Learning Business Analysis and Audit

 

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Principles of Auditing

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Rationale

Learning Outcomes

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Business Analysis and Audit

 

Rationale

Financial Statements (or financial reports) are a record of a business' financial flows and levels.The big four statements are :

1. Balance Sheet which describes a company's assets and liabilities.

2. Income statement which describes a company's income and expenses.

3. Statement of Cash Flows which describes how corporate operating, investment, and financing activities

4. Statement of Retained Earnings which describes changes to shareholders equity (for example a payment of dividend).

Because these statements are often complex an extensive set of Notes to the Financial Statements and management discussion and analysis is usually included. The notes will typically describe each item on the Balance Sheet and Income statement in further detail. In many cases the notes are much longer than the financial statement they are elucidating.If a company has extraordinary items that affect the balance sheet or the shareholders equity position it will usually include a Other Comprehensive Income Statement, which describes the adjustments to made. Examples of Other Comprehensive Income include revaluation of corporate assets away from their stated cost, as well as accrurals for liabilities.Today most governments require publicly-traded companies to issue, and issue in a certain way, annual financial statements. Some governments, such as the United Kingdom government, require all companies to publish annual financial statements, although smaller companies only need publish them in abbreviated form.

 

See also

 

External links

 

Auditing is different from other accounting courses in that there are few "rules" in auditing. Auditors rely on professional judgment to assess the risk of fraud, evaluate the reliability of evidence, and determine the materiality of misstatements. This reliance on professional judgment makes auditing both fascinating and frustrating. Because of the nature of auditing, we will spend very little time memorizing "rules" (a relatively easy task) and considerable time working to develop sound judgment (a more difficult task). The course is designed to provide the student with a basic understanding of all aspects of auditing. These include accepting and planning the audit, evaluating internal controls, verifying account balances and financial statement assertions, reporting on audited financial statements, as well as auditing standards, and the legal liabilities and ethical responsibilities of auditors.

 

Learning Outcomes

On completion of this module the students will have:

1. A basic understanding of all aspects of auditing. These include accepting and planning the audit, evaluating internal controls, verifying account balances and financial statement assertions, reporting on audited financial statements, as well as auditing standards, and the legal liabilities and ethical responsibilities of auditors. Expanded the foundation upon which your accounting education will be developed. Expanded upon the conceptual framework while examining each topic in detail. Augmented cooperative learning and interactive skills.

2. Evaluated GAAP from the user perspective.

 

Transferable Skills

1. Strengthened written and oral communication skills. Enhanced research and analytical skills. Expanded critical thinking and analysis skills.Cultivated a professional work ethic.

2. Established proficiency in the use of interactive technological applications in the accounting profession.

 

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Introduction

Tutorials

 

Readings

 

A Financial Audit, or more accurately, an audit of financial statements, is the examination by an independent third party of the financial statements of a company or other organisation, resulting in the publication of an independent opinion on whether or not those financial statements are relevant, accurate, complete, and fairly presented.

Financial audits are typically performed by firms of practising accountants due to the specialist financial reporting knowledge they require. The financial audit is one of many assurance or attestation functions provided by accounting and auditing firms, whereby the firm provides an independent opinion on published information.

Many organisations separately employ or hire internal auditors, who do not attest to financial reports but focus mainly on the internal controls of the organisation. External auditors including UK's Chartered Certified Accountant (ACCA) and Chartered Accountant (CA or ACA) or US's Certified Public Accountant (CPA) may choose to place limited reliance on the work of internal auditors.
Introduction to Model Financial Statements

 

See also

 

An Audit Trail is a chronological sequence of audit records, each of which contains evidence directly pertaining to and resulting from the execution of a business process or system function.

Audit records typically result from activities such as transactions or communications by individual people, systems, accounts or other entities.

Webopedia defines an audit trail as "a record showing who has accessed a computer system and what operations he or she has performed during a given period of time." ([1])

In telecommunication, the term means a record of both completed and attempted accesses and service, or data forming a logical path linking a sequence of events, used to trace the transactions that have affected the contents of a record.

In information or communications security it means a chronological record of system activities to enable the reconstruction and examination of the sequence of events and/or changes in an event.

In accounting, it refers to documentation of detailed transactions supporting summary ledger entries. This documentation may be on paper or electronic records.

