The Independent

Financial
Statement
Audit
AUDITING AND ASSURANCE:
CONCEPTS AND APPLICATIONS 1
OBJECTI • Enable the auditor to express
an opinion on whether the
VE financial statements are
OF THE prepared, in all material
FINANCIAL respects, in accordance with an
STATEMEN identified financial reporting
framework or acceptable
T AUDIT financial reporting standards.
PSA 120, Item 20
How does the auditor
arrive at the audit
opinion?
In forming the audit
opinion, the auditor obtains
sufficient appropriate audit
evidence to be able to draw
conclusions on which to
base that opinion.
PSA 120, Item 21
Responsibility for the
Financial Statements
The management is responsible for
preparing and presenting the financial
statements in accordance with the
financial reporting framework.

The auditor’s responsibility is to form

and express an opinion on these
financial statements based on his
audit.
Reasonable
Assurance
• The auditor's opinion
enhances the
credibility of financial
statements by
providing a high, but
not absolute, level of
assurance.
Inherent Limitations
in Conducting an Audit

Judgment of the auditor Use of testing

(NON-SAMPLING RISK) (SAMPLING RISK)

Inherent limitations of Evidence is mostly

accounting or internal persuasive, rather than
control systems conclusive in nature
 General Principles
Governing Audit of the
Financial Statements
Compliance with Code of
Professional Ethics for
CPAs
• Auditors must adhere to
standards of ethical
conduct that embody and
demonstrate integrity,
objectivity and concern for
the public rather than self-
interest.
Compliance with
PSAs
• The auditor shall comply
with all PSAs relevant to
the audit. A PSA is
relevant to the audit when
the PSA is in effect and the
circumstances addressed
by the PSA exist.
Professional
Skepticism
• The auditor shall plan and
perform an audit with
professional skepticism
recognizing that
circumstances may exist
that cause the financial
statements to be
materially misstated.
Professional
Skepticism
• The auditor shall plan and
perform an audit with
professional skepticism
recognizing that
circumstances may exist
that cause the financial
statements to be
materially misstated.
Need for Independent
Financial Statement
Audit
Reasons to Conduct Audit

Conflict of Expertise Remoteness Financial

interest of financial consequenc
between information es
managemen
t and users