Question

Explain how auditing can be used in your organization. If you are not familiar with auditing, do some investigating, either in your text or on the web. Explain the relationships among audit services, attestation services, and assurance services. Give real-world examples of each.

Answer 1

Auditing

Financial auditing is the process of examining an organization's (or individual's) financial records to determine if they are accurate and in accordance with any applicable rules (including accepted accounting standards), regulations, and laws.

External auditors come in from outside the organization to examine accounting and financial records and provide an independent opinion on these records. Law requires that all public companies have their financial statements externally audited.

Internal auditors work for the organization as internal employees to examine records and help improve internal processes such as operations, internal controls, risk management, and governance.

Auditing can be used in your organization.,

First of all, for most organisations (for instance companies, larger charities and clubs) publishing audited accounts once a year is something they must do by law. But most experts agree that the real value of the audit process goes far beyond ‘ticking a box’.
In fact, having independent and unbiased auditors confirm that an organisation’s claims about its financial position, and the process behind these claims, are true and fair is useful for a wide range of reasons, depending on your point of view. For instance:
Investors and shareholders: These people own the organisation but, in many cases, will not be closely involved in its day to day running. So, again, an independent audit is very interesting to them, since it provides a trusted second opinion on the organisation’s financial statements and, in turn, gives some, insight as to how well it is being run.
Company accountants/Finance Directors: These people are essentially in charge of the finances of the organisation being audited and, for them, going through an audit is mostly about confidence and peace of mind. Having an independent expert poring over your figures might be a little bit uncomfortable at times, but the reward is in making sure that your numbers are true and fair.
What’s more, most audits these days will look at ‘internal control systems’ as well as the finances. These systems are usually established through the specific design of computer systems and, for instance, ensure that the authorisation of transactions is controlled according to clear rules and policies. Knowing these control systems are sufficiently strong and are working properly is also very reassuring.
Finally, many company accountants and finance directors also value working closely with auditors, believing they can help to solve complex accounting problems, offer world class advice on issues ranging from governance to business processes and keep them up to date with the latest techniques, rules and regulations.
Financial analysts: These people help to determine what an organisation’s shares are worth and, therefore, its value as a whole. They do so by independently analysing and commenting on its financial position as well as making predictions about its future success. For financial analysts, audited accounts are a vital tool, since they provide unbiased and independently checked information on which to base their work.
Regulators: These independent organisations are tasked with overseeing wide range of industries to ensure individual firms are operating fairly and legally. They may make use of audited accounts as part of the ongoing monitoring of each firm or to help with more specific investigations.
Other stakeholders: Depending on the organisation being audited, the outcome of an audit process may be interesting to a whole range of other stakeholders, such as politicians, journalists and the general public.

Explain the relationships among audit services, attestation services, and assurance services. Give real-world examples of each.

An assurance service is an independent professional service to improve the quality of information for decision makers. An attestation service is a form of assurance service in which the CPA firm issuesa report about the reliability of an assertion that is the responsibility of another party. Audit services are a form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria.The most common form of audit service is an audit of historical financial statements, in which the auditor expresses a conclusion as to whether the financial statements are presented in conformity with generally accepted accounting principles. An example of an attestation service is a report on the effectiveness of an entity’s internal control over financial reporting. There are many possible forms of assurance services, including services related to business performance measurement, health care performance, and information system reliability