Sources

 

 

Assurance Quality and Legal Liability of CPAs

 

Tutorials

 

Readings

 

Related Articles

Internal Audit Quality Assurance Reviews

 

 

Audit Planning, Evidence and Risk

Tutorials

 

Readings

Audit Risk is a term that is commonly applied in relation to the audit of the financial statements of an entity. The primary objective of such an audit is to provide an opinion as to whether or not the financial statements present fairly the financial position and results of the entity. Audit risk is the risk of the auditor providing an inappropriate opinion on the financial statements. In other words, it is the risk of the auditor stating the financial statements present fairly the financial position of the entity, when in fact they do not.

 

Analytical review techniques

 

A technical explanation of this term can be found in International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (http://www.ifac.org).

 

 

Keystone Case - Spreadsheet Software Instructions

 The KEYSTONE spreadsheet templates are a software supplement to Whittington and Pany Principles of Auditing and Other Assurance Services 15th edition, and are for use in connection with the text’s continuing integrated audit case, Keystone Computers & Networks, Inc., (KCN).

These template files were created for use with Microsoft Excel for Windows. For each of the files, one or more exercise requirements are presented below. Instructors can modify these requirements by making changes to the Word files that accompany each Excel file.

 

 

Consideration of Internal Control in an Information Technology Environment. Assessing Control Risk.

Tutorials

 

Readings

Internal Auditing is a management-oriented discipline that has evolved rapidly since World War II. Once a function primarily concerned with financial and accounting matters, internal auditing now addresses the entire range of operating activities and performs a correspondingly wide variety of assurance and consulting services.

 

A Guide to Planning, Conducting, and Reporting on Internal Auditing Assurance Engagements in the Federal Government of Canada

 

The Institute of Internal Auditors (IIA) definition of internal auditing is as follows:

Internal auditing is an independent, objective assurance, and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

 

 

The Institute of Internal Auditors was established in 1941 and is an international professional association of more than 122,000 members with global headquarters in the United States. Throughout the world, The IIA is recognized as the internal audit profession’s leader in certification, education, research, and technological guidance.

The IIA governs the only professional qualification for internal auditors, the Certified Internal Auditor (CIA) qualification.

External links

 

 

Data Analysis is the means by which the information systems auditor determines the completeness and accuracy of an organization’s data.

Auditors perform data analysis to determine where it is best to focus audit tests.

Along with manual audit procedures, the auditor can employ computer assisted auditing tools and techniques (CAATT’s) to perform data analysis throughout the audit engagement.

Generalized Audit Software (GAS), also known as Data Analysis Software, is the most popular form of CAATT used in the data analysis process.

 Data Analysis

 

 

See also

 

Data analysis process

 

Audit Sampling

Tutorials

 

Readings

 

Business Statistics

Business Statistics is the science of good decision making in the face of uncertainty and is used in many disciplines such as financial analysis, econometrics, auditing, production and operations including services improvement, and marketing research.

These sources feature regular repetitive publication of series of data. This makes the topic of time series especially important for business statistics. It is also a branch of applied statistics working mostly on data collected as a by-product of doing business or by government agencies. It provides knowledge and skills to interpret and use statistical techniques in a variety of business applications.

A typical business statistics course is intended for business majors, and covers statistical study, descriptive statistics (collection, description, analysis, and summary of data), probability, and the binomial and normal distributions, test of hypotheses and confidence intervals, linear regression, and correlation.

 

See also

 

 

Working Capital and and Financial Investments

Tutorials

 

Readings

In finance, Cash Flow refers to the amounts of cash being received and spent by a business during a defined period of time, sometimes tied to a specific project.

Most of the time cash flows are being used to determine gaps in the liquid position of a company. For this reason only the total amount of cash flowing in and out of a company matters. However when using cash flows as a benchmark tool (for example when calculating the internal rate of return) it is better to separate the total cash flow into separate cash flows streams. Another reason for separating the different types of flows is that it makes it much easier to read cash flows statements and to determine when earnings are being manipulated.

There are multiple types of flows of incoming and outgoing cash that are included in the total cash flow amount:

Operational cash flows: Cash received or expended as a result of the companies core business activities.

Investment cash flows: Cash received or expended by making capital expenditures (i.e the purchase of new machinery), the making investments or acquisitions.

