Topic 1 Complete

COURSE OUTLINE
FINANCIAL AUDIT
FINANCIAL AUDIT
AUDIT OF FINANCIAL STATEMENTS AND RELATED

INFORMATION
What is an audit?
Auditing?
Put your own definition..
Historical Background of
audit
The role of auditor goes back
many hundreds of years. There
are records from ancient Egypt
and Rome, showing that people
were employed to review work
done by tax collector and estate
managers
The emphasis was very much on
the detection of fraud and other
irregularities
Historical Background of
audit
Emphasis has changed and the
role of the auditor becomes much
more sophisticated
Stewardship requires an outsider
with sufficient independence and
objectively to review the accounts
of stewardship and to express an
opinion as to their honesty or
otherwise.
DEVELOPMENT OF MODERN AUDITING
Concept of a company as a separate legal entity came into

existence in the late ninetieth century.
This led to the separation of ownership (shareholders) from

control (directors) and consequent need to safeguard the
interests of the owners, who in all but the smallest of
business where shareholders and directors were on and
the same) were not involved in the day to day decisions
made by the management
Before 19th Century

the
appointed auditor duties to discover fraudulent

misrepresentations, the detection of fraud and error
become the major objective of company audits.
After ( late 19th Century)
However in later part of nineteenth century, there was a growing

school of thought that the prevention of fraud and error (as opposed to
its detection) should be the major objective of the auditor (both
external and internal) and that the management of a company should
play a greater part and accept a larger degree of responsibility in this
respect
The Kingston Cotton Mill case of 1896, established the

fact that the auditor should not be responsible for finding
every fraud and error. Here, the judgment pronounced that
the auditors role should be likened to that of a watchdog
rather than bloodhound, and that what was required of
auditors was that they should act with such reasonable care
and skill as was appropriate circumstances
DISADVANTAGES OF AUDIT
The audit involves the clients staff and

management in giving time to providing
information to the auditor. Professional
auditors should therefore plan their audit
carefully to minimize the disruption, which
their work will cause.
The audit fee, clearly the services of an
auditor must be paid for. It is for this
reason that few partnership and even
fewer sole trader are likely to have their
accounts audited. The accountants role as
the preparer of financial statements, as tax
adviser and general financial adviser,
becomes much more important to such
concerns.
ADVANTAGES OF AUDIT
Companies
Directors
Assurance
that statutory
responsibilities concerning
accounts have been carried out
Assistance with statutory
responsibilities concerning
accounts
Availability of expert professional
advice
The letter of weakness
ADVANTAGES OF AUDIT
To shareholders
Assurance
that accounts show a true and

fair view and comply with statutory
requirements
Assurance that directors have fulfilled
their statutory responsibilities for books
and accounts, and the safeguarding of
assets
Assurance that directors have fulfilled
their statutory responsibilities for books of
accounts and the safeguarding of assets
Assurance that all directors remuneration
has been disclosed
ADVANTAGES OF AUDIT
Other organization with published accounts
Assurance
to all users of accounts , that

the accounts show a true and fair view
and comply with statute
Assurance that stewards have fulfilled
their accounting and financial
responsibilities
Private organizations such as partnerships
Assurance
that accounts are reliable

Reasonable assurance that all fraud of
consequence has been disclosed.
In addition they provide reliable accounts to regulatory bodies such

as the Companies Registry, the stock exchange etc.

In
previous years it was part of the

appointed auditor duties to discover
fraudulent misrepresentations, the
detection of fraud and error become the
major objective of company audits.
However in later part of nineteenth
century, there was a growing school of
thought that the prevention of fraud and
error (as opposed to its detection) should
be the major objective of the auditor (both
external and internal) and that the
management of a company should play a
greater part and accept a larger degree of
responsibility in this respect
The Kingston Cotton Mill case of 1896, established the

fact that the auditor should not be responsible for finding
every fraud and error. Here, the judgment pronounced that
the auditors role should be likened to that of a watchdog
rather than bloodhound, and that what was required of
auditors was that they should act with such reasonable care
and skill as was appropriate circumstances
DUTIES OF AUDITORS
Carry
out procedures designed to obtain

sufficient appropriate audit evidence, in
accordance with International Standards of
Auditing, to determine with reasonable
confidence whether the financial
statements are free from materials
misstatement
Evaluate the overall presentation of the
financial statements, in order to ascertain
whether they have been prepared in
accordance with relevant legislation and
IFRS/IAS
Issue a report containing a clear expression
of their opinion on the financial statements.
AUDIT AND AUDITING

