Skip to main content

Understanding Auditing: Principles, Practices, and Governance Study Guide

This guide explains the essential preliminary steps auditors must complete before starting an audit. It covers determining the audit team's qualifications and resources, ensuring adherence to ethical standards and independence, and formalizing the client relationship with an engagement letter. Understanding these activities is crucial for a successful and compliant audit process.

Save this study guide to your study set

Sign up free

Your learning path

Introduction to Assurance and Financial Statement Auditing

Introduction to Assurance and Financial Statement Auditing

An introduction to the definition of an audit and assurance, the distinction between auditing and accounting, and the importance of auditing to business.

  • Definition of auditing and assurance
  • Difference between auditing and accounting
  • Accounting standards vs auditing standards
  • Agency theory
  • Corporate governance
  • Capital markets
  • Reasonable assurance vs absolute assurance
  • Auditors' independence
  • Professional judgement
  • Professional skepticism
  • Material misstatement
  • Financial reporting framework
  • International Standards on Auditing (ISA)
  • Auditor's report and audit opinion

Regulatory Requirements and Audit Case Study

Auditing Regulatory Requirements and Auditor Responsibilities

Discussion of the Malaysian Code on Corporate Governance 2021, the Companies Act 2016, and the roles, rights, and duties of auditors and directors.

  • Malaysian Code on Corporate Governance 2021
  • external auditors
  • internal audit function
  • obligation to detect fraud
  • Companies Act 2016
  • removal and resignation of auditors
  • rights and duties of auditors
  • responsibilities of Directors
  • internal control
  • Audit Oversight Board

Apex Berhad Financial Reporting and Audit Case Study

  • Financial reporting
  • Audit exemption
  • Appointment and independence
  • Access and reporting
  • Governance and oversight
  • Companies Act 2016
  • Financial Reporting Act 1997
  • Audit Committee responsibilities
  • Auditing-standard compliance
  • AOB functions

The Role of Auditing

The Role of Auditing

Auditing is described within several contexts including a process of review, the principal-agent relationship, a component of the corporate governance process, and a fundamental piece of the capital markets system.

  • Auditing as a process of review
  • Principal-agent relationship
  • Corporate governance process
  • Capital markets system
  • Financial reporting framework
  • Independence of auditors
  • Stewardship of resources
  • Audit committee oversight
  • Information disclosure

Statutory and Regulatory Requirements

Statutory and Regulatory Audit Requirements

This lesson covers statutory and regulatory requirements for preparing financial statements, auditor duties, and compliance with the Companies Act 2016 and Financial Reporting Act 1997.

  • Statutory requirements for financial statements
  • MASB and Financial Reporting Act 1997
  • Companies Act 2016 compliance
  • Directors' responsibilities for financial reporting
  • Malaysian Code on Corporate Governance
  • Audit requirements for public and private companies
  • Audit exemption criteria for micro and small companies
  • Approval and consent for company auditors
  • Disqualification of auditors

The Audit Planning Process

The Audit Planning Process

This lesson covers client acceptance and continuance, preliminary engagement activities, and the audit planning process.

  • Client acceptance and continuance
  • Preliminary engagement activities
  • Letter of engagement
  • Audit strategy and plan
  • Assessment of business risks
  • Establishment of materiality
  • Assessment of the need of specialists
  • Violations of laws and regulations
  • Identifying related parties
  • Reasonable assurance
  • Audit risk
  • Material misstatement
  • Audit evidence
  • Prospective client evaluation
  • Communication with predecessor auditor
  • Client integrity
  • Independence
  • Client retention

Management Incentives, Professional Skepticism, and Auditor Independence

Management Incentives and Auditor Responsibilities

Understanding management’s incentive to misstate financial statements through professional skepticism, reasonable assurance, and independence of auditors.

  • Management’s incentive to misstate financial statements
  • Professional skepticism
  • Reasonable assurance
  • Audit risk
  • Independence of auditors
  • Independence in fact
  • Independence in appearance
  • Financial reporting framework

Appointment, Rights, and Responsibilities of Auditors

Appointment and Rights of Auditors

Procedures for the appointment, removal, and resignation of auditors under the Companies Act 2016, including their reporting responsibilities and legal rights.

  • Appointment of auditors in private and public companies
  • Term of office and reappointment
  • Procedures for replacing outgoing auditors
  • Removal versus resignation of auditors
  • Reporting responsibilities under Section 266
  • Auditors' attendance at general meetings
  • Access to accounting records and information
  • Rights to remuneration and compensation
  • Rights of resigning auditors

Preliminary Audit Engagement Activities

Preliminary Audit Engagement Activities

Auditors determine engagement team requirements, assess compliance with ethical and independence requirements, and establish an understanding with the entity through an engagement letter.

  • Audit engagement team requirements
  • Technical proficiency
  • Staffing requirements
  • Ethical and independence requirements
  • Independence in fact and appearance
  • Terms of engagement
  • Engagement letter
  • Management's responsibilities
  • Auditor's responsibilities

Make it your own.

Keep these readings and topics in a new study set, or add them to one you already use.

Get started freeLog in