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PR O F E S S I O N A L L E VE L

A U DI T & A S S U R A N C E ( P - 2 )

G RI D WEIG HTAGE
PART-A
15%
OVERVIEW OF AUDITING AND ASSURANCE
PART-B
20%
AUDIT PLANNING
PART-C
INTERNAL CONTROLS 20%
PA R T- D
25%
AUDIT EVIDENCE
PART-E
20%
REVIEW AND REPORTING
Total 100%

SYLLABUS OVERVIEW:  Determine legal and ethical considerations


This course is divided into five main areas of audit. relating to the appointment and removal of
The syllabus starts with the nature, purpose and auditor,
scope of assurance engagements both internal and  Describe and evaluate internal controls,
external, including the statutory audit, its techniques and audit tests, including IT
regulatory environment, and introduces systems to identify and communicate control
professional ethics relating to audit and assuran ce risks and their potential consequences,
engagements. It then leads into planning an audit. making appropriate recommendations,
The syllabus then covers a range of areas relating to  Identify and describe the work and evidence
an audit of financial statements including the scope obtained by the auditor and others required
of internal control. These include, evaluating to meet the objectives of audit engagements
internal controls, audit evidence, and a review of and the application of the International
the financial statements. In addition to final review Standards on Auditing
procedures, the last section concentrates on  Explain how consideration of subsequent
reporting, including the form and content of the events and the going concern principle can
statutory audit report. inform the conclusions from audit work and
are reflected in different types of audit
LEARNING OUTCOMES: report, written representations and the final
On completion of this course, students will be able review and report.
to:  Prepare an audit report, keeping in view
 Explain the concept of audit and assuran ce types of qualifications,
and the functions of audit,

DETAILED CONTENTS WEIGHTAGE IN %


PART-A
OVERVIEW OF AUDITING AND ASSURANCE
1. The concept of  Identify and describe the objective and general principles of
audit and audit engagement.
assurance  Define and provide the objectives of an assurance engagement.
engagements  Explain the five elements of an assurance engagement.
 Describe the types of assurance engagement
Relevant ISA: ISA 200
2. External audits  Explain the statutory regulations governing the appointment,
rights, removal and resignation of auditors. (i.e. Companies
Ordinance 1984: Section # 252-260)
 Explain the regulations governing the rights and duties of 15
auditors (i.e. Companies Ordinance 1984: Section 255)
 Describe the limitations of external audits.
3. Internal audits  Discuss the factors to be taken into account when assessing
the need for internal audit.
 Compare and contrast the role of external and internal audit.
 Discuss the scope of internal audit and the limitations of the
internal audit function.
 Discuss the nature and purpose of operational internal audit
assignments

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 Describe the format and content of audit review reports and
make appropriate recommendations to management and
those charged with governance
Relevant ISA: ISA 610 (Revised)
PART-B
AUDIT PLANNING
4. Obtaining and  Discuss the requirements of professional ethics in relation to
accepting audit the acceptance of new audit engagements
engagements  Explain the preconditions for an audit
 Explain the process by which an auditor obtains an audit
engagement
 Justify the importance of engagement letters and their
contents
 Specific responsibilities of the auditor regarding quality
control procedures
Relevant ISA: ISA 210, ISA 220
5. Audit planning  Identify and explain the need for and importance of planning
and an audit.
documentation  Identify and describe the contents of the overall audit strategy
and audit plan.
 Explain and describe the relationship between the overall
audit strategy and the audit plan.
 Explain the need for, and the importance of, audit
documentation.
 Describe the form and contents of working papers.
 Explain the procedures to ensure safe custody and retention of
working papers. 20
Relevant ISAs: ISA 300, ISA 230
6. Understanding the  Explain how auditors obtain an initial understanding of the
entity and its entity and its environment.
environment  Describe and explain the nature, and purpose of, analytical
procedures in planning.
 Compute and interpret key ratios used in analytical
procedures.
 Auditor’s responsibilities relating to related party
relationships and transactions in an audit of financial
statements
Relevant ISAs: ISA 315, ISA 520, ISA 550
7. Fraud, laws and  Discuss the effect of fraud and misstatements on the audit
regulations strategy and extent of audit work.
 Evaluation of misstatements identified during the audit.
 Discuss the responsibilities of external auditors in context of
fraud and error.
 Explain the auditor’s responsibility to consider laws and
regulations in an audit of Financial Statements
Relevant ISA: ISA 240, ISA 250, ISA 450
PART-C
INTERNAL CONTROLS
8. Assessing audit  Explain the components of audit risk.
risks  Explain the audit risks in the financial statements.
 Define and explain the concepts of materiality and
performance materiality.
 Explain and calculate materiality levels from financial
information.
 Audit considerations relating to an entity using a service 20
organization
Relevant ISAs: ISA 315, ISA 320, ISA 402,
9. Internal control  Explain why an auditor needs to obtain an understanding of
systems internal control relevant to the audit.
 Define internal management control
 Importance of internal control, internal audit and risk