Financing cash flows: Cash received or expended as a result of financial activities such as receiving or paying loans, issuing stock, and paying dividends
Stable Cash Flow

 

See also

 

External links

 

Accounts Receivable Process

Accounts Receivable is one of a series of accounting transactions dealing with the billing of customers which owe money to a person, company or organization for goods and services that have been provided to the customer. This is typically done in a one person organization by writing an invoice and mailing or delivering it to each customer.

On a company's balance sheet, accounts receivable is the amount that customers owe a business. Sometimes called trade receivables, they are classified as current assets. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credit the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is always debit.

Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use accounting software on a computer to perform this task.

Associated accounting issues include recognizing accounts receivable, valuing accounts receivable, and disposing of accounts receivable.

Other types of accounting transactions include accounts payable, payroll, and trial balance.

Since not all customer debts will be collected, businesses typically record an allowance for bad debts which is subtracted from total accounts receivable. When accounts receivable are not paid, some companies turn them over to collection agencies. However, many debtors still do not pay; in those cases, some creditors turn to collection attorneys.

 

 

Turnover Prediction Map

 

Revenue is a U.S. business term for the amount of money that a company receives from its activities in a given period, mostly from sales of products and/or services to customers. In Europe (including the UK) the term is turnover. For individuals, the equivalent term is income. For government, revenues refers to the gross proceeds received from taxes, fees, and the like. For non-profit organizations, revenue from products and services can be expanded to include proceeds from donations, grants, trade in lieu of cash, and other liquid assets.

Revenue is often referred to as the “top line” due to its position on the income statement at the very top. This is to be contrasted with the “bottom line” which denotes net income, revenues after all applicable costs. At times, the term “Sales” is used interchangeably, but is only accurate when the amount described is denoted in currency as opposed to units ($100,000 of iPod sales vs. 500 iPods sold).

Revenue is often simplified in economics or basic finance projections to “Price x Quantity” (the price of a good times the number of goods sold) though it is rarely this simple in actuality. Net revenue (revenue – returns) is used when sales returns are a factor in the business.

Revenue, like all income statement accounts, can only be presented in terms of a period, for example, the revenues a company earned between January 1, 2005 and December 31, 2005. Alternatively, one could express it in terms of the following examples: 2005 revenue, Q1 (1st quarter) revenue, or March revenue. This periodicity is in contrast to a balance sheet account, which would be given as of the date of the statement. To simply say that a company earned revenue of $5 million without giving a period is meaningless (however, saying that a company has $5 million cash certainly has meaning).

Internally, companies break revenue down by operating segment, geographic region, and product line.

 

External links

 

Keystone Case - Spreadsheet Software Instructions

 The KEYSTONE spreadsheet templates are a software supplement to Whittington and Pany Principles of Auditing and Other Assurance Services 15th edition, and are for use in connection with the text’s continuing integrated audit case, Keystone Computers & Networks, Inc., (KCN).

These template files were created for use with Microsoft Excel for Windows. For each of the files, one or more exercise requirements are presented below. Instructors can modify these requirements by making changes to the Word files that accompany each Excel file.

 

In business management, inventory consists of a list of goods and materials held available in stock.

An inventory can also mean a self-examination, a moral inventory.

In computing, Inventories can comprise physical and non-physical components.

 

See also

 

External links

Inventory Management

 

 

How To Calculate Cost Of Goods Sold (COGS) In Easy

In accounting, the Cost of Goods Sold (also, cost of sales) describes the direct expenses incurred in producing a particular good for sale, including the actual cost of materials that comprise the good, and direct labor expense in putting the good in salable condition. Cost of goods sold does not include indirect expenses such as office expenses, accounting, shipping department, advertising, and other expenses that can not be attributed to a particular item for sale.

Subtracting the cost of goods sold from the amount billed when selling the good (sales revenue) produces the gross profit on the good.

The net profit, what most people understand as the business' income or profit, is determined by subtracting the cost of goods sold and the indirect expenses from the sales revenue.

See also

 

External links

Cost of Goods Sold Explanation and examples for Inventory and Cost of Goods Sold.

Key Terms 12

 

 

Fixed Assets, Libilities and Capital

Tutorials

 

Readings

Fixed Asset, also known as property, plant, and equipment (PP&E), is a term used in accountancy for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.

Fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment over short-term assets because they depreciate over time.

See also
55 Years of new China: great progress seen in jubilating figures

 

Accounts Payable Template

In accounting, Current Liabilities are considered liabilities of the business that are due within the fiscal year.

For example accounts payable for goods, services or supplies that were purchased for use in the operation of the business and payable within a normal period of time would be current liabilities.

Bonds, mortages and loans that are payable over a term exceeding one year would be fixed liabilities. However the payments due in the current fiscal year could be considered current liabilities if the amount were material.

The proper classification of liabilities is essential when considering a true picture of an organization's fiscal health.

 

Accounts Payable is one of a series of accounting transactions covering payments to suppliers owed money for goods and services. The average household performs this task by writing checks each month to such suppliers to the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services.

Business organizations which have become too large to perform such tasks by hand, or who prefer not to do them by hand will generally use accounting software on a computer to perform this task. Accounts payable is classified as a liability account and as such normally has a credit balance. Accounts payable is classified as a Current Liability because the obligation is generally due within 12 months from the initial transaction date.

Other types of accounting transactions include accounts receivable, payroll, and trial balance.

 

See also

 

Keystone Case - Spreadsheet Software Instructions

 The KEYSTONE spreadsheet templates are a software supplement to Whittington and Pany Principles of Auditing and Other Assurance Services 15th edition, and are for use in connection with the text’s continuing integrated audit case, Keystone Computers & Networks, Inc., (KCN).

These template files were created for use with Microsoft Excel for Windows. For each of the files, one or more exercise requirements are presented below. Instructors can modify these requirements by making changes to the Word files that accompany each Excel file.

 

Debt Capital is the capital that a business raises by taking out a loan. It is a loan made to a company that, which is normally repaid at some future date. Debt capital differs from equity or share capital because subscribers to debt capital do not become part owners of the business, but are merely creditors, and the suppliers of debt capital usually receive a contractually fixed annual percentage return on their loan, and this is known as the coupon rate.

Debt capital ranks higher than equity capital for the repayment of annual returns. This means that legally, the interest on debt capital must be repaid in full before any dividends are paid to any suppliers of equity.

A company that is highly geared has a high debt capital to equity capital ratio.

 Bank of China Tower, Hong Kong

 

In finance and accounting, Ownership Equity, commonly known simply as equity, but also as risk capital or liable capital, is the difference in value between the assets and the claims on them (liabilities), which accrues to the owner(s). In case the owners are shareholders, it is usually called shareholders' equity.

In a bankruptcy court, creditors have the first claim on assets, and ownership equity is the last or residual claim against assets, paid only after all other creditors are paid.

For example, in real estate the owner's equity in a property is the difference between the market price of a property and the owner's mortgage debt.

Equity can be a source of assets, either through contributed capital (the contribution of capital resources, i.e., assets from the owners) or retained earnings (when the business increases assets through earning activities). These retained earnings can then be distributed to the owners (through equity draws or dividends depending on the corporate structure) or kept in the business.

 

Consolidated Statements of Shareholders' Equity

 

Case Studies

Bank of China

 

Cisco Systems

 

Auditing Operations, Testing and Completing the Audit

Tutorials

Value-Added Audit

 

Readings

 

Audit Management Process

 

Audit Management is responsible for ensuring that board-approved audit directives are implemented.

Audit management oversees the internal audit staff, establishes internal audit programs, and hires and trains the appropriate internal audit personnel. The staff should have the necessary skills and expertise to identify inherent risks of the business and assess the overall effectiveness of controls in place relating to the company's information technology operations.

Internal audit is a function setup the organisation to reduce the risk of fraud in the organisation and runs according to the management commands. This is the main difference between internal and external audit where external auditors and independent of management and hence external auditors give an opinion on the financial statements.

An Information Technology (IT) Audit or Information Systems (IS) Audit is an examination of the controls within an entity's Information technology infrastructure. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement. Formerly called an Electronic data processing (EDP) audit, an IT audit is the process of collecting and evaluating evidence of an organization's information systems, practices, and operations. Obtained evidence evaluation can ensure whether the organization's information systems safeguard assets, maintains data integrity, and is operating effectively and efficiently to achieve the organization's goals or objectives.

