Reading Control Topic I

FIELD OF AUDIT

a) What is the nature of auditing.

The audit can be defined as a systematic process to obtain and evaluate objectively
the evidence related to reports on activities of various kinds and other events
related, whose purpose is to determine the degree of correspondence of the informational content with
the evidence that gave rise to it.

b) List the points that the audit must address.

Guidelines
Planning
Execution
Reports
Quality

c) En cuales conceptos se basa la filosofía de la auditoria (enuméralos y defínelos).

Evidence: this includes all influences on an auditor's mind that affect their judgment.
regarding the accuracy of propositions, sent to him for his review. The auditor does not seek a
concrete, absolute test. It is used in accordance with the requirements of the assignment, to ensure
a responsible and competent person regarding the reasonableness of the financial statements of the
direction and/or adjustment of internal control activities.
Due care of the auditor: it refers to the extent of the review necessary to carry out
an audit. The exercise of due diligence requires a critical review at any level of
supervision of the work carried out and the judgment exercised by those who collaborated in the preparation
of the exam or review.
Appropriate presentation: It refers to the following three concepts of auditing. Ownership in the
accounting: it is an effort to summarize accounting. That is, compliance with the
generally accepted accounting principles, it is useful to abstract from accounting practices
accepted the essence of the currently valid principles. These fundamentally affect two
general areas of accounting: the first can be called accounting methods and the second
presentation of the financial statements.

d) What are the general objectives of the audit.

Discover frauds
Discover principle errors
Discover technical errors

e) What do you understand by safeguarding assets and what mechanisms does the company have to achieve this?
objective.

The most significant investment that companies have is in the acquisition of fixed assets, since
that without them the operation of this would be virtually impossible. Safeguarding assets means
take care of them, ensure that they are properly insured and for that
 they use internal control measures to keep them under care. Some measures that are used to
to safeguard them are:
Planning
Physical inventory taking
Review, reconciliation, and data entry of information
Management and maintenance of the database

f) Enumera las ramas de la auditoria (defínelas).

External or legal audit: This is an examination of the accounts conducted at legal request.
The idea of the procedure is to verify the financial status and operations of a company.
match the official records. In these cases, the auditor is an independent person who does not
It has nothing to do with the company.
Internal audit: In the case of the internal audit, it is an evaluation process that
the members of the company itself carry out. The aim is almost always to review the processes that
take place in it and from there propose solutions. The type of internal audit is voluntary or
at most 1 requested by management.
Operational Audit: Its central objective is to increase the performance of a company. Although
it can be carried out by either an external agent or an internal one, the aim is to review the
procedures that are part of the daily routine and improve the level of productivity. That is to say, it goes beyond
beyond the review of the financial statements. A good example of this type of audit is the one that
It carries out to determine if a company meets the minimum quality standards.
Public or governmental audit: It is conducted directly at the request of an entity.
governmental. Its objective is to review the financial statements of companies and identify any
type of irregularity, such as tax evasion, unjustified financing or the
non-compliance with labor laws. In Spain, this task falls to the Court of Auditors.
IT Audit: Almost all companies rely on IT systems. Therefore, it is
I need to conduct an evaluation of them every so often and, if necessary, update them.
adapt them to the context requirements. The two main types of IT audit are
those carried out in information systems (IS) and electronic data processes (EDP).

g) Explain in your own words or with an example what legal responsibility means.
independent auditors.

The independent auditor must express their opinion on the reasonableness of the financial statements in all
its aspects, financial situation, results of operations and cash flow, in this regard, the auditor
you must ensure that the management of the company receiving your services understands the nature of
the audit.

h) According to the emphasis placed on the audit review, it is classified into several
groups. (mention them)

Independent Audit
Internal Audit
Government Audit
Fill in the blanks

a) Evidence includes all the influences on an auditor's mind and affects their judgment to express their opinion.
work.
b) Ethical Conduct It is the conduct that the auditor must maintain in order to perform their work in compliance with
it is established by the profession.
c) It is an organizational plan and all related methods and procedures that are directly
related to safeguarding assets. Internal Control
d) Opinion It is what the auditor expresses in their report based on an investigation that meets the
techniques and standards for performing audit work.
e) The only external evidence of the greater activity of the CPA profession is recorded.
fundamental and constitutes the fundamental base when making decisions.
Independent Audit, Internal Audit, and Government Audit are the three branches or
classification that arises from the field of auditing, depending on the type of review work being performed.

