RLG205H5 Lecture Notes - Lecture 1: Internal Control, Earnings Management, Agency Cost
Document Summary
Auditing = accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Should be done by a competent, independent person. Accounting: recording, classifying and summarizing of economic events. Bc it is not outright fraud, these things may fly by auditor without them worrying about it too much as they may not want to upset customer and lose them. Moral hazard by having to sign on audit with company stamp instead of signing off with audit partner"s name. Little info, bias, motives of provider, voluminous data, complex exchange transactions, perceived cost/benefit (cost to obtain information may be too expensive) The higher data that has to be processed, the higher chance for things to go wrong. User shares info risk with management (if audit not avail, may be only option) Financial statement audit: conducted by public accountants to determine whether overall financial statements are in accordance with specified criteria.
