International

Standards on
Auditing

Bullet Point Summary

for D11
 ISAs
O ISA 200 O ISA 300 O ISA 500 O ISA 600 O ISA 700

O ISA 501
O ISA 210 O ISA 315 O ISA 610 O ISA 705
O ISA 505
O ISA 220 O ISA 320 O ISA 620 O ISA 706
O ISA 520

O ISA 230 O ISA 330 O ISA 530

O ISA 240 O ISA 550

O ISA 560

O ISA 580 O 2410

2
ISA 200
Overall Objectives of the Independent Auditor
Objectives of the auditor
O To obtain reasonable assurance whether financial statements as a whole
are free from material misstatement, whether due to fraud or error.
O To express an opinion on whether the financial statements are prepared, in
all material respects, in accordance with a relevant reporting framework.
O To report on the financial statements, and communicate as required, in
accordance with the auditor’s findings.

Responsibilities of management

O Preparation of the financial statements in accordance with the applicable

financial reporting framework.
O Internal control necessary to enable preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
O To provide the auditor with:
O Access to all information relevant to the preparation of the financial statements.
O Unrestricted access to persons from within the entity whom the auditor determined
it necessary to obtain evidence. 3
ISA 200
Overall Objectives of the Independent Auditor
Responsibilities of auditors
O The auditor shall plan and perform an audit with professional skepticism;
O The auditor shall comply with relevant ethical requirements, including those
pertaining to independence;
O The auditor shall exercise professional judgment in planning and performing
an audit;
O To obtain reasonable assurance, the auditor shall obtain sufficient
appropriate audit evidence;
O Conduct of an audit in accordance with ISAs.

Inherent limitations of audit

Audit evidence is persuasive rather than conclusive because of:
O The nature of financial reporting;
O The nature of audit procedures; and
O The need to conduct audit within a reasonable time and at reasonable
cost.

4
ISA 210
Agreeing the Terms of Audit Engagements

Preconditions for acceptance

The auditor should accept or renew an engagement only if the preconditions
for an audit are present:
O And appropriate financial reporting framework is to be applied in the
preparation of the financial statements; and
O Management’s acknowledgement and understanding of its responsibilities.

Contents of engagement letter

O The objective and scope of the audit;

O The responsibilities of the auditor;
O The responsibilities of management;
O The identification of an applicable financial reporting framework; and
O Reference to the expected form and content of any reports to be issued.

5
ISA 230
Audit Documentation
Objectives of documentation
O Sufficient appropriate record of basis for audit report.
O Evidence that audit planned and performed in accordance with ISAs and
legal / regularity requirements.

Timely Preparation
O Preparing audit documentation on a timely basis helps the quality of audit
and facilitates the effective review of audit.

Content – ta enable and experienced independent auditor to

understand;

O Nature, timing & extent of audit procedures:

O Specific items tested
O Who performed work and when
O Who reviewed and when
O Results of audit procedures.
O Significant conclusions and professional judgments. 6
ISA 230
Audit Documentation

Assembly of audit file

O Auditor shall assemble the audit documentations in an audit file
O Auditor shall retain the audit file at least five years.

Examples of audit documentation

O Audit programs
O Audit schedules (top as well as sub)
O Points for review
O Audit tests (Test of controls & Substantive procedures)
O Summary of significant matters
O Analysis
O Letter of confirmation and representations
O Abstracts and copies of client record / documents
O Compliance checklists

7
ISA 240
Responsibilities regarding Fraud
Objectives of auditor
O Identify risks of material misstatement in financial statements due to fraud;
O Obtain sufficient appropriate evidence regarding assessed risks;
O Respond appropriately to fraud or suspected fraud identified.

Fraud - Definition
O Intentional act involving use of deception to obtain unjust/illegal advantage.

Types of Fraud
O Fraudulent financial reporting;
O Misappropriation of assets.

Professional Skepticism - Definition

O An attitude of a questioning mind; a critical assessment of audit evidence.

Requirements
O Auditor shall maintain professional skepticism throughout the audit.
O Discussion among the engagement team to identify that where the entity’s financial statements
are susceptible to material misstatement due to fraud.