AUDITING) is a systematic
process of objectively
obtaining and evaluating
evidence regarding assertions
about economic actions and
events to ascertain the
degree of correspondence
between those assertions and
established criteria and
communicating the results to
interested parties.
AUDIT AND
AUDIT REFERS
AUDITING
to an independent
examination of the financial
statements of an enterprise,
conducted with a view to
expressing an opinion
as to whether those statements
give a true and fair view
What is true and fair

view?
We
say financial
statements shows true
and fair view.. What
is it?
What is true and fair view?

True
information is factual and

conforms with reality, not
false.
In addition the information
conforms with required
standards and law.
The accounts have been
correctly extracted from the
books and records
What is true and fair

view?
Fair
information is free from

discrimination and bias and
in compliance with expected
standards and rules.
The accounts should reflect
the commercial substance
of the companys underlying
transactions.
Objectives of Auditing
Primary
Objective (main
objective)
To produce a report by the
auditor of his opinion of the
truth and fairness of financial
statements so that any
person reading or using them
can have belief in them
Objectives of Auditing
Secondary
To
detect errors and fraud ( Consider

materiality)
To prevent errors and fraud by the
deterrent and moral effect of the
audit
To provide spin- off effects. The
auditor will be able to assist his
clients with accounting , systems,
taxation , financial , and other
problems.
AUDIT OBJECTIVES
Validity
Completeness
Cutoff
Ownership
Accuracy
Valuation
Classification
Disclosure
LIMITATION OF AUDIT
The
responsibility for preparation and

presentation of the financial statements is that
of directors of the entity. The audit does not
relieve the directors of any of their
responsibilities.
Auditors
opinion is not a guarantee of the future

viability of the entity
Auditors opinion is not an assurance of
managements effectiveness and efficient
Causes
The
of limitations
impracticality of examining all items within an

account balance or class of transactions
The inherent limitation of any accounting and
control system
The possibility of collusion or misrepresentation for
fraudulent purposes
Most audit evidence is being persuasive rather than
conclusive
PROFESSIONAL SCEPTICISM
Material misstatement may exist in financial statement and

auditors should plan their work on this basis, i.e. professional
skepticism, ISA, makes it clear that, even where auditors
assess that the risk of litigation or adverse publicity as very
low , they must still perform sufficient procedures according to
auditing standards, ie there can never be a reason for
carrying out an audit of a lower quality than that demanded
by the ISAs
In carrying out his work the auditor should adopt an

attitude of professional skepticism, recognizing that
circumstances may exist which cause the financial
statements to be materially misstated.
The purpose of the independent audit is to ensure that the

financial statements are OBJECTIVE, FREE from BIAS and
MANIPULATION and RELEVANT to the need of users.
LEGAL FRAMEWORK OF AUDITING

The
work of an auditor is regulated by:
The Act requires auditors to have a recognized

professional qualification,
Professional
pronouncements on Auditing
Professional
pronouncements include the rules of

professional conduct
The
ethical principles that govern auditors

responsibilities are
Integrity
Objectivity
Independence
Professional
competence an due care
Professional
behavior
confidentiality
TYPES OF AUDIT
Statutory
Audit, carried because the law

requires them. (FS filed to SEC, BIR, IC,
Listed Cos., CDA etc.)
Private audits, because of auditors desire
and not because of law e.g. sole trader and
partnership
Internal audits, is the one conducted by an
employee of a business into any aspect of
its affairs.
Management audit, an inquiry into efficiency
and effectiveness of management
Public sector audit, contract audit ,
computer audit etc
TYPES OF AUDITS
-Financial statements audit
-Compliance audits
-Operational audits
-Comprehensive audits
-Forensic audits
TYPES OF AUDITORS
-External auditors
-Internal auditors
-Government auditors
-Forensic auditors
ISSUES AFFECTING THE PROFESSION

-Expanded services
-Globalization
-Litigation
-Independence issues
THE RELATIONSHIP OF EVIDENTIAL MATTER

TO THE AUDIT REPORT
Financial
Statements
Audit
Report
Management
Assertions
Audit
Objectives
Audit
Procedures
Evidence
MANAGEMENT ASSERTIONS
Existence or occurrence
Completeness
Rights and obligations
Valuation and allocation
Presentation and disclosure