 

Internal Control Frameworks for Auditing and Control Self-assessment

IT audits are also known as automated data processing (ADP) audits and computer audits.

 

See also

 

External links

 

Information Technology Audit Process:

 

Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all data and processes of an organization into a single unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a single, unified database to store data for the various system modules.

 

Supply Chain Management

 

The term ERP originally implied systems designed to plan the utilization of enterprise-wide resources. Although the acronym ERP originated in the manufacturing environment, today's use of the term ERP systems has much broader scope. ERP systems typically attempt to cover all basic functions of an organization, regardless of the organization's business or charter. Business, non-profit organizations, governments, and other large entities utilize ERP systems.

Additionally, it may be noted that to be considered an ERP system, a software package generally would only need to provide functionality in a single package that would normally be covered by two or more systems. Technically, a software package that provides both Payroll and Accounting functions (such as QuickBooks) would be considered an ERP software package.

However; the term is typically reserved for larger, more broadbased applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database).

Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain, Financials, CRM, Human Resources, and Warehouse Management.

 

See also

 

External links

 

ISO 19011 is a document that sets forth guidelines for:

 

Keystone Case - Spreadsheet Software Instructions

The KEYSTONE spreadsheet templates are a software supplement to Whittington and Pany Principles of Auditing and Other Assurance Services 15th edition, and are for use in connection with the text’s continuing integrated audit case, Keystone Computers & Networks, Inc., (KCN).

These template files were created for use with Microsoft Excel for Windows. For each of the files, one or more exercise requirements are presented below. Instructors can modify these requirements by making changes to the Word files that accompany each Excel file.

 

 

Integrated Audits of Public Companies and Governmental Organisations

 

Readings

 

A Public Company is a company owned by the public rather than by a relatively few individuals. There are two different meanings for this term:

A company that is owned by stockholders who are members of the general public and trade shares publicly, often through a listing on a stock exchange. Ownership is open to anyone that has the money and inclination to buy shares in the company. It is differentiated from privately held companies where the shares are held by a small group of individuals, who are often members of one or a small group of families or otherwise related individuals, or other companies. The variant of this type of company in the United Kingdom and Ireland is known as a public limited company.

A government-owned corporation. This meaning of a "public company" comes from the tradition of public ownership of assets and interests by and for the people as a whole, and is the less-common meaning in the United States. See public ownership.

"Publicly-owned company" can also have either meaning, although in the United Kingdom it will usually refer to ownership by national, regional or local government.

An Audit Committee is an operating committee of a publicly-held company. Committee members are normally drawn from members of the Company's board of directors. An audit committee of a publicly traded company in the United States is composed of independent or outside directors.

Responsibilities of the audit committee typically include:

  • Overseeing the financial reporting process.
  • Monitoring choice of accounting policies and principles.
  • Monitoring internal control process.
  • Overseeing hiring and performance of the external auditors.

 

The U.S. Securities and Exchange Commission (SEC) first recommended that publicly held companies establish audit committees in 1972. The stock exchanges quickly followed by either requiring or recommending that companies establish audit committees. Over the years, various initiatives to strengthen and increase the responsibilities of audit committees have been made.

In 2002, the Sarbanes-Oxley Act increased audit committees’ responsibilities and authority, and raised membership requirements and committee composition to include more independent directors. In response, the SEC and the stock exchanges proposed new regulations and rules to strengthen audit committees.

Current costs of Sarbanes Oxley compliance are estimated at over $6 Billion per annum. A White Paper on cost reduction can be found at http://www.sarbanesoxleywhitepaper.com
Fortune 1000 Companies

 

 

See also

 

 

Citgo Petroleum Corporation

A Government Corporation or Government-owned Corporation is a legal entity created by a government to exercise some of the powers of the government. It may resemble a not-for-profit corporation as it has no need or goal of satisfying the shareholders with return on their investment through price increase or dividends.

In the United States, businesses that are government owned include Amtrak, Tennessee Valley Authority, and the United States Postal Service. Many states have government owned businesses for operations as well. Generally speaking, a statute passed by a legislature specifically sets up a government owned company in order to undertake a specific public purpose with public funds or public property.

