The Institute of Certified Public Accountants of Uganda (ICPAU) was established in

1992 by
The Accountants Act, Cap 266. The functions of the Institute, as prescribed by the
Act, are to regulate and maintain the standard of accountancy in Uganda and to
prescribe or regulate the conduct of accountants in Uganda. Under its legal
mandate, the Institute prescribes professional standards to be applied in the
preparation and auditing of financial reports in Uganda.

The objective of an audit of financial statements is to enable the auditor to express an opinion
whether the financial statements are prepared, in all material respects, in accordance with an
identified financial reporting
framework. The phrases used to express the auditor’s opinion are “give a true and fair view”
or “present fairly, in all material respects,” which are equivalent terms. A similar objective
applies to the audit of financial or other information prepared in accordance with appropriate
criteria.

INTERNATIONAL STANDARD ON AUDITING 200

OBJECTIVE AND GENERAL PRINCIPLES GOVERNING AN AUDIT OF
FINANCIAL STATEMENTS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the objective and general principles governing an audit of financial
statements.

The objective of an audit of financial statements is to enable the auditor to express an

opinion whether the financial statements are prepared, in all material respects, in
accordance with an identified financial reporting framework. The phrases used to express
the auditor’s opinion are “give a true and fair view” or “present fairly, in all material
respects,” which are equivalent terms.

Although the auditor’s opinion enhances the credibility of the financial statements, the user
cannot assume that the opinion is an assurance as to the future viability of the entity nor the
efficiency or effectiveness with which
management has conducted the affairs of the entity.

INTERNATIONAL STANDARD ON AUDITING 210

TERMS OF AUDIT ENGAGEMENTS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on:
(a) Agreeing the terms of the engagement with the client; and
(b) The auditor’s response to a request by a client to change the terms of an engagement to
one that provides a lower level of assurance.

The auditor and the client should agree on the terms of the engagement. The agreed
terms would need to be recorded in an audit engagement letter or other suitable form of
contract.
This ISA is intended to assist the auditor in the preparation of engagement letters relating to
audits of financial statements. The guidance is also applicable to related services. When other
services such as tax, accounting, or
management advisory services are to be provided, separate letters may be appropriate.

In some countries, the objective and scope of an audit and the auditor’s obligations are
established by law. Even in those situations the auditor may still find audit engagement letters
informative for their clients.

INTERNATIONAL STANDARD ON AUDITING 220

QUALITY CONTROL FOR AUDIT WORK.
The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the quality control:
(a) Policies and procedures of an audit firm regarding audit work generally; and
(b) Procedures regarding the work delegated to assistants on an individual audit.
Quality control policies and procedures should be implemented at both the level of the
audit firm and on individual audits.

In this ISA the following terms have the meaning attributed below:
(a) “The auditor” means the person with final responsibility for the audit.
(b) “Audit firm” means either the partners of a firm providing audit services or a sole
practitioner providing audit services, as appropriate.
(c) “Personnel” means all partners and professional staff engaged in the audit practice of the
firm.
(d) “Assistants” means personnel involved in an individual audit other than the auditor.

INTERNATIONAL STANDARD ON AUDITING 230

DOCUMENTATION.
The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance regarding documentation in the context of the audit of financial statements.

The auditor should document matters which are important in providing evidence to
support the audit opinion and evidence that the audit was carried out in accordance
with ISAs.

“Documentation” means the material (working papers) prepared by and for, or obtained and
retained by the auditor in connection with the performance of the audit. Working papers may
be in the form of data stored on paper, film, electronic media or other media.

Working papers:
(a) Assist in the planning and performance of the audit;
(b) Assist in the supervision and review of the audit work; and
(c) Record the audit evidence resulting from the audit work performed to support the
auditor’s opinion.
 INTERNATIONAL STANDARD ON AUDITING 240
THE AUDITOR’S RESPONSIBILITY TO CONSIDER FRAUD AND ERROR IN AN
AUDIT OF FINANCIAL STATEMENTS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the auditor’s responsibility to consider fraud and error in an audit of
financial statements. While this ISA focuses on the auditor’s responsibilities with respect to
fraud and error, the primary responsibility for the prevention and detection of fraud and error
rests with both those charged with governance and the management of an entity.

When planning and performing audit procedures and evaluating and reporting the
results thereof, the auditor should consider the risk of material misstatements in the
financial statements resulting from fraud or error.