Clasifique a cuáles ramas pertenecen los auditores que realizan estas auditorías. (gubernamental, Interna
the Independent)

a) The company hired an auditor (licensed public accountant) to review the financial statements that
prepares the Independent Audit company.
b) This accountant works at the company and their duties consist of ensuring that the policies are followed.
accounting and internal control Internal Audit.
They are accountants working in the audit department of the Superintendent of Banks Audit.
Governmental.
d) In the inspection department of the DGII, there are 8 accountants in which branch of auditing.
Government Audit.
 CONTROL READING THEME II.
PROFESSIONAL ETHICS

a) __________ represents an important part of the relationship and discipline system that is essential in
any civilized society.
b) Legal, ethical, and moral responsibility are the three levels of responsibility that inspire our
disciplinary system.
c) Code of ethics It is a conduct manual for auditors to fulfill their professional obligations.
and for professional activities.
d) The ethical standards followed by an auditor are established by the company that employs them.
e) Code of ethics for public accountants are formal rules established by the executive division committee.
of professional ethics.

EXPLAIN IN YOUR OWN WORDS THE FOLLOWING CASES:

a) What should the relationship between the auditor and their client be like?
In their work, the auditor seeks to provide an independent assurance that the management processes of
risks, governance, and internal control of an organization are functioning appropriately. The exercise of
supervision of the actions of the administrators often creates a certain tension between the auditor and the
auditor administrator or client.

b) What is your stance on the professional image that a professional should have?

The professional image can be defined as the perception one has of a person by others.
environment in which it operates, based on the stimuli that emanate during its work activity. In other
Words are to appear what one is.

c) Explain which levels of responsibility inspire our disciplinary system?

Individual social responsibility: Our individual actions, which we carry out as mothers
and parents, sons and daughters, members of a homeowners' community, team members,
users of certain services or as consumers... have repercussions on others
people and our environment.
Corporate social responsibility: Also known by its initials (CSR), it is an aspect
that every day they take more into account their customers and users, aware that productivity, the
cost reduction and profit generation cannot justify in any way
the exploitation, the violation of fundamental rights of people or the degradation of
environment.
Public or governmental social responsibility: The social responsibility of entities
governmental not only is external, that is, regulating the activities of individuals and
organizations, companies, etc., that fall under its administrative umbrella. Also its
responsibility is played out in the internal sphere, in the management of its activity itself, in the
consideration of the staff that is part of them and the activities that take place within them.
 d) Provide a brief explanation and an example when a financial conflict of interest may exist.
(P64).

A financial conflict of interest exists when UNH reasonably determines that the
relevant financial interest could directly and significantly affect the design, execution or the
presentation of reports on research activities funded by the PHS.
e) What requirements must a member providing accounting services to a
audit client, in order to maintain the appearance of being a reasonable observer, that not
Is he a worker? (P 65)

f) What does 'management services' mean and give some examples of these services?
g) Auditor's reports. The main function of an auditor is to certify that the financial statements
they are based on real foundations. After doing their audit work, they issue their __________ (P68)
h) _________________ and _________________ are the two types of reports that can be presented by the
opinion of an auditor.
i) Explain what a short report consists of and what paragraphs it contains?
j) Search online what a clean or unqualified opinion of a completed work consists of.
auditor?
k) When should a clean opinion be refused? (P69)
l) What does a long audit report consist of? P 69
m) Explain the ethical rules that have indicated that the following practices are unacceptable to establish
professional fees. (P. 74)

Answer True or False

a) Can a client pay a commission to obtain a client?

b) Currently, any advertising that is not false is considered acceptable.
c) It is prohibited advertisement to exalt one's own virtues that are not based on verifiable facts.
d) The preparation of interim financial statements is considered a special report.
e) Subsequent events are those that have occurred after the date of the financial statements.
but before issuing the audit report

TRY TO ANSWER THE FOLLOWING QUESTIONS ABOUT SITUATIONS BETWEEN THE

AUDITOR AND THE CLIENT (SEE PAGE.

a) Whose are the working papers?

