Auditing Principles and Practices

Professional Skepticism

• Professional skepticism is an attitude of questioning and critically assessing everything. This includes being alert to potential errors or fraud.
• Auditors must be wary of information provided and should always attempt to verify information, corroborate testimony, and look for signs of deceit.
• Professional skepticism is important to maintain the integrity of audits and ensure accurate information is presented.

Reasonable Assurance

• Reasonable assurance means having confidence in the accuracy of information and that appropriate procedures have been followed.
• It involves applying auditing procedures and judgments to create a reliable assessment of risks, internal controls, and other engagement-related matters.

Operations Audit Phases

• Operations audits consist of three phases: Planning, Fieldwork, and Reporting.
• Planning is the most important phase as it sets the foundation for a successful audit.

Planning Considerations

• Planning includes defining the scope of the audit, understanding the auditee's objectives and risks, identifying key controls and assessing their adequacy.
• It also involves developing a test plan and work program to guide the audit process and allocating resources to the engagement.

Fieldwork

• Fieldwork involves performing tests outlined in the planning phase and evaluating the results using various methods like document review, client inquiries, analytical procedures, and observations.
• The main objective of fieldwork is to gather sufficient and appropriate evidence to support audit conclusions and recommendations.

Persuasiveness of Audit Evidence

• Evidence is persuasive if it helps auditors draw sound conclusions and provide confident advice.
• Evidence must be relevant, reliable, and sufficient to be persuasive.

Types of Audit Evidence

• There are four main types of audit evidence: testimonial, physical, documentary, and analytical.

Audit Procedures

• Audit procedures are specific tasks used to collect evidence and achieve the objectives of the audit.
• Internal auditors utilize both manual procedures and Computer-Assisted Audit Techniques (CAATs) to gather sufficient and appropriate evidence.

Audit Working Papers

• Working papers are documents created by auditors to record their work and support their conclusions.
• They provide evidence of the audit process and ensure proper supervision and review of the work performed.

Fieldwork Reminders

• Follow the audit plan and work program during fieldwork.
• Manage relationships with management and staff to ensure cooperation and obtain necessary information.
• Document all findings and activities to ensure accountability.

Reporting

• Reporting involves communicating findings, observations, and recommendations for corrective action.
• Effective audit findings include criteria, condition, cause, effect, and recommendations.

Follow-up

• After reporting, auditors conduct follow-up reviews to monitor the implementation of management actions and address open recommendations.

7 Es of Operations Audit

• The 7 Es (Effectiveness, Efficiency, Economy, Excellence, Ethics, Equity, and Ecology) provide a framework for enhancing the value of operations audits and demonstrating commitment to organizational success.
• By incorporating the 7 Es into the planning process, auditors can help organizations improve their performance across various areas.

This quiz covers essential auditing principles including professional skepticism, reasonable assurance, and the phases of operations audits. Understand the critical importance of these concepts in ensuring accurate and reliable audit outcomes. Test your knowledge on the planning phase and its impacts on audit success.