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Introduction and Purpose of Auditing

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Review of Auditing: Week One, Part One

Introduction and Purpose of Auditing

At the end of the two weeks, there will be an exam covering this review.

In addition to reading/mastering the materials I have provided, you are

also required to read the related sections in the auditing textbook you

have. At the end of each section, I will provide the section titles and

page numbers for the latest editions of the Messier, et al. and Arens, et

al. textbooks (further referred to as “Messier” and “Arens”,

respectively). If you have an earlier edition of either book or you are

using a different textbook, the section titles will likely be the same or

similar while the page numbers will not. You will need to use the book’s

index to help you locate the material. Please note: my materials are only

a summary of the material…you MUST read the detailed information in

the textbook to have an understanding of all that you need to remember.

In this week’s review, we will cover (1) the purpose of auditing, (2) the

standard setters and standards related to auditing, (3) the audit risk

model, and (4) materiality and tolerable misstatement. To break up the

reading a bit, I have put together a separate document for each topic. I

recommend you read them in the order listed above. In next week’s

review, we will cover (1) the accounting cycles, (2) management’s

assertions and audit objectives, and (3) audit evidence.

Purpose of Auditing

Seems like we should know the purpose of an audit if we’re going to

study it all semester, right? Let’s start right in with the formal definition,

taken from Arens, et al. (2012), page 4:

“Auditing is the accumulation and evaluation of evidence about

information to determine and report on the degree of

correspondence between the information and established criteria.

Auditing should be done by a competent, independent person.”

That’s a whole lot of words, I’d say. Let me interrupt myself for just a

second to talk about the learning of auditing: The thing about auditing

classes in general is that they don’t usually play to the strengths of most

accounting students. I think most of us get onto this career path because

we love numbers and mathematical analyses…we love right and wrong

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