They are the property of the independent auditor or auditing firm.

b) Can an auditor voluntarily testify against their client when they are in
involved in a litigation between parties?

Yes, auditors and fraud examiners are often called to testify to support investigations of
fraud

c) Who can examine the auditor's working papers, tax returns, and others
confidential documents related to the client?
 d) If the auditor knows the client's intention to commit a crime, should they remain silent?

No, he must disclose his intentions as he must adhere to the code of ethics of an auditor.

A staff member from our firm wants to send their resume to another auditing firm.
Can you include the names of the companies you have worked for as part of your experience?
audit?

f) Can the auditor voluntarily testify against their client when they are under
involved in a litigation between parties?
 Theme III.
AUDIT STANDARDS

a) Mention the three categories or types of audit that this area covers. (p.40)

Independent Audit, Internal Audit, and Government Audit.

b) Mention (only) the auditing standards that are applicable to everyone who practices this.
profession.

Independence, professional integrity, reliability of statements and records, maintenance of control

internal, obtaining and evaluating evidence.

c) Why do internal and government auditors need to be sure that the records
The basics of financial statements are reliable.

Because they are interested in determining if the financial statements adequately represent the position
financial statement of company X as of December 31 of year X and the results of operations.

d) Why should the independent or external auditor be more careful in obtaining and evaluating the
evidence of your work? (two reasons) (p. 42).

The first reason is the result of the legal relationship that the independent auditor has with their client.
and the third parts.
The second reason why the rules for obtaining evidence have not been outlined as clearly
detail for internal and governmental auditors, is due to the nature of the work that they
they carry out.

INTRODUCTION: THE APPLICABLE STANDARDS FOR INDEPENDENT AUDIT ARE

CLASSIFY INTO THREE LARGE GROUPS:

a) General Standards
Proper technical training and competence: this is about formal education in auditing and
accounting that the auditor must have, combined with their practical experience to carry out the work.
Independent mental attitude.
Due professional care

b) Work execution standards

The work must be properly planned and the attendees, if there are any, must be
properly supervised.
The internal control must be known in detail in order to plan the audit and determine the
nature, duration, and scope of the tests that will be conducted.
 Sufficient evidence must be obtained through inspection, observation, inquiries, and confirmations.
to obtain a reasonable basis for issuing an opinion regarding the financial statements that are
auditing.

c) Report standards
The report must indicate whether the financial statements are presented in accordance with the standards of
applicable financial information. ACCOUNTING BASE IAS or IFRS.
The report should identify those circumstances in which the regulations have not been observed.
principles coherently in the current period in relation to the previous period

General Rules: READING CONTROL

a) Explain in your own words the general rule that deals with training and the skill that must be
have the auditor.
The appropriate technical training and skill as an auditor refers to their competence.
an auditor must be technically competent like anyone who can work with another professional on bases
similar. The required skills are obtained through education, both formal and informal, and by
experience.

b) The second general rule concerns independence, briefly explain what it consists of.
It requires that the auditor must be mentally independent from their client. It is of vital importance for the
Profession that the general public maintains trust in the independence of the external auditor.

c) What points must the auditor have access to in order to have independence in programming and
research (p. 45)

. Independence in programming:
Freedom from interference or intention to eliminate or modify any part of the audit by the
address.
Freedom from interference in the attitude of non-cooperation regarding the application of procedures.
select
Freedom from any external attempt to modify the auditing work by reviewing something other than that.
expected during the audit process.

