Week 3

Pre-acceptance, Planning and Risk Assessment

 1. Audit objectives
ISA 200 overall objectives of the audit:
1. Obtain reasonable assurance whether the financial
statements as a whole are free from material
misstatement and prepared in accordance with an
applicable financial reporting framework;
2. To report on the financial statements, and
communicate as required by the ISAs in accordance
with the auditor’s findings
 1. Audit objectives
Ethical requirements relating to an audit of
financial statements:
1. Professional scepticism;
2. Professional judgement;
3. Sufficient appropriate audit evidence and audit
risk.
 1. Audit objectives
Conduct of an audit in accordance with ISA’s
1. Comply with ISA;
2. Understand the ISA;
3. Disclose compliance with ISA.
 2. Quality control
1. Quality control within the firm as a whole
Several things can be done to ensure a strong
quality control environment
2. Quality control on each assignment
Several measures should be taken on each
assignment to ensure quality
 3. Quality assurance in
any assurance engagement
1. Firm leadership
2. Human resources
3. Engagement performance
4. Ethics
5. Client relationships
6. Monitoring
 4. Audit planning
1. Why plan?
2. ISA 300 Planning an Audit of Financial
Statements
3. Audit strategy
4. Detailed audit plan
 5. ISA 315 Identifying
and Assessing the RoMM
through Understanding
the entity
6. Audit risk – The
practical aspects
 6. Audit risk – The
practical aspects
1. The importance of risk assessment;
2. Risk assessment procedures.
 7. Audit risk – The
theory
1. The audit risk model:

2. Interaction of the audit risk model;

3. ISA 330 The auditor’s Responses of Assessed Risks
7. Audit risk – The theory
 8. The auditor’s
responsibility to consider
fraud in an Audit of
financial statements
1. Responsibilities;
2. Response to the risk of fraud;
3. Reporting fraud.
4. Responsibility with regards to Law and
Regulations
 9. ISA 520 Analytical
procedures
The use of ratios in analytical procedures:
1. GP margin;
2. ROCE;
3. Stock days;
4. Debtor days;
5. Creditor days;
6. Gearing.
 10. Materiality
Materiality guidelines:
 10. Materiality
Different levels of materiality:
1. Overall materiality;
2. Specific areas of the financial statements;
3. Performance materiality;
4. Other issues with materiality.
10. Materiality
11. ISA 450 Evaluation of
Misstatements Identified
During the Audit
 12. Audit documentation
1. Importance of documentation;
2. Content of working papers;
3. Current audit files;
4. Permanent audit files;
5. Retention of audit files and working papers.