 

In monarchical Commonwealth countries country-wide government corporations often use the style "Crown corporation". Notable exceptions include both the State-Owned Enterprises and the Crown entities in New Zealand. Examples of Crown corporations include the CBC in Canada and Air Canada before it underwent privatisation. Cabinet ministers (Ministers of the Crown) often control the shares in such public corporations.

At the level of local government, territorial or other authorities may set up government corporations such as "Local Authority Trading Enterprises" (LATEs).

In Japan, Japan Post is currently partially owned by the government, but will soon be sold to the public. JR, NTT and Japan Tobacco were formerly owned by the government.

In most OPEC countries, the governments prefer to own the oil companies operating on their soil. A notable example is the Saudi national oil company, Saudi Aramco, which the Saudi government bought in 1988 and changed its name from Arabian American Oil Company to Saudi Arabian Oil Company. Saudi government also owns and operates Saudi Arabian Airlines, and owns 70% of SABIC, as well as many other companies. They are, however, being publicized gradually.

 

 

A State-Owned Enterprise (SOE) is an enterprise, often a corporation, owned by a state.

See also

 

External links

 SOEing the seeds of rapid growth

 

Cloud Sherpas Named Fifth Fastest Growing Privately Held Company in Atlanta The term Privately Held Company refers to ownership of a business company in two different ways—first, referring to ownership by non-governmental organizations; and second, referring to ownership of the company's stock by a relatively small number of holders who do not trade the stock publicly.

 

 

See also

 

External links

 

 

Government Financial Reports are an important part of democracy but often not widely read or discussed. Online reporting by governments makes these government financial reports more accessible.

Governmental financial reports can include not only the budget but also government financial reports, financial statements, performance reports and audits. Many governmental financial reports are online and opened to critical review by constituents, taxpayer groups, bond rating firms and creditors. Ratio analysis is one of the ways to examine the financial conditions of a government. One online source for state and local financial reports (called Comprehensive Annual Financial Reports) is from the Governmental Accounting Standards Board (GASB) gasb.org

One of the key elements in the financial statement is the Management Discussion and Analysis (MD&A). The MD&A is designed to provide a readable version of the technical financial statements. In June of 1999, the Governmental Accounting Standards Board adopted standard 34. Standard 34 requested all cities and states in the US to include a MD&A in their financial statement.

First developed in the late 1960s and shepherded by the United States General Accounting Officethe chief audit arm of the US federal government, government performance auditing has since spread to most state governments and nearly all of the best managed local governments.

Some of the best managed local governments have also begun to employ continuous municipal performance audits, e.g. Baltimore CitiStat, consisting of weekly accountability sessions where senior politicians question staff closely on performance questions.

In Canada the Auditor General of Canada has strongly advocated a similar approach to improve government at all levels. This complements other efforts in that country such as the FCM InfraGuide for best practice exchange of all routine municipal infrastructure management problems.

See also: Golden Fleece Award

The Auditing Practices Board Limited (APB) was originally established in 1991 as a committee of the Consultative Committee of Accountancy Bodies, to take responsibility within the United Kingdom and Republic of Ireland for setting standards of auditing with the objective of enhancing public confidence in the audit process and the quality and relevance of audit services in the public interest. In 2002 APB was re-established under the auspices of The Accountancy Foundation and, following a UK government review, it has been transferred to the Financial Reporting Council (FRC). Its objective has remained the same, but its remit has been extended to include responsibility for setting standards for auditors' integrity, objectivity and independence.

Further information regarding the APB's remit and processes is provided in the statement of its scope and authority of pronouncements on its website, http://www.frc.org.uk .

 

Financial Reporting Council

National Audit Office, China

The National Audit Office of the People's Republic of China is the supreme audit institution in the People's Republic of China. It was established in 1983 according to the Constitution. It is a ministry of the State Council and under the leadership of the Premier.

 

 

The National Audit Office (NAO) is an independent Parliamentary body in the United Kingdom which is responsible for auditing central government departments and government agencies, non-departmental public bodies. The National Audit office (NAO) also carries out Value for Money (VFM) audit into the administration of public policy, but not into the policies.

The NAO reports to the Comptroller and Auditor General who is an officer of the House of Commons of the Parliament of the United Kingdom and in turn report to the Public Accounts Committee, a select committee of the [[House of Commons. The reports produced by the NAO are reviewed by PAC and in some cases investigated further.

