BANK 1 - INTRODUCTION TO AUDITING

Describe what an auditor does

An auditor enhances the degree of confidence of the intended users in the financial statements.

BANK 2 - ASSURANCE AND NON-ASSURANCE

ENGAGEMENTS
Define an assurance engagement.

An assurance engagement is one in which an auditor expresses a conclusion designed to enhance

the degree of confidence of the intended users, other than the responsible party, about the
outcome of the evaluation or measurement of a subject matter against criteria

BANK 3 - FINANCIAL STATEMENT AUDIT

ENGAGEMENT
Explain the scope of ISA 200.

i)  This International Standard on Auditing (ISA 200) deals with the independent auditor's overall
responsibilities when conducting an audit of financial statements in accordance with ISA's.
Specifically, it sets out the overall objectives of the independent auditor, and explains the nature
and scope of an audit designed to enable the independent auditor to meet those objectives.  It also
explains the scope, authority and structure of the ISAs, and includes requirements establishing the
general responsibilities of the independent auditor applicable in all audits, including the
obligation to comply with the ISAs.  

ii)  ISAs are written in the context of an audit of financial statements by an auditor.  They are to
be adapted as necessary in the circumstances when applied to audits of other historical financial
information.  ISAs do not address the responsibilities of the auditor that may exist in legislation,
regulation or otherwise in connection with, for example, the offering of securities to the public.
Such responsibilities may differ from those established in the ISAs.  Accordingly, while the
auditor may find aspects of the ISAs helpful in such circumstances, it is the responsibility of the
auditor to ensure compliance with all relevant legal, regulatory or professional obligations.

BANK 4 - PARTIES TO AN AUDIT

Identify the various parties to an audit.

* Shareholders

* Directors

* Auditors

ASSURANCE ENGAGEMENTS
Explain the purpose of the framework.

The framework defines and describes the elements and objectives of an assurance engagement,
and identifies engagements to which international Standards on Auditing, International Standards
on Review Engagements (ISREs) and International Standards on Assurance Engagements
(ISAEs) Apply.  It provides a frame of reference for:

-Professional Accountants in Public Practice when performing assurance engagements.

-Others Involved, Intended users of an assurance report and the responsible party.

-International Auditing and Assurance Standards Board (IAASB) in its development of ISA,
ISRE, ISAE

STAGES OF THE AUDIT PROCESS

Describe the four stages of the audit process.

Preliminary Stage
This stage consists of what are termed preliminary engagement activities which take place before
an audit engagement is accepted.  This includes:

-performing procedures to determine whether the audit firm wishes to establish (in the case of a
prospective client), or continue (in the case of an existing client) the client relationship

-establishing whether the client can be appropriately serviced, i.e., can the auditor do the audit
properly?

-evaluating whether the firm is able to comply with the ethical requirements relating to the
engagement, e.g., is there a threat to independence?

-establishing an understanding of the terms of the engagement.

Planning Stage

This stage involves a number of activities:

-Establishing the audit strategy - this will be a preliminary idea of what the scope, timing and
direction (focus) of the audit will be and what resources (skills, number of staff, etc) will be
needed on the audit

-Considering materiality - this entails the auditor making a judgment about the size of
misstatements which will be considered material

-Planning risk assessment procedures - this entails planning the procedures which will be
conducted to obtain an understanding of the entity and its environment so that the identification
and assessment of the risk of material misstatement can take place.

-Conducting risk assessment procedures -this entails carrying out the planned risk assessment
procedures and identifying and assessing the risk of material misstatement as they progress

-Planning "further" and "other" audit procedures - this amounts to planning the "further"
procedures which will be conducted to address the identified risks, in such a manner that audit
risk (the risk of gin an inappropriate opinion) is reduced to an acceptable level, and planning
"other" procedures necessary to satisfy the requirements of the ISAs.

Responding to assessed risk Stage

The auditor’s responses to assessed risk, states that the auditor should obtain sufficient,
appropriate, audit evidence regarding the assessed risks of material misstatement through
designing and implementing appropriate responses to those risks.  The auditor's first "response"
to assessed risk is to plan "further" and "other" audit procedures and thereafter

*Respond in a general sense to assessed risk at financial statement level, e.g., assigning

appropriately experienced and skilled individuals to the audit team to execute the plan
*Respond specifically to assessed risk at assertion level by carrying out test of controls and
substantive tests so as to gather sufficient, appropriate evidence that material misstatement has
not gone undetected and

*Carry out those procedures which are required to comply with the ISAs.  Again, these are not
clearly defined "stand alone" steps; they combine with and influence each other

Concluding Stage

This stage of the process consists of:

*Evaluating and concluding on the audit evidence gathered - this means evaluating all the audit
evidence gathered to determine whether it is sufficient (enough) and appropriate (relevant and
reliable) to draw a conclusion of fair presentation

*Formulating the audit opinion and drafting the audit report which conveys that opinion.

THE PRELIMINARY ENGAGEMENT STAGE

Explain the consideration that applies to the auditor's decision whether or not to
accept an engagement to carry out audit work.

The client must exhibit all the following characteristics.  A practitioner accepts an assurance
engagement only where the practitioner's preliminary knowledge of the engagement
circumstances indicates that:

 (a)  Relevant ethical requirements, such as independence and professional competence will be
satisfied; and

(b)  The engagement exhibits all of the following characteristics:

 (i)   The subject matter is appropriate;

(ii)  The criteria to be used are suitable and are available to the intended users;

(iii) The practitioner has access to sufficient appropriate evidence to support the practitioner's
conclusion;

(iv) The practitioner's conclusion, in the form appropriate to either a reasonable assurance
engagement or a limited assurance Engagement, is to be contained in a written report; and

(v)  The practitioner is satisfied that there is a rational purpose for the engagement.  If there is a
significant limitation on the scope of the practitioner's work, it may be unlikely that the
engagement has a rational purpose.  Also, a practitioner may believe the engaging party intends
to associate the practitioner's name with the subject matter in an inappropriate manner.
THE PLANNING STAGE
Describe the auditor’s objective in planning the audit.

Planning an audit of financial statements, states that the objective of the auditor is to: "plan the
audit so that is will be performed in an effective manner".  This entails developing an audit
strategy, supported by an appropriate audit plan.

ISA 300 also requires that the engagement partnered other key members of the audit team be
involved in planning the audit, as their experience and insight will enhance the effectiveness and
efficiency of the planning process.

SCOFIELD