INTERNATIONAL STANDARD ON AUDITING 250

CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF FINANCIAL
STATEMENTS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the auditor’s responsibility to consider laws and regulations in an audit
of financial statements.

When planning and performing audit procedures and in evaluating and reporting the
results thereof, the auditor should recognize that noncompliance by the entity with laws
and regulations may materially affect the financial statements. However, an audit cannot
be expected to detect noncompliance with all laws and regulations. Detection of
noncompliance, regardless of materiality, requires consideration of the
implications for the integrity of management or employees and the possible effect on other
aspects of the audit.

INTERNATIONAL STANDARD ON AUDITING 260

COMMUNICATION OF AUDIT MATTERS WITH THOSE CHARGED WITH
GOVERNANCE.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on communication of audit matters arising from the audit of financial
statements between the auditor and those charged with governance of an entity. These
communications relate to audit matters of governance interest as defined in this ISA. This
ISA does not provideguidance on communications by the auditor to parties outside the entity,
for example, external regulatory or supervisory agencies.

The auditor should communicate audit matters of governance interest arising from the
audit of financial statements with those charged with governance of an entity.

INTERNATIONAL STANDARD ON AUDITING 300

PLANNING.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on planning an audit of financial statements.
This ISA is framed in the context of recurring audits. In a first audit, the auditor may need to
extend the planning process beyond the matters discussed herein.

The auditor should plan the audit work so that the audit will be performed in an
effective manner.

“Planning” means developing a general strategy and a detailed approach for the expected
nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient
and timely manner.

INTERNATIONAL STANDARD ON AUDITING 310

KNOWLEDGE OF THE BUSINESS.
The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on what is meant by a knowledge of the business, why it is important to the
auditor and to members of the audit staff working on an engagement, why it is relevant to all
phases of an audit, and how the auditor obtains and uses that knowledge.

In performing an audit of financial statements, the auditor should have or obtain a

knowledge of the business sufficient to enable the auditor to identify and understand the
events, transactions and practices that, in the auditor’s judgment, may have a
significant effect on the financial statements or on the examination or audit report. For
example, such knowledge is used by the auditor in assessing inherent and control risks and in
determining the nature, timing and extent of audit procedures.

The auditor’s level of knowledge for an engagement would include a general knowledge of
the economy and the industry within which the entity operates, and a more particular
knowledge of how the entity operates. The level of knowledge required by the auditor would,
however, ordinarily be less than that possessed by management. A list of matters to consider
in a specific engagement is set out in the Appendix to this ISA.

INTERNATIONAL STANDARD ON AUDITING 315

UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING
THE RISKS OF MATERIAL MISSTATEMENT

The purpose of this International Standard on Auditing (ISA) is to establish standards and to
provide guidance on obtaining an understanding of the entity and its environment, including
its internal control, and on assessing the risks of material misstatement in a financial
statement audit. The importance of the auditor’s risk assessment as a basis for further audit
procedures is discussed in the explanation of audit risk in ISA 200, “Objective and General
Principles Governing an Audit of Financial Statements.”

The auditor should obtain an understanding of the entity and its environment, including
its internal control, sufficient to identify and assess the risks of material misstatement of
the financial statements whether due to fraud or error, and sufficient to design and
perform further audit procedures. ISA 500, “Audit Evidence,” requires the auditor to use
assertions in sufficient detail to form a basis for the assessment of risks of material
misstatement and the design and performance of further audit procedures. This ISA requires
the auditor to make risk assessments at the financial statement and assertion levels based on
an appropriate understanding of the entity and its environment, including its internal control.
ISA 330, “The Auditor’s Procedures in Response to Assessed Risks” discusses the auditor’s
responsibility to determine overall responses and to design and perform further audit
procedures whose nature, timing, and extent are responsive to the risk assessments. The
requirements and guidance of this ISA are to be applied in conjunction with the requirements
and guidance provided in other ISAs. In particular, further guidance in relation to the
auditor’s responsibility to assess the risks of material misstatement due to fraud is discussed
in ISA 240, “The Auditor’s Responsibility to Consider Fraud and Error in an Audit of
Financial Statements.”

INTERNATIONAL STANDARD ON AUDITING 320

AUDIT MATERIALITY.
The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the concept of materiality and its relationship with audit risk.

The auditor should consider materiality and its relationship with audit risk when
conducting an audit.