8
ISA 240
Responsibilities regarding Fraud

O Auditor shall perform risk assessment procedures to obtain information regarding risks of material
misstatement due to fraud.
O Auditor shall identify & assess the risks of material misstatement due to fraud.
O Auditor shall determine overall responses to address the assessed risk of material misstatement
due to fraud.
O Auditor shall evaluate the audit evidence to judge whether or not the misstatements found are
indicative of any fraud.

Apply audit procedures to identify:

O Appropriateness of journal entries;
O Review of accounting estimates;
O Identify significant transactions outside normal course of business.

Examples of fraud risk factors:

O High degree of competition;
O Need to obtain additional financing;
O Low morale amongst senior staff;
O Large amounts of cash on hand.

9
ISA 300
Planning

Objective of planning
O Help auditor to devote appropriate attention to important areas of audit;
O Help to identify and resolve issues on a timely basis;
O Assist in selection of suitable audit team;
O Help direction and supervision of audit team.

Content of audit strategy

O Scope of engagement ( e.g. input of other auditors);
O Reporting objectives of engagement (reporting timetable);
O Nature / timing / extent of resources;

Content of audit plan

O Risk assessment procedures;
O Detailed planned audit procedures.

10
ISA 315
Identifying and Assessing Risks of Material Misstatement
Required understanding of entity and environment
O Industry / regulatory factors affecting financial statements;
O Nature of entity
O operations;
O Ownership and governance; and
O Financing.
O Accounting policies;
O Objectives and strategy.

Risk
O Audit risk: risk of inappropriate opinion;
O Inherent risk: risk of susceptibility of an assertion about a class of transaction
(e.g. sales) or account balance (e.g. receivables) to material misstatement:
O Control risk: risk that material misstatement not detected by entity’s internal
control:
O Detection risk: risk that audit procedures do not detect material
misstatements.
11
ISA 315
Identifying and Assessing Risks of Material Misstatement
IT controls, risks
O Unauthorized changes to data in master files;
O Unauthorized access to programs;
O Inappropriate manual intervention.

Assessing whether a control is relevant to audit

O Materiality;
O Significance of related risk;
O Applicable legal / regulatory requirements;
O Nature of entity’s business.

12
ISA 320
Materiality
Materiality - Definition
Misstatements, including omissions, are considered to be material if they,
individually or in the aggregate, could reasonable be expected to influence
the economic decisions of users taken on the basis of the financial statements.

Performance materiality - Definition

An amount set as less than materiality for the financial statements as a whole=,
to reduce to an appropriately low level the probability that the financial
statements as a whole are materially misstated.

Tolerable error - Definition

A monetary amount set by the auditor in respect of which the auditor seeks to
obtain an appropriate level of assurance that the monetary amount set by the
auditor is not exceeded by the actual misstatement in the population.

13
ISA 330
Responses to Assessed Risk
Designing of audit procedures
The auditor shall design and perform audit procedures whose nature, timing
and extent are based on and are responsive to the assessed risks of material
misstatement.

Test of controls

To evaluate operating effectiveness of controls in preventing, or detecting and

correcting material misstatements at the assertion level.

Substantive procedure

To detect material misstatement at assertion level, comprising tests of details

and analytical procedures.

14
ISA 500
Audit Evidence
Characteristics
O Appropriate: quality, linked to relevance and reliability.
O Sufficient: quantity, linked to quality and to risk of material misstatement

Relevance: linked to assertions

Assertions
Statements of Financial Position:
Completeness, rights and obligations, valuation, existence

Statement of Comprehensive Income:

Occurrence, completeness, accuracy, cutt off.

Reliability
O Independent better than internal
O Auditor generated better than indirectly obtained
O Documentary better than oral
O Originals better than photocopies. 15
ISA 520
Analytical Procedures
Definition
O Evaluation of financial information
O By analyzing plausible relationships
O Among financial and non-financial data.

Objectives
O Obtain relevant & reliable evidence when using substantive AP
O Design & perform AP near the end of the audit to ensure that FS are
consistent with auditor understanding.

