Guide Understanding Audit Assurance Essay

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A GUIDE TO UNDERSTANDING
AUDITING AND ASSURANCE:
LISTED COMPANIES
OCTOBER 2014

BE HEARD.
BE RECOGNISED.

2 | A GUIDE TO UNDERSTANDING AUDITING AND ASSURANCE

CPA Australia Ltd (‘CPA Australia’) is one of the world’s largest accounting bodies representing more than 150,000 members of the financial, accounting and business profession in 121 countries.
ISBN: 978-1-921742-40-8
For information about CPA Australia, visit our website cpaaustralia.com.au
First published 2013
CPA Australia Ltd
ACN 008 392 452
Level 20, 28 Freshwater Place
Southbank Vic 3006
Australia
Legal notice
Copyright CPA Australia Ltd (ABN 64 008 392 452) (“CPA Australia”), 2014. All rights reserved.
Save and except for third party content, all content in these materials is owned by or licensed to
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CONTENTS
Contributors 4
Foreword 5
A guide to understanding auditing and assurance: Listed companies

6

Why are audits and reviews required?

6

What does assurance mean?

6

What is an audit of financial statements?

7

What is a review of financial statements?

7

Relationships in financial reporting

7

The auditor’s report

8

Modified auditor’s reports

9

How can you tell if the auditor’s report is clean or not?

9

What is auditor independence?

10

What do auditors and reviewers do?

11

What does materiality mean?

12

What do auditors do in regard to fraud?

12

What do auditors do in regard to going concern?

12

Does a clean auditor’s report mean a clean bill of health for the company?

13

Does the auditor sign off on the whole annual report?

13

What is audit quality?

13

Difference between internal and external audit

13

Other assurance

13

Appendix 1 – Glossary

14

Appendix 2 – Example auditor’s report

15

4 | A GUIDE TO UNDERSTANDING AUDITING AND ASSURANCE

CONTRIBUTORS
CPA Australia acknowledges the work of the External Reporting Centre of Excellence.

EXTERNAL REPORTING
CENTRE OF EXCELLENCE
David Hardidge FCPA

Chairman

Indra Abeysekara CPA
Tong-Gunn Chew FCPA
Ric De Santi FCPA
Thomas Egan FCPA
Amir Ghandar FCPA Technical Support and Lead Author
Piotr Jakubicki CPA
Alan Lee CPA
Jeffrey Luckins FCPA
Carmen Ridley
Mark Shying CPA

Technical Support

Julie Sinclair FCPA
Ram Subramanian

Technical Support

Eva Tsahuridu

Technical Support

A GUIDE TO UNDERSTANDING AUDITING AND ASSURANCE | 5

FOREWORD
Auditing and assurance play an essential role in the effective operation of our capital markets and the economy at large, providing confidence to current and prospective shareholders about the information disclosed by companies.
A guide to understanding auditing and assurance: listed companies explains the value and purpose of auditing and assurance in plain language. This should assist shareholders who are
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