The Audit Commission performs a similar function for local government in England, the English NHS Trusts and some other public agencies in England and Wales. Audit Scotland has a similar role in Scotland, with the added responsibility of auditing the Scottish Executive and its public bodies.

The Wales Audit Office is responsible for auditing the Welsh Assembly Government and its public bodies. The Northern Ireland Audit Office performs similar functions in Northern Ireland.

 

See also

 

The Audit Commission

 

The Audit Commission is a non-departmental public body in the United Kingdom, established under the Local Government Finance Act 1982, to appoint auditors to all local authorities in England and Wales. The National Health Service and Community Care Act 1990 extended the remit of the Commission to cover health service bodies. Legislation covering the Commission’s activities was consolidated into the Audit Commission Act 1998. One of the Commission’s primary objectives is to improve economy, efficiency and effectiveness in local government and the health service, directly through the audit and inspection process and also through value for money studies. Since 1 April 2005 the Commission’s functions in Wales have been the responsibility of the Auditor General for Wales.

Auditors appointed by the Commission are responsible for auditing local government in England, National Health Service Trusts and other local agencies in England and Wales.

It works in partnership with the Department for Communities and Local Government, the Department of Health and the National Assembly for Wales.

 

See also

External link

 

 


 The 2009 Financial Report Of The U.S. Government Is Out - America's Economic Goose Is Cooked

 

Financial Times, Asia Pacific

 

 

 

Other Accounting and Assurance Services

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Readings

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Statements on Standards for Attestation Engagements

With over 350,000 CPA members (in 2005), the American Institute of Certified Public Accountants (AICPA) is the largest CPA professional organization in the United States of America. Approximately 40% of its members are engaged in the practice of public accounting, in areas such as auditing, accounting, taxation, general business consulting, business valuation, personal financial planning and business technology. The majority (60%) of its members are CPAs who work in industry, government and education. However, because of the Institute's major role in self-regulation of most practicing CPAs, a large part of the Institute's resources are devoted to this function and to related programs to help CPAs maintain professional competence. The two most visible CPA practice functions are tax practice and the independent audits and similar services related to financial statements of all types of entities. Only CPAs and a now dwindling number of "grandfathered-in" non-CPA accountants are permitted to perform this audit function.

The Institute's overriding role is to promote and enhance the profession of accounting. To accomplish this, it has a variety of functions, which include: providing group member benefits; preparing the Uniform CPA Examination; developing CPA professional standards; providing technical support to CPA members in many areas of practice; operating the profession's public relations programs; providing support to the academic community and representing the profession before Congress and federal agencies.

 

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Simulations

Established in 1941, The Institute of Internal Auditors (IIA) is an international professional association of more than 117,000 members with global headquarters in Altamonte Springs, Fla., United States.

 

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The Sarbanes-Oxley Act of 2002 (Pub. L. No. 107-204, 116 Stat. 745, also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX or SarbOx; July 30, 2002) is a United States federal law passed in response to a number of major corporate and accounting scandals involving prominent companies in the United States. These scandals resulted in a decline of public trust in accounting and reporting practices.

The legislation is wide ranging and establishes new or enhanced standards for all U.S. public company Boards, Management, and public accounting firms. The Act contains 11 titles, or sections, ranging from additional Corporate Board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Some believe the legislation was necessary and useful, others believe it does more economic damage than it prevents and yet others observe how essentially modest the Act is compared to the heavy rhetoric accompanying it.
What is Sarbanes-Oxley Act?

 

The first and most important part of the Act establishes a new quasi-public agency, the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. The Act also covers issues such as auditor independence, corporate governance and enhanced financial disclosure. It is considered by some as one of the most significant changes to United States securities laws since the New Deal in the 1930s.

The Act came in the wake of a series of corporate financial scandals, including those affecting Enron, Tyco International, and WorldCom (now MCI). Named after sponsors Senator Paul Sarbanes (D–Md.) and Representative Michael G. Oxley (R–Oh.), the Act was approved by the House by a vote of 423-3 and by the Senate 99-0.

 

 

Recommended Texts

Principles of Auditing

 

 

 

 

Principles of Auditing and Other Assurance Services, 15/e

O. Ray Whittington, DePaul University
Kurt Pany, Arizona State University

ISBN: 0073010847
Copyright year: 2006

Check the availability and buy your books from our Bookshop.

