. Engage assurance
Practitioner report
practitioner
Intended
5. Collect evidence
Audit is a type of user
about fairness of
assurance subject matter
engagements information

Assurance Services
Framework for Assurance Engagements
International Framework for Assurance Engagements
Audits and Reviews of Assurance Engagements Other

Historical than Audits or Reviews of
Financial Information Historical Financial Information
Audits of Historical • Compliance Audit

Financial Statements • Operational Audit
• Audit of Internal Control over
Reviews of Historical Financial Reporting
Financial Information • Examination of Prospective
Financial Information
• Fraud & Illegal Act Assessment
• Assurance Services on IT
• Other Assurance Engagements
Non-Assurance Services
CPA firms perform numerous non-assurance services
(called Related Services), such as :
• Agreed-upon Procedures
• Compilation
• Accounting & Bookeeping
• Tax Services
• Management Consulting

Audit of Financial Statements

Audit Laporan Keuangan
Tujuan audit laporan keuangan adalah untuk meningkatkan

tingkat keyakinan pengguna laporan yang dituju melalui
pernyataan suatu opini oleh auditor tentang apakah laporan
keuangan disajikan, dalam semua hal yang material, sesuai
dengan suatu kerangka pelaporan keuangan yang berlaku.
(SA 200).
• A type of assurance service Unmodified

opinion
• Hasil dari suatu audit adalah laporan
yang memuat pernyataan opini.

Kerangka Pelaporan Keuangan - Criteria
• Basis yang digunakan dalam menyusun laporan keuangan
• Digunakan oleh auditor sebagai kriteria untuk menilai
kewajaran laporan keuangan.
Jenis kerangka pelaporan keuangan

 Fair presentation framework
 General purpose financial reporting
 SAK, IFRS, US GAAP, SAP
 Compliance framework
 Laporan keuangan yang disusun berdasarkan UU/
regulasi

Pernyataan Opini – Penyajian Wajar
Kesimpulan hasil audit dinyatakan dalam bentuk pernyataan

opini (pendapat) auditor tentang apakah laporan keuangan
disajikan secara wajar, dalam semua hal yang material,
sesuai dengan kerangka pelaporan keuangan yang berlaku.
• Kerangka Penyajian Wajar (Fair Presentation Framework)

- Patuh terhadap semua ketentuan dalam kerangka
pelaporan (misal: PSAK, IAS/IFRS, SFAS/US GAAP)
- Bebas dari salah saji material (error & fraud)

Pernyataan Opini – Kerangka Kepatuhan
Kesimpulan hasil audit dinyatakan dalam bentuk pernyataan

opini (pendapat) auditor tentang apakah laporan keuangan,
dalam semua hal yang material, disajikan sesuai peraturan
tertentu.
• Kerangka Kepatuhan (Compliance Framework)

- Patuh terhadap semua ketentuan dalam peraturan
tertentu yang harus diterapkan
- Bebas dari salah saji material (error & fraud)

Opini dan Keyakinan Memadai
• Sebagai dasar untuk menyatakan suatu opini, auditor
harus memperoleh keyakinan memadai (reasonable
assurance) tentang apakah laporan keuangan bebas dari
kesalahan penyajian material, baik yang disebabkan oleh
kesalahan (error) maupun kecurangan (fraud).
• Keyakinan memadai dicapai melalui perolehan bukti audit
yang cukup (sufficient) dan tepat (appropriate) untuk
menurunkan risiko audit ketingkat rendah yang dapat
diterima (acceptable audit risk).
• Keyakinan memadai vs keyakinan absolut

Opini dan Keyakinan Memadai
opini
assurance
Engagement risk
evidence

Inherent Limitation of an Audit
Limitation Reason
The Nature of The preparation of financial statements involves:
Financial Reporting • Judgment by management in applying the applicable
financial reporting framework; and
• Subjective assessments (such as estimates) by
management involving a range of acceptable
interpretations or judgments.
Nature of Audit • Audit evidence tends to be persuasive in character
Evidence Available rather than conclusive.
• Audit evidence may include information obtained
from other sources such as: previous audits; a firm’s
quality control procedures for client acceptance and
continuance; the entity’s accounting records; and
audit evidence prepared by an expert employed or
engaged by the entity

Inherent Limitation of an Audit
Limitation Reason
The Nature of Audit procedures will not detect every misstatement.
Audit Procedures • Audit procedures applied to a sample introduces
some risk that a misstatement will not be detected;
• Management or others may not provide the complete
information required. Fraud may involve sophisticated
and carefully organized schemes designed to conceal
it; and
• Audit procedures used to gather audit evidence may
not detect that some information is missing.
Timeliness of The relevance/value of financial information tends to
Financial Reporting diminish over time, so a balance needs to be struck
between the reliability of information and its cost.

The Risk-based Audit

Risk Based Audit
An audit in which the auditor

• carefully analyzes the entity and its existing internal
controls,
• identifies areas that pose a higher
risk of financial statement errors and
fraud, and
• allocates a greater proportion of
audit resources to those areas.

Risk Based Audit
A risk-based audit has three key steps :
Performing risk assessment procedures
Risk to identify and assess the risks of material
1
Assessment misstatement in the financial statements
Designing and performing further audit

procedures that respond to identified and
Risk
2 assessed risks of material misstatement, at
Response
both the financial statements and assertion
levels
This involves forming an opinion based on

1
3 Reporting the audit evidence obtained; and preparing
and issuing a report that is appropriate to
the conclusions reached

Audit Process - Risk Based Audit
Plan Design Evaluate audit
the Audit further audit evidence
Assessment
Response
Reporting
procedures obtained
Risk
Risk
Perform risk Perform Prepare the

assessment further audit auditor’s
procedures procedures report
What events could occur Did the events identied What audit opinion, based
that would cause a occur and result in a on the evidence obtained,
material misstatement in material misstatement in is appropriate on the
the financial statements? the financial statements? financial statements?
Identify potential Obtain evidence Draw conclusion

fraud & error

Risk Based Audit - Benefits
Benefits of the risk-based audit :
• Time flexibility when audit work needs to be performed
• Audit team’s effort focused on key areas
• Audit procedures focused on specific risks
• Understanding of internal control
• Timely communication of matters of interest to
management

End

Overview Audit

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Kuliah 1

©2015 FAKULTAS EKONOMI DAN BISNIS UNIVERSITAS PADJADJARAN 1-1

2 Auditing vs. Accounting

3 Auditing and Information Risk

4 Types of Audits and Auditors

6 Audit of Financial Statements - Overview

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An audit is a systematic process of objectively

American Accounting Association Committee on Basic Auditing

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Objectively obtaining and evaluating evidence

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Audit report is writed up in a specific form regulated by

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Accounting is the recording, classifying, and summarizing

Auditing is determining whether recorded information

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Auditing can have a significant

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The function of auditing is to lend credibility to

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Biases and motives of the provider

Complex exchange transactions

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User verifies information.

User shares information risk with management.

Audited financial statements are provided.

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Client or audit Auditor Auditor issues

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Evaluate computerized payroll system

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Determine whether bank requirements

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Example Annual audit of Boeing's financial statements

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• Government accountability office (GAO)

• Internal revenue agents (USA)

• Internal auditors (CIA)

• Certified fraud examiners (CFE)

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Assurance services are independent professional

Assurance services can be performed by CPAs or by

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Assurance engagement risk —The risk that the practitioner expresses

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