. Research independence:
Direct and free access to all the company's books, records, directors and employees, and other sources of
information.
Active cooperation of the management staff during the course of the auditor's examination.
Freedom from any attempt by management to assign or specify the activities to be examined.

d) Regarding independence in the audit report, what points should be taken into account?
auditor?
Freedom from any sense of loyalty or obligation to alter the reported facts
about any part.
2. Prohibition of the practice of excluding significant matters from the formal report in favor of their inclusion in a
informal report of any kind.
3. Avoid the intentional or unintentional use of ambiguous language in the statement of facts, opinions, and
recommendations and their interpretation.

Work Execution Standards CONTROL READING (PAGE 47)

WITHIN THESE RULES WE HAVE FOUR MAIN GROUPS A) PLANNING B)
SUPERVISION

a) What does the planning of the audit involve?

Develop a general strategy for conducting the audit.

b) What points should the auditor consider when planning their examination?

Matters relating to the entity's business and the industry in which the client operates.
The accounting procedures and policies of the entity.
Anticipated trust in accounting internal controls.
Preliminary estimates of the levels of materiality for auditing purposes.

c) Which 'PROCEDURES' should the auditor use or consider for the execution of the
planning?

Review correspondence files, working papers from previous years, permanent files,
financial statements and audit reports.
Comment on the issues that may affect the exam with the staff of the responsible entity.
non-audit services.
Ask about the current business developments that affect the entity.
Read the current internal financial statements.
Comment on the type, scope, and timing of the examination with the entity's management and board of directors.
etc.

d) Regarding supervision, what is its objective?

The supervision aims to guide the efforts of the assistants, who are involved in completing
the objectives of the exam and to determine if these objectives have been met.

e) What is the objective of evaluating the internal control of the auditing company (see brochure and copy p. 48)

Let it serve as a basis for trust in him and for the determination of the resulting extent of the tests to
the audit procedures will be restricted.

f) Methods to evaluate internal control (see brochure)

Descriptive method
Questionnaire method
Flowcharts

g) Sufficient evidence must be obtained through various means, what would these be?

Inspection, observation, questions, and confirmations, to provide us with reasonable grounds for an opinion.
about the financial statements under review.

h) How are the types of evidence classified to conduct an audit (p. 49)
 Physical exams.
Written and/or oral statements from third parties.
Authorized documents prepared outside the client's organization.
Auditor's calculations.
Authorized documents prepared within the client's organization.
Statements from client executives and employees.
Satisfactory interrelation with other information.

Report guidelines: READING CONTROL

What guidelines should the independent or external auditor consider when preparing their report?

To whom it is addressed
The date of the audit report
Introductory paragraph
Scope paragraph
Paragraph of the opinion
The signing of the report

b) Accounting principles and International Accounting Standards (IAS).

Generally Accepted Accounting Principles (GAAP) or financial reporting standards

(NIF) are a set of general rules that serve as an accounting guide to establish criteria related to the
measurement of the heritage and the information on the heritage and economic elements of an entity. The
PCGA are parameters for the preparation of financial statements based on methods
accounting technique uniforms.

NIC 1. Presentation of financial statements.

NIC 2. Inventories.
NIC 7. Statement of Cash Flows.
NIC 8. Accounting policies, changes in accounting estimates and errors.
NIC 10. Events occurring after the reporting period.
NIC 11. Construction contracts.
NIC 12. Income tax.
NIC 16. Property, Plant and Equipment.
NIC 17. Leases.
NIC 18. Ordinary revenues.
NIC 19. Employee Benefits.
NIC 20. Accounting for Government Grants and Disclosure of Assistance Information
governmental.
NIC 21. Effects of changes in foreign currency exchange rates.
NIC 23. Costs of borrowing.
NIC 24. Information to disclose about related parties.
NIC 26. Accounting and financial reporting for retirement benefit plans.
NIC 27. Consolidated and individual financial statements.
NIC 28. Investments in related companies.
NIC 29. Financial information in hyperinflationary economies.
NIC 31. Joint venture interests.
NIC 32. Financial instruments: Presentation.
NIC 33. Earnings per Share.
NIC 34. Interim financial information.
NIC 36. Impairment of Assets.
NIC 37. Provisions, contingent assets and liabilities.
NIC 38. Intangible assets.
NIC 39. Financial instruments: recognition and measurement.
NIC 40. Investment property.
NIC 41. Agriculture.
c) Consistency (look up this word in the dictionary) and in the audit report what its
purpose?