“Materiality” is defined in the International Accounting Standards Committee’s “Framework

for the Preparation and Presentation of Financial Statements” in the following terms:

“Information is material if its omission or misstatement could influence the economic

decisions of users taken on the basis of the financial statements. Materiality depends on the
size of the item or error judged in the particular circumstances of its omission or
misstatement. Thus, materiality provides a threshold or cut-off point rather than being a
primary qualitative characteristic which information must have if it is to be useful.”

INTERNATIONAL STANDARD ON AUDITING 330

THE AUDITOR’S PROCEDURES IN RESPONSE TO ASSESSED RISKS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on determining overall responses and designing and performing further
audit procedures to respond to the assessed
risks of material misstatement at the financial statement and assertion levels in a financial
statement audit. The auditor’s understanding of the entity and its environment, including its
internal control, and assessment of the risks of material misstatement are described in ISA
315, “Understanding the Entity and Its Environment and Assessing the Risks of Material
Misstatement.”

The following is an overview of the requirements of this standard:

 Overall responses. This section requires the auditor to determine overall responses to
address risks of material misstatement at the financial statement level and provides
guidance on the nature of those responses.
  Audit procedures responsive to risks of material misstatement at the assertion level.
This section requires the auditor to design and perform further audit procedures,
including tests of the operating effectiveness of controls, when relevant or required,
and substantive procedures, whose nature, timing, and extent are responsive to the
assessed risks of material misstatement at the assertion level. In addition, this section
includes matters the auditor considers in determining the nature, timing, and extent of
such audit procedures.
 Evaluating the sufficiency and appropriateness of audit evidence obtained. This
section requires the auditor to evaluate whether the risk assessment remains
appropriate and to conclude whether sufficient
appropriate audit evidence has been obtained.
• Documentation. This section establishes related documentation requirements.

In order to reduce audit risk to an acceptably low level, the auditor should determine
overall responses to assessed risks at the financial statement level, and should design
and perform further audit procedures to respond to assessed risks at the assertion level.
The overall responses and the nature, timing, and extent of the further audit procedures are
matters for the professional judgment of the auditor. In addition to the requirements of this
ISA, the auditor also complies with the requirements and guidance in ISA 240, “The
Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements” in
responding to assessed risks of material misstatement due to fraud.

INTERNATIONAL STANDARD ON AUDITING 400

RISK ASSESSMENTS AND INTERNAL CONTROL.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on obtaining an understanding of the accounting and internal control
systems and on audit risk and its components: inherent risk, control risk and detection risk.

The auditor should obtain an understanding of the accounting and internal control
systems sufficient to plan the audit and develop an effective audit approach. The
auditor should use professional judgment to
assess audit risk and to design audit procedures to ensure it is reduced to an acceptably
low level.

INTERNATIONAL STANDARD ON AUDITING 401

AUDITING IN A COMPUTER INFORMATION SYSTEMS ENVIRONMENT.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on procedures to be followed when an audit is conducted in a computer
information systems (CIS)1 environment. For purposes of ISAs, a CIS environment exists
when a computer of any type or size is involved in the processing by the entity of financial
information of significance to the audit, whether that computer is operated by the entity or by
a third party.

The auditor should consider how a CIS environment affects the audit.

The overall objective and scope of an audit does not change in a CIS environment. However,
the use of a computer changes the processing, storage and communication of financial
information and may affect the accounting and internal control systems employed by the
entity. Accordingly, a CIS environment may affect:
 The procedures followed by the auditor in obtaining a sufficient understanding of the
accounting and internal control systems.
 The consideration of inherent risk and control risk through which the auditor arrives
at the risk assessment.
 The auditor’s design and performance of tests of control and substantive procedures
appropriate to meet the audit objective.

INTERNATIONAL STANDARD ON AUDITING 402

AUDIT CONSIDERATIONS RELATING TO ENTITIES USING SERVICE
ORGANIZATIONS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance to an auditor whose client uses a service organization. This ISA also
describes the service organization auditor’s reports which may be obtained by client auditors.

The auditor should consider how a service organization affects the client’s accounting
and internal control systems so as to plan the audit and develop an effective audit
approach.

A client may use a service organization such as one that executes transactions and maintains
related accountability or records transactions and processes related data (for example, a
computer systems service organization). If a client uses a service organization, certain
policies, procedures and records maintained by the service organization may be relevant to
the audit of the financial statements of the client.

