Question

1.      Define “Independence” and “Objectivity” as they relate to auditing.

2. Audits typically consist of three phases: Planning; Fieldwork; Reporting. Describe activities that accompany each phase.

Distinguish between Assurance and Attestation Services.

Answer 1

1)INDEPENDENT-INDEPENDENT MEANS THE JUDGEMENT OF A PERSON IS NOT SUBORDINATE TO THE WISHES OF ANOTHER PERSON.IT REQUIRES THAT HE SHOULD NOT WORK UNDER ANY INFLUENCE.THUS HE CAN WORK IN A COMPLETE UNBIASED MANNER.

IF AUDITOR MAINTAIN HIGH DEGREE OF INDEPENDENCE ,CREDIBILITY OF FINANCIAL STATEMENTS IS ENHENCED .INDEPENDENT AUDIT REPORT WILL BE ACCEPTED AND RESPECED BY ALL STAKEHOLDERS.

OBJECTIVITY-UNBIASED AND IMPERSONAL APPROACH TO CONDUCT EACH STEP OF AUDIT WORK ,THAT NO PERSONAL INTREST SHOULD AFFECT THE DECISION OF AUDITOR.

2)PLANNING-IN THE PLANNING PHASE ,THE AUDITOR MAKES AN EFFORT TO UNDERSTAND WHAT KIND OF DOCUMENTATION ARE NEEDED,COLLECTS DOCUMENTS FROM PREVIOUS AUDITS AND GATHERS PRELIMINARY STATEMENTS FROMINVOVED PARTIES.DURING THE PLANNING PHASE ,THE AUDITOR ALSO BEGINS TO PLAN THE SCOPE SCOPE OF THE AUDIT AND TO DETERMINE WHAT THE OBJECTIVE OF THE AUDIT IS .IN SOME NON-SENSITIVE CASES,ALETTER IS SENT TO THE INTERNAL ORGANIZATION'S AUDITING COMMITTEE TO LET THE GROUP KNOW THAT AN AUDIT IS FORTHCOMING.

FIELDWORK-THE AUDITOR WILL BEGIN TO INTERVIEW EMPLOYEES IN DIFFERENT AREAS OF THE ORGANIZATION TO UNDERSTAND ITS GENERAL PRACTICE AND PROCESSES.THE AUDITOR OFTEN PERFORM THIS WORK ON SITE .THE AUDITOR BEGINS TO ABLE TO DETERMINE ,DURING THIS PHASE ,IF THE ORGANIZATION'S OPERATIONS AND PROCESSES ARE WORKING AS EFFECTIVELY AS THEY SHOULD.THE AUDITOR ALSO CLEARLY IDENTIFIEDTHE AREAS THAT ARE NOT INCOMPLIANCE ,OR THAT ARE LESS EFFECTIVE THAN THEY NEED TO BE .FOER EXAMPLE, HE MAY NOTICE THAT AN ORGANIZATION IS NOT KEEPING RECORDS OR FILLING DOCUMENTS AS FEDERAL OR LOCAL LAW MANDATES.

REPORTING-THIS PHASE CULMINATES IN THE PRODUCTION AND DELIVERY OF AUDIT REPORT .IN ADDITION TO IDENTIFY AREAS IN NEED OF IMPROVEMENT,THE AUDIT REPORT ALSO INCLUDES RECOMMENDATIONS THAT LIST THE PROCESSES THE ORGANIZATION CAN FOLLOW TO IMPROVE THE WAY IT OPERATE .FOR EXAMPLE ,AN AUDITOR MAY RECOMMEND THAT AN ORGANIZATION ADD AN EXTRA LAYER OF APPROVAL BEFORE A SUPERVISOR IS ABLE TO OKAY PURCHASE.

• ASSURANCE SERVICE-ASSURANCE SERVICE IS AN INDEPENDENT PROFESSIONAL SERVICE ,TYPICALLY PROVIDED BY CHARTERED OR CERTIFIED PUBLIC ACCOUNTANT OR CHARTERED CERTIFIED ACCOUNTANT,WITH THE GOAL OF IMPROVING INFORMATION SO THAT DECISION MAKERS CAN MORE INFORMED,AND PRESUMABLY BETTER DECISION.
• ATTESTATION SERVICE-AN ATTESTATION SERVICE IS A TYPE OF ASSURANCE SERVICE WHERIN A CPA ISSUES A REPORT ABOUT THE RELIABILITY OF ANOTHER PART'S ASSERTION.ADDING ASSURANCE TO THE TERM "ORGANIC".