AUDIT PROCEDURES AND REPORTING

Compare and Contrast: Audit Procedures and Reporting



Compare and Contrast: Audit Procedures and Reporting

Introduction

The word “audit” comes form the Latin word audire which means “to hear” because, in the middle Ages, accounts or revenue and expenditure were “heard” by the auditor. Statutory audits (i.e. carried out in accordance with statutory provisions) become mandatory for companies in 1900. At this time the purpose of an audit was to detect fraud, technical errors and errors of principle. However, the recognition in case law that it is unreasonable to expect auditors to detect all aspects of fraud, even though they exercised reasonable skill and care, means that this is not now a primary purpose (McKenna, 2011).

There is a common base for presenting financial statements, regardless of which level of service is used. This is a large body of rules that describe what information should be included in financial statements and the format for the information. This body of knowledge is called generally accepted accounting principles, or GAAP. Imperfect in implementation though it may be, the concept is that similar transactions will be recorded by all organizations in the same way. In addition, financial statements of similar organizations will actually look similar (Cutting, 2008).

Discussion

The procedures performed by the external accountant during a review will be limited to inquiries and analytical review. This means the accountant will ask many questions of management and the finance staff. If the answers to the questions indicate the accounting is appropriate, then no additional follow-up would be needed. Analytical review means the accountant will look at the relationships between numbers to make sure they make sense. For example, if attendance at a local church is up about 10% from a year ago, then the amount of contributions from the congregation should have increased by something in ...