Consistency. A presumption that once a particular method of accounting is adopted, it should not be changed.
from one period to another. It aims to make the financial statements of a specific company comparable, from a
year to year.

Basic Principle of Governmental Accounting, which indicates that the policies, methods of quantification and
Accounting procedures must be appropriate to reflect the entity's situation, and must be applied with
uniform criterion throughout a period and from one period to another.

d) What does the breakdown consist of?

A breakdown, in a broader sense, can consist of removing pages from a document. The notion also
refers to the dissociation of certain elements from a whole, with the aim of analyzing them separately.

e) Expression of an opinion.

The auditor will express an unfavorable opinion when, having obtained sufficient audit evidence and
appropriate, conclude that the inaccuracies, individually or collectively, are material and widespread
in the financial statements.

f) Copy a short report and say in which paragraph the auditor's opinion is.

To the shareholders of Society ABC [or to the corresponding recipient]

Report on the audit of the financial statements(1)

Opinion with reservations

We have audited the financial statements of the ABC company (the Company), which comprise the statement of
financial situation as of December 31, 20X1, the statement of comprehensive income, the statement of changes in the
net equity and the statement of cash flows corresponding to the year ended on that date, as
like the explanatory notes of the financial statements that include a summary of the accounting policies
significant.

In our opinion, except for the effects of the issue described in the Basis of the opinion with
Caveats of our report, the attached financial statements faithfully present, in all aspects
materials, (or express the true image of) the financial situation of the Company as of December 31, 20X1, thus
as (of) its results and cash flows corresponding to the fiscal year ended on that date, of
compliance with International Financial Reporting Standards (IFRS).
Basis of the opinion with reservations

The short-term negotiable securities of the Company are valued in the financial position statement at
xxx. The management has not updated these values to market value, but instead, they have registered them at
cost, which constitutes a breach of IFRS. The Company records indicate that if the management
if it had updated the negotiable values to market value, the Company would have recognized some losses not
made from xxx in the statement of comprehensive income for the period. The recorded value of the marketable securities
in the statement of financial position would have been reduced by the same amount as of December 31, 20X1, and the
corporate tax, net income and equity would have been reduced by xxx, xxx, and xxx,
respectively.

We have conducted our audit in accordance with the International Auditing Standards (IAS).
Our responsibilities according to these standards are described further on in the
Section Responsibilities of the auditor in relation to the audit of the financial statements of our report.
We are independent from the Society in accordance with the applicable ethical requirements.
audit of the financial statements in [jurisdiction] and we have fulfilled the other ethical responsibilities of
compliance with those requirements. We believe that the audit evidence we have obtained
provides a sufficient and adequate basis for our opinion with reservations.

Paragraph of emphasis - Effects of a fire

We draw attention to Note X of the financial statements, which describes the effects of a fire on the
production facilities of the Society. Our opinion has not been modified in relation to this.
issue.

Responsibilities of management and those in charge of the governance of the entity in relation to the
financial statements(2)

[Report of compliance with ISA 700 (Revised) – see Example 1 of ISA 700 (Revised).]

Responsibilities of the auditor in relation to the audit of the financial statements

[Compliance report with ISA 700 (Revised) – see Example 1 of ISA 700 (Revised).]

Report on other legal and regulatory requirements

[Report of compliance with ISA 700 (Revised) – see Example 1 of ISA 700 (Revised).]