This course intends to equip students with sound financial management skills required for the management of modern complex organizations. The course examines the general nature of financial management. Specific attention is given to present value and capital budgeting and the major financial decisions of corporations, financial analysis and forecasting decision making.

According to the International Standard on Auditing (ISA) No. 200 Objective and General Principles Governing an Audit of Financial Statements, the objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework.

 

The phrases used to express the auditor’s opinion are “give a true and fair view” or “present fairly, in all material respects,” which are equivalent terms. A similar objective applies to the audit of financial or other information prepared in accordance with appropriate criteria.

 

The Institute of Certified Public Accountants of Kenya (ICPAK) defines as the independent examination of and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation: 

 Related Services

In addition to audit services, auditors provide other services. These can be classified as:

Assurance engagements

  • Audits
  • Reviews

Non-assurance Engagements

  • Agreed upon Procedures
  • Compilations

The course intends to equip students with sound financial management skills required for the management of modern complex organizations. The course examines the general nature of financial management. Specific attention is given to present value and capital budgeting and the major financial decisions of corporations, financial analysis and forecasting decision making.

According to the International Standard on Auditing (ISA) No. 200 Objective and General Principles Governing an Audit of Financial Statements, the objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework.

The phrases used to express the auditor’s opinion are “give a true and fair view” or “present fairly, in all material respects,” which are equivalent terms. A similar objective applies to the audit of financial or other information prepared in accordance with appropriate criteria. 

The Institute of Certified Public Accountants of Kenya (ICPAK) defines auditing as the independent examination of and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.

In addition to audit services, auditors provide other services. These can be classified as:

Assurance engagements

• Audits

• Reviews

Non-assurance Engagements (related services)

• Agreed upon Procedures

• Compilations

Reviews

The objective of a review of financial statements is to enable an auditor to state whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with an identified financial reporting framework. A similar objective applies to the review of financial or other Information prepared in accordance with appropriate criteria.

A review comprises inquiry and analytical procedures, which are designed to review the reliability of an assertion that is the responsibility of one party for use by another party. While a review involves the application of audit skills and techniques and the gathering of evidence, it does not ordinarily involve an assessment of accounting and internal control systems, tests of records and of responses to inquiries by obtaining corroborating evidence through inspection, observation, confirmation and computation, which are procedures ordinarily performed during an audit.

Although the auditor attempts to become aware of all significant matters, the procedures of a review make the achievement of this objective less likely than in an audit engagement, thus the level of assurance provided in a review report is correspondingly less than that given in an audit report.

Agreed-upon Procedures (ISRS4400)

The objective of these procedures is to report on the factual findings of procedures as agreed with the client. In an engagement to perform agreed-upon procedures, an auditor is engaged to carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings. The recipients of the report must form their own conclusions from the report by the auditor. The report is restricted to those parties that have agreed to the procedures to be performed since others, unaware of the reasons for the procedures, may misinterpret the results.

Compilations (ISRS 4410)

The objective of compilations is to collect, summarize and classify financial information i.e. using accounting rather than auditing expertise into understandable form e.g. financial

statements. In a compilation engagement, the accountant is engaged to use accounting expertise as opposed to auditing expertise to collect, classify and summarize financial information. This ordinarily entails reducing detailed data to a manageable and understandable form without a requirement to test the assertions underlying that information. The procedures employed are not designed and do not enable the accountant to express any assurance on the financial information. However, users of the compiled financial information derive some benefit as a result of the accountant’s involvement because the service has been performed with due professional skill and care.

Prospective Financial Information

This is financial information based on assumptions about events that may occur in the future and possible actions by an entity. They can be in the form of a forecast, projection or both. A forecast is prepared on the basis of assumptions as to future events, that is best estimates.

A projection is prepared on the basis of hypothetical assumptions about future events and management actions which are not necessarily expected to take place.

Audit and assurance reports

The need for assurance reports is increasing because for example, 

  • The need quicker and better information for decision making in increasingly competitive business environment.
  • The complexity of systems and the anonymity of the internet present potential barriers to growth.
  • The need for independent assurance that decisions are made based on reliable information.

An assurance engagement is an engagement in which the practitioner expresses a conclusion designed to enhance the degree of confidence of intended users, other than the responsible party, about the outcome of the evaluation or measurement of subject matter against criteria.

The practitioner provides a written report containing a conclusion that conveys the assurance obtained about the subject matter information. He or she also considers othe reporting responsibilities including communicating with those charged with governance. ISAs, ISREsand ISAE s establish basic elements of assurance reports.

The form of assurance given maybe reasonable assurance or limited assurance. A reasonable assurance engagement expresses an opinion in a positive form while a limited

assurance engagement expresses a conclusion in a negative form.

An introduction to Auditing with a closer look at the auditing environment, planning and testing methodologies used in audit.