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management
 Objectives of internal control systems and how they can help
prevent fraud and error
 Describe and explain the five components of internal control
- the control environment
- the entity’s risk assessment process,
- the information system, including the related
business processes, relevant to financial reporting
and communication
- control activities relevant to the audit
- monitoring of controls
Relevant ISA: ISA 315 (Appendix)
10. The use and  Explain how auditors record internal control systems
evaluation of including the use of, narrative notes, flowcharts, internal
internal control control questionnaires and internal control evaluation
systems by questionnaires.
auditors  Evaluate internal control components, including deficiencies
and significant deficiencies in internal control.
 Internal control system and Effectiveness of internal control
systems
 Discuss the limitations of internal control components
11. Tests of control  Describe computer systems controls including general IT
controls and application controls
 Describe control objectives, control procedures, activities and
tests of control in relation to:
- The sales system;
- The purchases system
- The payroll system
- The inventory system
- The cash system
- Non-current assets
12. Communication  Communication with those charged with governance
on internal control  Discuss the requirements and methods of reporting significant
deficiencies in internal control are provided to management
and those charged with governance.
 Explain, in a format suitable for inclusion in a management
letter, significant deficiencies within an internal control system
and provide recommendations for overcoming these
deficiencies to management
Relevant ISA: ISA 260, 265
PART-D
AUDIT EVIDENCE
13. Financial  Explain the assertions contained in the financial statements
statement about:
assertions and - Classes of transactions and events;
audit evidence - Account balances at the period end;
- Presentation and disclosure
 Describe the nature and timing of the audit procedures to
obtain audit evidence
 Discuss the quantity and of quality of audit evidence including
the concept of relevance and reliability of the audit evidence
 Audit Evidence-Specified consideration for selected items
Relevant ISA: ISA 500, ISA 501. 25

14. Audit procedures  Discuss substantive procedures for obtaining audit evidence
 Discuss and provide examples of how analytical procedures
are used as substantive procedures
 Discuss the difference between tests of control and
substantive procedures
 Describe the principles of External Confirmation Procedures
to Obtain Audit Evidence
 Describe the auditor’s responsibilities relating to opening
balances in an initial audit engagement

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Relevant ISAs: ISA 520, ISA 330, ISA 505, ISA 510
15. Audit sampling  Define audit sampling and explain the need for sampling.
and other means  Identify and discuss the differences between statistical and
of testing non-statistical sampling.
 Discuss the results of statistical sampling, including
consideration of whether additional testing is required.
Relevant ISAs: ISA 530
16. The audit of  Receivables:
specific items:  Inventory:
 Payables and accruals:
 Bank and cash:
 Tangible and intangible non-current assets
 Non-current liabilities, provisions and contingencies
 Share capital, reserves and directors’ emoluments
Relevant ISAs: ISA 540 (Part Related to Accounting
Estimates Only)
17. The work of  Discuss why auditors rely on the work of others.
others  Discuss the extent to which external auditors are able to rely
on the work of experts, including the work of internal audit.
 Explain the extent to which reference to the work of others can
be made in audit reports.
 Special consideration-audits of group financial statements
(including the work of component auditors)
Relevant ISAs: ISA 600, ISA 610, ISA 620
PART-E
REVIEW AND REPORTING
18. Subsequent  Explain the purpose of a subsequent events review.
events  Explain the responsibilities of auditors regarding subsequent
events.
 Discuss the procedures to be undertaken in performing a
subsequent events review.
Relevant ISA: ISA 560
19. Going concern  Define and discuss the significance of the concept of going
concern.
 Explain the respective responsibilities of auditors and
management regarding going concern.
 Identify and explain potential indicators that an entity is not a
going concern.
 Discuss the procedures to be applied in performing going
concern reviews.
 Discuss the reporting implications of the findings of going
concern reviews.
Relevant ISA: ISA 570
20. Written  Explain the purpose of and procedure for obtaining written 20
representations representations.
 Discuss the quality and reliability of written representations as
audit evidence.
 Discuss the circumstances where written representations are
necessary and the matters on which representations are
commonly obtained.
Relevant ISA: ISA 580
21. Audit finalization  Describe procedures an auditor should perform in conducting
and audit reports their overall review of financial statements.
 Identify and describe the basic elements of an unmodified
auditor’s report
 Explain modified audit opinions in the audit report.
 Describe the format and content of emphasis of matter and
other matter paragraphs.
 Describe auditor’s responsibilities relating to comparative
information in an audit of financial statements.
 Explain the auditor’s responsibilities relating to other

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information in documents containing audited financial
statements.
Relevant ISAs: ISA 700, ISA 705, ISA 706, ISA 710, ISA 720
22. Review  Objectives of a Review Engagements
Engagements  Terms of Engagements
 Procedure and Evidence
 Conclusion and Reporting
 Objectives of an Engagements to review interim Financial
Information
 Agreeing the Terms of Engagements
 Procedure of a Review of Interim Financial Information
 Reporting the Nature, Extent and Result of the Review of
Interim Financial Information
 Assurance Engagement Other than Audits or Reviews of
Historical Financial Information
- Engagements Acceptance and Continuance
- Agreeing on the Terms of the Engagements
- Planning and performing the Engagements
- Preparing the Assurance Report
 Engagements to Perform Agreed upon Procedures Regarding
Financial Information
- Objective of an Agreed-Upon Procedure Engagements
- Defining the Terms of the Engagement
- Procedure and Evidence
- Reporting
 Examination of prospective financial statements
Relevant ISAs: ISRE 2400 (Revised), ISRE 2410, ISAE 3000,
ISRS 4400 and ISRS 4410
23. Related Services  Agreed upon procedures
 Compilation Engagements
 Assurance engagements to report on the compilation of
proforma financial information included in prospectus
 Services under the provision of corporate laws
 Services under the provision of tax laws
TOTAL WEIGHTAGE 100

Recommended Books & Other Resources


CORE READINGS
TITLE AUTHOR PUBLISHER
Handbook of International Quality Control,
Auditing, Review, Other Assurance, and IFAC / ICAP IFAC / ICAP
Related Services Pronouncements
International Standard on Auditing IFAC I FA C
CIMA, UK Study Text - -- BP P
ACCA UK Study Text - -- Kaplan Publishing
Auditing Concepts & Practices Javaid H. Zuberi Petiwala Book Depot, Karachi
Code of Ethics Issued by IFAC & SAFA - --