 

Principles of Auditing and other Assurance Services

Principles of Auditing and other Assurance Services, 14/e

Ray Whittington, DePaul University
Kurt Pany, Arizona State University

ISBN: 0072822732
Copyright year: 2004

Check the availability and buy your books from our Bookshop.

 

Simulations

In April of 2004, the American Institute of Certified Public Accountants launched the computer-based Uniform Certified Public Accountant Exam. The Auditing & Attestation section represents 4½ hours of that 14-hour examination. The AICPA indicates that each Auditing & Attestation exam will consist of multiple choice questions and two condensed case studies referred to as simulations. While the CPA Exam has long included multiple choice questions, the simulations are new. You may work the sample auditing simulation (as well as multiple choice questions) provided by the AICPA—go to www.aicpa.org. That website also provides the 10-12 software components needed to download the simulation and the sample multiple choice questions.

We prepared the following two simulations. While they are comparable in requirements to the auditing simulation provided by the AICPA, they are about a different company and do not require the extensive downloads necessary for the AICPA simulation. Our two simulations are each in an Excel file that consists of a workbook with a number of worksheets. As such, our simulations are similar to, but not the same as, the AICPA provided simulation. Finally, we have provided you the solution to the first simulation; the solution to the second simulation is available to your instructor.

 

 

Resources

 

 

 

Internal Auditing Benchmarking Association

 

 

 

 

International Auditing and Assurance Standards Board

 

 

Case Studies

 

Bank of China

Bank of China Limited (BOC; Simplified Chinese: 中国银行; Traditional Chinese: 中國銀行; pinyin: Zhōngguó Yínháng; often abbreviated as 中行)(SEHK: 3988) is one of the big four state-owned commercial banks of the People's Republic of China. Founded in 1912, it is the oldest bank in China. It was 100% owned by the central government, via Central Huijin Investment and National Council for Social Security Fund (SSF) in the past but as of June 2006, various non-governmental and foreign investors and shareholders have together held a stake of over 26%.

 

Cisco Systems

 

Cisco Systems, Inc. (NASDAQ: CSCO, SEHK: 4333) is an American manufacturer of telecommunications equipment based in California. The company originally manufactured only enterprise routing equipment, but it now sells a variety of devices for both enterprises and telecommunications carriers. These include, but are not limited to:

 

Cisco's tag line is "The Worldwide Leader in Networking for the Internet" [2]

 

See also

 

 

SAIC

The Shanghai Automotive Industry Corporation (in Chinese: 上海汽车工业(集团)总公司; Pinyin: Shànghǎi Qichē Gõngyè (Jítuán) Zǒnggõngsī; or 上汽, Shàngqi; abbreviated SAIC) is one of the "Big Three" Chinese automakers.

SAIC partnered with General Motors to form Shanghai GM, SAIC-GM-Wuling Automobile, and the Pan-Asia Technical Automotive Center. SAIC also partnered with Volkswagen Group in the formation of Volkswagen Group China.

SAIC owns 20% stake of Chery, another Chinese automaker and in late 2004 took a 49% stake of SsangYong Motor Company.

MG Rover Site

 

 

Enron

Enron Corporation is an American energy company based in Houston, Texas, United States. Prior to its bankruptcy in late 2001, Enron employed around 21,000 people and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of $101 billion in 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years. It achieved infamy at the end of 2001, when it was revealed that its reported financial condition was sustained mostly by institutionalized, systematic, and creatively planned accounting fraud. Its European operations filed for bankruptcy on November 30, 2001, and it sought Chapter 11 protection in the U.S. two days later on December 2. At the time, it was the biggest bankruptcy in U.S. history, and it cost 4,000 employees their jobs [1].

The lawsuit against Enron's directors, following the scandal, was notable in that the directors settled the suit by paying very significant amounts of money personally. In addition, the scandal caused the dissolution of the Arthur Andersen accounting firm, which had effects on the wider business world, as described in more detail below.

Enron still exists, operating a handful of key assets and making preparations for the sale or spin-off of remaining businesses. Enron emerged from bankruptcy in November of 2004 after one of the biggest and most complex bankruptcy cases in U.S. history. It has since become a popular symbol of willful corporate fraud and corruption.

 

See also

 

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