Requirements
Auditor shall
O Determine the suitability of AP for given assertions
O Evaluate the reliability of data used for AP
O Develop an expectation to identify misstatement
O Determine the amount of difference of recorded amounts from expected
values 16
ISA 530
Audit Sampling
Definitions
Audit Sampling: application of audit procedures to less than 100% of
population to provide auditor with reasonable basis to draw conclusions on
entire population.

Sampling risk: risk of selecting unrepresentative sample.

Non-Sampling risk: risk of erroneous conclusion from representative sample.

Statistical Sample: random sampling plus use of probability theory to evaluate

results.

Factors for increasing sample size

O Increase in risk of material misstatement

O Increase in tolerable misstatement
O Increase in expected misstatement.

17
ISA 560
Subsequent Events
Adjusting Events
Provide evidence of conditions existing at the statement of financial position date.

Non-Adjusting Events
Provide evidence of conditions arising after the statement of financial position date.

Objectives
O To obtain evidence about subsequent events that require adjustment or disclosure
O To respond to facts that become known to the auditor after the date of auditor’s report

___________active duty____________ _______passive duty______

FS date  FS approval date AR date  FS issue date     

18
ISA 580
Written Representations
Definition
O Written statement by management provided to auditor to confirm
certain matters or to support other audit evidence. It does not include
FS, assertion, or books and records.

Content of representation letter

O Management responsibility for preparation of financial statements.
O Auditor provided with all relevant information
O All transactions recorded in financial statement
O Plans that may affect the carrying values of the assets.

Other requirements
O If auditor concludes that WR are not reliable he will determine the
possible effect on his opinion
O If management does not provide WR requested, the auditor
O Discuss the matter with management
O Reevaluate the integrity of management and evidence
O Determine the possible effect on his opinion 19
ISA 610
Using the Work of Internal Audit
External auditor must evaluate
O The objectivity of the internal audit function
O The technical competence of the internal audit function
O Whether the internal audit function is carried out with due professional care
O Whether there is likely to be effective communication between the internal
and external auditor.

External auditor must also review the work of internal audit to

evaluate whether

O The work was performed by people with adequate technical training and
proficiency
O The work was properly supervised, reviewed and documented
O Sufficient and appropriate evidence has been obtained to be able to draw
reasonable conclusions
O The conclusions reached are appropriate in the circumstances
O Any usual matters are properly resolved.
20
ISA 620
Using the Work of An Auditor’s Expert
External auditor must assess an Expert’s
O Independent and objectivity
O competence.

External auditor must assess the expert’s work including

O The consistency of the findings with other evidence

O The significant assumptions made
O The use and accuracy of source data

21
ISA 700
Forming an opinion and Reporting on Financial Statements

Contents of audit report

Title:
Reference to independent auditor.
Addressee:
Shareholders/members.
Introductory paragraph:
Entity, financial statements, reporting date.
Management’s responsibility:
For preparation of financial statements .
Auditor’s responsibility:
To express an opinion on financial statements .
Audit conducted in accordance with ISAs.
Description:
Of audit.
Audit opinion:
Financial statements prepared in accordance with IFRS.
Financial statements give true and faire view. 22
ISA 705
Modifications to the audit opinion
Definition
Modified: qualified, adverse or disclaimer.
Pervasive: not confined to specific elements or representing a substantial
proportion of a single element.

Modifications

Financial statements as a whole not free from material misstatements:

O Material but not pervasive: Qualified

O Pervasive: Adverse

Unable to obtain sufficient appropriate evidence:

O Material but not pervasive: Qualified

O Pervasive: Disclaimer

23
ISA 706
Emphasis of matter & other paragraphs
Definition
Refers to matter fundamental to user’s understanding of financial statements.

Matter already disclosed or presented in FS

Emphasis of matter paragraph can only be used to highlight a matter already
disclosed or presented in the financial statements.

Matter not already disclosed or presented in FS

Other matter paragraph can only be used to highlight a matter not already
disclosed or presented in the financial statements.

Requirements

O EOM or OM should be included immediately after opinion paragraph

O Heading either Emphasis of matter paragraph or Other matter paragraph
O Clear reference of matter is required in the paragraph
O Indicate that auditor ‘s opinion is not modified in respect of matter 24