Understanding the Audit Process

This assignment examines the crucial role of understanding the accounting process in conducting effective audits. It delves into concepts like professional skepticism, emphasizing the need for transparency and accuracy in financial reporting. The importance of following established rules and regulations by both accountants and auditors is highlighted to ensure reliable audit reports that reflect an organization's true financial position.

The importance of understanding the
accounting process in order to
perform an effective audit

Table of Contents
INTRODUCTION...........................................................................................................................1
PROFESSIONAL SCEPTICISM....................................................................................................1
REFERENCES................................................................................................................................3

INTRODUCTION
Accounting and auditing is very important for an organisation as it can help to evaluate
performance and financial strength of the company (Quadackers, Groot and Wright, 2014).
Auditing is the process of analysing and examining financial statements of an organisation in
which it is assessed that all the recorded information is appropriate or not. It is essential for a
business to conduct regular audit so that it can be determined that organisation is performing
well or not. Accounting is an activity which is performed by accountants of company and they
record, summarize, analyse accounting information. Recorded data is presented in front of the
auditors and then they examine transparency and appropriateness. All the books, accounts and
statements are checked in auditing and the report of auditor is presented in front of the
stakeholders so that they can analyse actual position of the company.
PROFESSIONAL SCEPTICISM
Professional scepticism is the combination of rules and regulation that are formed by
IAASB for organisations that needs to be followed at the time of accounting and auditing
(Professional scepticism, 2018). For a company it is very important to follow proper process for
internal as well as external audit. It includes quality control, assurances, auditing, reviewing and
other services. Every company have to conduct internal auditing in which an auditor is hired and
an audit report is generated which is based on the accounting informations that are recorded in
the financial statements.
For an auditor it is essential to plan and perform auditing activities by following
professional scepticism in which transparency of the data is analysed and than a report is
presented to stakeholders so that they can get exact information of organisational position and
image in the market. Business entities have to follow all the accounting standards while
recording transactions in the books of accounting. If the recorded data is accurate and exact then
it can facilitate auditors while whole auditing process.
Auditing can evidence all the errors, contradictions, materiality of information, frauds,
performance and financial strength of a company with the help of final accounts that are
generated by accountants. Professional scepticism is related to fundamental ethical
considerations of an auditor's independence. It is also linked with the application of professional
judgement which is provided on the transparency of the data recorded in books of accounting. If
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it is not followed by the auditor than the reports cannot show the accuracy and not considered as
a good quality report. Auditor should apply professional scepticism while assessing engagement
acceptance, analysing risk procedures, obtaining evidences for audit and at last while evaluating
appropriateness of evidences. It helps the auditor to form right opinion and to check that
financial statements that are presenting fair view of the company (Hurtt and et. al., 2013).
For every organisation it is very important to record right information in the books of
accounting so that the auditor can analyse transparency of the same. Professional scepticism is a
set of rules and regulations that are introduced by IAASB for every organisation that are required
to follow while recording transactions in the books of accounting.
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REFERENCES
Books and journals:
Hurtt, R. K. and et. al., 2013. Research on auditor professional skepticism: Literature synthesis
and opportunities for future research. Auditing: A Journal of Practice & Theory.
32(sp1). pp.45-97.
Quadackers, L., Groot, T. and Wright, A., 2014. Auditors’ professional skepticism: Neutrality
versus presumptive doubt. Contemporary accounting research. 31(3). pp.639-657.
Online:
Professional scepticism. 2018. [Online]. Available through:
<https://www.accaglobal.com/my/en/student/exam-support-resources/professional-
exams-study-resources/p7/technical-articles/scepticism.html#>
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