Considerations of the Client Auditor.

A service organization may establish and execute policies and procedures that affect a client
organization’s accounting and internal control systems. These policies and procedures are
physically and operationally separate from the client organization. When the services
provided by the service organization are limited to recording and processing client
transactions and the client retains authorization and maintenance of accountability, the client
may be able to implement effective policies and procedures within its organization. When the
service organization executes the client’s transactions and maintains accountability, the client
may deem it necessary to rely on policies and procedures at the service organization.

INTERNATIONAL STANDARD ON AUDITING 500

AUDIT EVIDENCE.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the quantity and quality of audit evidence to be obtained when auditing
financial statements, and the procedures for obtaining that audit evidence.

The auditor should obtain sufficient appropriate audit evidence to be able to draw
reasonable conclusions on which to base the audit opinion.

Audit evidence is obtained from an appropriate mix of tests of control and substantive
procedures. In some circumstances, evidence may be obtained entirely from substantive
procedures.
“Audit evidence” means the information obtained by the auditor in arriving at the conclusions
on which the audit opinion is based. Audit evidence will comprise source documents and
accounting records underlying the financial statements and corroborating information from
other sources.

“Tests of control” means tests performed to obtain audit evidence about the suitability of
design and effective operation of the accounting and internal control systems.
“Substantive procedures” means tests performed to obtain audit evidence to detect material
misstatements in the financial statements, and are of two types:
(a) Tests of details of transactions and balances; and
(b) Analytical procedures.

INTERNATIONAL STANDARD ON AUDITING 500 (REVISED)

AUDIT EVIDENCE.

The purpose of this International Standard on Auditing (ISA) is to establish standards and to
provide guidance on what constitutes audit evidence in an audit of financial statements, the
quantity and quality of audit evidence to be obtained, and the audit procedures that auditors
use for obtaining that audit evidence.

The auditor should obtain sufficient appropriate audit evidence to be able to draw
reasonable conclusions on which to base the audit opinion.

Concept of Audit Evidence.

“Audit evidence” is all the information used by the auditor in arriving at the conclusions on
which the audit opinion is based, and includes the information contained in the accounting
records underlying the financial statements and other information. Auditors are not expected
to address all information that may exist.1 Audit evidence, which is cumulative in nature,
includes audit evidence obtained from audit procedures performed during the course of the
audit and may include audit evidence obtained from other sources such as previous audits and
a firm’s quality control procedures for client acceptance and continuance.

Accounting records generally include the records of initial entries and supporting records,
such as checks and records of electronic fund transfers; invoices; contracts; the general and
subsidiary ledgers, journal entries and
other adjustments to the financial statements that are not reflected in formal journal entries;
and records such as work sheets and spreadsheets supporting cost allocations, computations,
reconciliations and disclosures. The entries in the accounting records are often initiated,
recorded, processed and reported in electronic form.
In addition, the accounting records may be part of integrated systems that share data and
support all aspects of the entity’s financial reporting, operations and compliance objectives.

Management is responsible for the preparation of the financial statements based upon the
accounting records of the entity. The auditor obtains some audit evidence by testing the
accounting records, for example, through analysis and review, reperforming procedures
followed in the financial reporting process, and reconciling related types and applications of
the same information. Through the performance of such audit procedures, the auditor may
determine that the accounting records are internally consistent and agree to the financial
statements. However, because accounting records alone do not provide sufficient audit
evidence on which to base an audit opinion on the financial statements, the auditor obtains
other audit evidence.

Other information that the auditor may use as audit evidence includes minutes of meetings;
confirmations from third parties; analysts’ reports; comparable data about competitors
(benchmarking); controls manuals; information obtained by the auditor from such audit
procedures as inquiry, observation, and inspection; and other information developed by, or
available to, the auditor that permits the auditor to reach conclusions through valid reasoning.

INTERNATIONAL STANDARD ON AUDITING 501

AUDIT EVIDENCE—ADDITIONAL CONSIDERATIONS FOR SPECIFIC ITEMS.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance additional to that contained in ISA 500, “Audit Evidence” with respect to
certain specific financial statement amounts and other disclosures.

Application of the standards and guidance provided in this ISA will assist the auditor in
obtaining audit evidence with respect to the specific financial statement amounts and other
disclosures addressed.

