Auditing Consider the following formal definition of auditing:
Auditing is a systematic process of objectively obtaining and evaluating evidence regarding asser- tions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.5
Let’s discuss this definition in plain English. The phrase “systematic process” implies that there should be a well-planned and thorough approach for conducting an audit. This approach involves “objectively obtaining and evaluating evidence.” In other words, the audi- tor must objectively search for and evaluate the relevance and validity of evidence. The type, quantity, and reliability of evidence will vary between audits, but the process of obtaining and evaluating evidence makes up most of the auditor’s activities on any audit.
As our analogy between house inspection and auditing illustrates, the evidence gath- ered by the auditor must relate to “assertions about economic actions and events.” The audi- tor compares the evidence gathered to management’s financial statement assertions in order to assess “the degree of correspondence between those assertions and established criteria.”
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5American Accounting Association, Committee on Basic Auditing Concepts, “A Statement of Basic Auditing Concepts” (Sarasota, FL: AAA, 1973).
The Relationship among Auditing, Attest, and Assurance ServicesF I G U R E 1 – 2