The risk-based audit approach

Table of Contents

• Introduction
• Theoretical Frameworks of Auditing
• The Policeman Theory
• The Lending of Credit Theory
• The Creditor Mediator Theory
• The Quasi-Judicial Theory
• The Confidence-Building Theory
• Agency Theory and the Economics of Assurance
• The Legal and Regulatory Framework of Auditing in France
• The Profession of Statutory Auditors in France
• Auditing Procedures and Risk Assessment

Objectives and Key Themes

This text aims to explore the theoretical underpinnings of auditing, focusing specifically on the French context and the evolution of auditing practices within a globalized economy. It examines various theories explaining the demand for and supply of audit services, analyzing the role of auditing in building confidence and ensuring the reliability of financial reporting.

• The evolution of audit theory and practice.
• The legal and regulatory framework governing auditing in France.
• The role of statutory auditors (CACs) in France.
• The application of risk-based auditing approaches.
• The influence of international standards (ISA and IFRS).

Chapter Summaries

Introduction: This introductory section lays the groundwork for the subsequent chapters by outlining the context and objectives of the study. It highlights the increasing importance of auditing in the wake of financial crises and underscores the need for a comprehensive understanding of the theoretical frameworks and regulatory aspects that govern auditing practices.

Theoretical Frameworks of Auditing: This chapter delves into several theoretical perspectives that attempt to explain the demand for and supply of audit services. It discusses theories ranging from the traditional "policeman theory" focusing on fraud detection, to more contemporary perspectives such as agency theory, which emphasizes the importance of information asymmetry and the need for assurance in principal-agent relationships. The chapter critically evaluates each theory, noting its strengths and limitations in explaining the complexities of the auditing field. The discussion provides a historical context to the development of auditing thought.

The Legal and Regulatory Framework of Auditing in France: This section focuses on the legal and regulatory environment governing auditing in France. It traces the historical development of auditing legislation, highlighting key legal acts and their impact on the profession. The increasing harmonization of regulations at the European and international levels is also discussed, particularly the influence of IFRS. The chapter also explores the role of the French government in overseeing the auditing profession and the evolution of accounting standards in the country.

The Profession of Statutory Auditors in France: This chapter provides a detailed description of the profession of statutory auditors (CACs) in France. It outlines the hierarchical structure of the profession, highlighting the role of key organizations such as the Haut Conseil du Commissariat aux Comptes and the Compagnie Nationale des Commissaires aux Comptes. The chapter also examines the regulatory oversight of CACs and the requirements for appointment and responsibilities of statutory auditors in different types of companies. The complexities and stringent requirements of the profession are thoroughly elaborated.

Auditing Procedures and Risk Assessment: This chapter addresses the practical aspects of the auditing process, emphasizing risk assessment and the application of auditing standards. It defines audit risk and materiality, explaining how these concepts influence the auditor's approach. The chapter details the stages of a standard audit process, including client acceptance, audit planning, testing and evidence gathering, and final evaluation and reporting. Furthermore, it explores the importance of considering the overall economic context and industry-specific knowledge in assessing risks.

Keywords

Auditing, risk-based auditing, France, statutory auditors (CAC), legal framework, IFRS, ISA, Agency Theory, Assurance, Financial Reporting, Audit Risk, Materiality, International Accounting Standards.

Frequently Asked Questions: A Comprehensive Guide to Auditing in France

What is the purpose of this text?

This text provides a comprehensive overview of auditing in France, exploring its theoretical foundations, legal framework, professional practices, and key procedures. It aims to analyze the evolution of auditing practices within a globalized economy and the role of auditing in building confidence and ensuring reliable financial reporting.

What theoretical frameworks of auditing are discussed?

The text examines various theories of auditing, including the Policeman Theory, the Lending of Credit Theory, the Creditor Mediator Theory, the Quasi-Judicial Theory, the Confidence-Building Theory, and Agency Theory. It critically evaluates each theory's strengths and limitations in explaining the complexities of the auditing field.

What is the legal and regulatory framework of auditing in France?

This section details the legal and regulatory environment governing auditing in France. It traces the historical development of auditing legislation, highlighting key legal acts and their impact on the profession. The influence of European and international harmonization, particularly IFRS (International Financial Reporting Standards), is also discussed.

What is the role of Statutory Auditors (CACs) in France?

The text provides a detailed description of the profession of statutory auditors (CACs) in France, including their hierarchical structure, the role of key organizations like the Haut Conseil du Commissariat aux Comptes and the Compagnie Nationale des Commissaires aux Comptes, and the regulatory oversight of CACs.

What auditing procedures and risk assessment methods are covered?

The text addresses the practical aspects of the auditing process, focusing on risk assessment and the application of auditing standards. It explains concepts like audit risk and materiality and details the stages of a standard audit process, including client acceptance, planning, testing, evidence gathering, and reporting. The importance of considering economic context and industry-specific knowledge is also highlighted.

What are the key themes explored in this text?

Key themes include the evolution of audit theory and practice, the legal and regulatory framework governing auditing in France, the role of statutory auditors (CACs), the application of risk-based auditing approaches, and the influence of international standards (ISA and IFRS).

What are the main chapters covered in this text?

The text includes chapters on the Introduction, Theoretical Frameworks of Auditing, The Legal and Regulatory Framework of Auditing in France, The Profession of Statutory Auditors in France, and Auditing Procedures and Risk Assessment.

What are the key words associated with this text?

Key words include Auditing, risk-based auditing, France, statutory auditors (CACs), legal framework, IFRS, ISA, Agency Theory, Assurance, Financial Reporting, Audit Risk, Materiality, and International Accounting Standards.