This ISA comprises the following parts:

Part A: Attendance at Physical Inventory Counting

Part B: Superceded by ISA 505—Part B has been deleted.
Part C: Inquiry Regarding Litigation and Claims
Part D: Valuation and Disclosure of Long-term Investments
Part E: Segment Information

INTERNATIONAL STANDARD ON AUDITING 505

EXTERNAL CONFIRMATIONS.
The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance on the auditor’s use of external confirmations as a means of obtaining audit
evidence.

The auditor should determine whether the use of external confirmations is necessary to
obtain sufficient appropriate audit evidence to support certain financial statement
assertions. In making this determination, the auditor should consider materiality, the
assessed level of inherent and control risk, and how the evidence from other planned
audit procedures will reduce audit risk to an acceptably low level for the applicable
financial statement assertions.

ISA 500, “Audit Evidence” states that the reliability of audit evidence is influenced by its
source and nature. It indicates that, in general, audit evidence from external sources is more
reliable than audit evidence generated internally, and that written audit evidence is more
reliable than audit evidence in oral form. Accordingly, audit evidence in the form of written
responses to confirmation requests received directly by the auditor from third parties who are
not related to the entity being audited, when considered individually or cumulatively with
audit evidence from other procedures, may assist in reducing audit risk for the related
assertions to an acceptably low level.

External confirmation is the process of obtaining and evaluating audit evidence through a
direct communication from a third party in response to a request for information about a
particular item affecting assertions made by management in the financial statements. In
deciding to what extent to use external confirmations the auditor considers the characteristics
of the environment in which the entity being audited operates and the practice of potential
respondents in dealing with requests for direct confirmation.

External confirmations are frequently used in relation to account balances and their
components, but need not be restricted to these items. For example, the auditor may request
external confirmation of the terms of agreements or transactions an entity has with third
parties. The confirmation request is designed to ask if any modifications have been made to
the agreement, and if so what the relevant details are.

Other examples of situations where external confirmations may be used include the
following:
• Bank balances and other information from bankers.
• Accounts receivable balances.
• Stocks held by third parties at bonded warehouses for processing or on consignment.
• Property title deeds held by lawyers or financiers for safe custody or as security
• Investments purchased from stockbrokers but not delivered at the balance sheet date.
• Loans from lenders.
• Accounts payable balances.

The reliability of the evidence obtained by external confirmations depends, among other
factors, upon the auditor applying appropriate procedures in designing the external
confirmation request, performing the external
confirmation procedures, and evaluating the results of the external confirmation procedures.
Factors affecting the reliability of confirmations include the control the auditor exercises over
confirmation requests and
responses, the characteristics of the respondents, and any restrictions included in the response
or imposed by management.

INTERNATIONAL STANDARD ON AUDITING 510

INITIAL ENGAGEMENTS—OPENING BALANCES.

The purpose of this International Standard on Auditing (ISA) is to establish standards and
provide guidance regarding opening balances when the financial statements are audited for
the first time or when the financial statements for the prior period were audited by another
auditor. This ISA would also be considered when the auditor may becomes aware of
contingencies and commitments existing at the beginning of the period. Guidance on the
audit and reporting requirements regarding comparatives is provided in ISA 710,
“Comparatives.”
For initial audit engagements, the auditor should obtain sufficient appropriate audit
evidence that:
(a) The opening balances do not contain misstatements that materially affect the current
period’s financial statements;
(b) The prior period’s closing balances have been correctly brought forward to the
current period or, when appropriate, have been restated; and
(c) Appropriate accounting policies are consistently applied or changes in accounting
policies have been properly accounted for and adequately disclosed.

“Opening balances” means those account balances which exist at the beginning of the period.
Opening balances are based upon the closing balances of the prior period and reflect the
effects of:
(a) Transactions of prior periods; and
(b) Accounting policies applied in the prior period.
In an initial audit engagement, the auditor will not have previously obtained audit evidence
supporting such opening balances.

INTERNATIONAL STANDARD ON AUDITING 520

ANALYTICAL PROCEDURES.
The purpose of this International Standard on Auditing (ISA) is to establish standards and provide guidance on
the application of analytical procedures during an audit.

The auditor should apply analytical procedures at the planning and overall review stages of the audit.
Analytical procedures may also be applied at other stages

“Analytical procedures” means the analysis of significant ratios and trends including the resulting investigation
of fluctuations and relationships that are inconsistent with other relevant information or deviate from predicted
amounts.