1. TOPIC 1: INTRODUCTION
References: Chapter 1 & 2
AUD390 2014
AUDITING AND ASSURANCE
SERVICES
IN MALAYSIA

2. LEARNING OUTCOMES
AUD390 2014
 DEFINITION OF AUDITING
 DISTINCTION BETWEEN AUDITING &
ACCOUNTING
 DEMAND FOR AUDITING
 TYPES OF AUDITS & AUDITORS
 PROFILE OF THE AUDITING PROFESSION
 STEWARDSHIP, ACCOUNTABILITY AND AGENCY
 MALAYSIAN APPROVED STANDARDS ON
AUDITING

3. DEFINITION OF AUDITING
AUD390 2014
Auditing is the accumulation and evaluation of
evidence about information to determine and report
on the degree of correspondence between the
information and established criteria.
(Arens, 2014)
 Information and established criteria
 Accumulation and evaluating evidence
 Competent, independent person (Auditor)
 Reporting (Audit Report)

4. DEFINITION OF AUDITING
(Financial Statement Audit)
AUD390 2014
To obtain reasonable assurance about whether the
financial report as a whole is free from material
misstatement, whether due to fraud or error, thereby
enabling the auditor to express an opinion on whether
the financial report is prepared, in all material
respects, in accordance with an applicable financial
reporting framework;
(Gay & Simnett, 2012)

5. DEVELOPMENT OF AUDITING
Assurance & Nonassurance Services
AUD390 2014
Audits Reviews
Internal Controls over
Financial Reporting
Other Attestation Services
Other Assurance Services
NONASSURANCE SERVICESASSURANCE SERVICES
Other Management
Consulting
Accounting &
Bookkeeping
Tax Services
Certain
Management
Consulting
ATTESTATION SERVICES

6. DEVELOPMENT OF AUDITING
Definition : ASSURANCE SERVICES
AUD390 2014
 An independent professional service that improves the
quality of information for decision-makers
Can be performed by auditors or a variety of other
professionals
E.g. the Consumers Association of Penang (CAP)
provides the information to help consumers make
intelligent decisions about the product they buy

7. DEVELOPMENT OF AUDITING
Definition : ASSURANCE SERVICES
AUD390 2014
 Category of assurance services provided by CA firms:-
Attestation services
Assurance services on Information Technology
Assurance services on:
Controls over and risk related to investments, including policies and
related to derivatives
Mysery shopping
Assess risks of accumulation, distribution and storage of digital
information
Fraud and illegal acts risk assessment
ISO 9000 certifications, etc.

8. DEVELOPMENT OF AUDITING
Definition : NONASSURANCE
SERVICES
AUD390 2014
 Other services provided by CA firms that fall outside
the scope of assurance services. E.g.
Accounting and bookkeeping services
Tax services
Management consulting services

9. DISTINCTION BETWEEN
Auditing & Accounting
AUD390 2014
 ACCOUNTING is the recording, classifying, and
summarizing of economic events in a logical manner
for the purpose of providing financial information for
decision making. Person in-change known as
ACCOUNTANT
 The difference… AUDITOR focus on determining
whether recoded information properly reflects the
economic events that occurred during the accounting
period

10. TYPES OF AUDITS
AUD390 2014
 Compliance Audit
 Performance Audit
 Financial Statements Audit
 Fraud Audit

11. TYPES OF AUDIT
Compliance Audit
AUD390 2014
 Is conducted to determine whether the auditee is
following specific procedures, rules or regulations set
by higher authority
 E.g. Determining whether accounting personnel are
following the procedures prescribed by company
controller
 Results of the audit – Findings are reported to higher
management of the unit being audited for necessary
improvements
 Performed by the internal auditor, external auditor &
government auditor

12. TYPES OF AUDIT
Performance Audit
AUD390 2014
 Also known as ‘Value For Money Auditing’,
‘Operational Auditing’, ‘Efficiency Auditing’ or
‘Program Results Auditing’
 Evaluate the efficiency & effectiveness of any part of
an organization's operating procedures & methods
 E.g. evaluate the efficiency & accuracy of processing
payroll transactions in a newly installed computer
system
 Results of the audit - recommendation for improving
the operations are propose to the management
 Performed by the internal auditor of a company or
management consultancy works by external auditor

13. TYPES OF AUDIT
Financial Statement Audit
AUD390 2014
 Is conducted to determine whether the overall FS (the
information being verified) are stated in accordance
with specific criteria i.e. an approved accounting
standards
 Results of the audit – draw conclusions on the FS that
can be relied upon by different group of users for the
different purposes
 Performed by the external auditor on the frequent
interval e.g. quarterly, half yearly or yearly basis

14. TYPES OF AUDIT
Fraud Audit
AUD390 2014
 Is conducted to investigate anomalies and gather
evidence of fraud that may lead to criminal conviction.
Fraud could either due to theft of assets or
misappropriation of accounting data by company’s
employees.
 Results of the audit – fraudsters subjected to criminal
conviction by the Court
 Performed by the fraud auditor who have earned the
Certified Fraud Examiner certification, upon
suspected case

15. TYPES OF AUDITORS
AUD390 2014
 External Auditor
 Internal Auditors
 Government Auditors
 Inland Revenue Assessment Officers

16. TYPES OF AUDITORS
External Auditor
AUD390 2014
 S8 of the Company Act (CA) 1965 …requires a
company to appoint an “Approved Company Auditor”
to audit every company incorporated under the Act
 External auditor work in the CPA firm i.e. public
accounting firm ranges from sole proprietorship to
partnership providing services such as attestation
services, accounting or tax services and management
advisory services

17. TYPES OF AUDITORS
Internal Auditor
AUD390 2014
 Employed by individual companies to audit for
management
 Involved in operational auditing or have expertise in
evaluating computer systems

18. TYPES OF AUDITORS
Government Auditor
AUD390 2014
 Working for the Auditor General Department, headed
by the Auditor General and reports to & is responsible
solely to Yang Dipertuan Agong
 Responsible to evaluate the operational efficiency &
effectiveness for all federal & states as well as
statutory bodies & public authorities

19. TYPES OF AUDITORS
Inland Revenue Assessment Auditor
AUD390 2014
 Staff of Inland Revenue Board (IRB), which
responsible for enforcing the Income Tax Act as being
defined by Parliament and interpreted by Courts
 Responsible to audit the taxpayers’ returns to
determine whether they have complied with the tax
laws

20. PRINCIPLES OF STEWARDSHIP,
ACCOUNTABILITY & AGENCY
AUD390 2014
PRINCIPAL
(Absentee
Owner)
AUDITOR
AGENT
(Manager)
Information
assymmetry &
conflicts of interest
lead to information
risk for the principal
Principal provides capital & hires agent to manage it
Agent is accountable to principal;
provides financial reports
Auditor gathers evidence to
evaluate fairness of agents
financial report. Auditor issues
audit opinion to accompany
agent’s financial reports.
Adding credibility to the
reports and reduce principal’s
information risk
Agent hires auditor to
report on the fairness of
agent’s financial reports.
Agent pays auditor to
reduce principal’s
information risk

21. MALAYSIAN APPROVED
STANDARDS AUDITING
AUD390 2014
 A general guidelines to aid auditors in fulfilling their
professional responsibilities in the audit of historical
financial statements

22. Tutorial Questions
AUD390 2014
1. Development of Auditing.
2. Distinction between Auditing & Accounting.
3. Types of Audits and Auditors.
4. Difference between External Auditor & Internal
Auditor on appointment, responsibility, scope of
works and objective.
5. Common objectives to both External and Internal
Auditors
6. To be able to use work undertaken by internal audit,
external auditor must be satisfied as the standard
and reliability of the information. Explain the criteria
that the external auditor should consider in deciding
the use of internal’s auditor work.