Existence or occurrence
Completeness
Rights and obligations
Valuation and allocation
Presentation and disclosure
KEY STAGES OF AUDIT

Determine
audit approach
Ascertain in the accounting system and
internal controls
Assess the accounting system and internal
controls
Test the accounting system and internal
controls
Test the financial statements ( substantive
testing)
Review the financial statements
Express an opinion
OR
KEY STAGES OF AUDIT

Client
acceptance and continuance
Establish
the terms of the

engagement
Plan
the audit
Consider
internal control
Conduct
substantive audit
procedures
Complete
Issue
the audit
audit report
AUDITING, ATTESTATION, AND ASSURANCE SERVICE

ATTESTATION
occurs when a practitioner is

engaged to issue or does issue a written
communication that expresses a conclusion
about the reliability of a written assertion that
is the responsibility of another party.
Examples:
The effectiveness of internal control
Financial information other than the financial statements
Future-oriented financial information
Compliance with statutory, regulatory, or contractual obligations
Managements discussion and analysis
ASSURANCE ENGAGEMENT
According to ISA, Audit client is an entity in respect of

which a firm conducts an audit engagement. When the
audit client is a listed entity, audit client will always
include its related entities. Audit engagement (An
assurance engagement) to provide a high level of
assurance that financial statements are free of
material misstatement, such as an engagement in
accordance with International Standards on Auditing.
This includes a statutory audit which is an audit
required by national legislation or other regulation.
ISA 100 Assurance Engagements, an assignment

whereby a professional accountant is required to
evaluate or measure a subject matter that is the
responsibility of another party against identified
suitable criteria, and to express a conclusion that
provides the intended user with a level of assurance
about the subject matter. It is important to distinguish
between the levels of assurance given by an audit
( which gives a high level of assurance) to that given
by other assurance engagements which , depending
on the nature of the engagement, may give a lower
level of assurance.
ASSURANCE ENGAGEMENT
There is a broad range of assurance engagements ,

including any combination of the following :
Engagements to report on a broad range of subject matters

covering financial and non-financial information.
Engagements intended to provide high or moderate levels
of assurance
Attest and direct reporting engagements
Engagements to report internally or externally
Engagement in the private or public sector.
ISA 910 states that the objective of a review of

financial statements is to enable an auditor to state
whether, on the basis of procedures which do not
provide all the evidence that would be required in an
audit, any thing has come to the auditors attention
that causes the auditor to believe that the financial
statements are not prepared, in all material
respects, in accordance with an identified financial
reporting frame work (negative assurance)
AUDITING, ATTESTATION, AND ASSURANCE SERVICES
ASSURANCE services are independent

professional services that improve the
quality of information, or its context, for
decision makers.
Examples:
Risk assessment
Information system reliability
Electronic commerce
Health care performance measurement
THE RELATIONSHIP
BETWEEN AUDITING,
ATTESTATION, AND
ASSURANCE SERVICES
Auditing
Attestation
Assurance
THREE FUNDAMENTAL CONCEPTS IN CONDUCTING AN AUDIT
-Materiality
-Audit risk
-Evidence
Materiality
A misstatement or the aggregate of

all misstatements in financial statements is
considered to be material if, in light of
surrounding circumstances, it is probable that
the decision of a person who is relying on the
financial statements, and who has a
reasonable knowledge of business and
economic activities ( the user), would be
changed or influenced by such misstatement
or the aggregate of all misstatements.
Audit risk is the risk that the auditor will
fail to express a reservation in his or her
opinion on financial statements that are
materiality misstated
Evidence
Evidential matter supporting the financial

statements consists of the underlying
accounting records and all corroborating
information available to the auditor.
Relevance refers to whether the evidence
relates to the specific audit objective
being tested.
Reliability refers to the whether or not a
particular type of evidence can be relied
upon to signal the true state of the
assertion or audit objective.
INTERNAL AUDITING
An internal audit is an
independent activity established
by management to examine and
evaluate the organizations risk
management process and
systems of control, and to make
recommendations for the
achievement of company
objectives.
INTERNAL AUDITING
The
internal audit staffs may also engage in

number of other activities :
Examination and evaluation of financial and operating information

within the organization- in certain organization this can form a
type of continuous auditing and may involve sophisticated
information systems that capture monitoring of risk and
evidencing of controls
Review of economy, efficiency and effectiveness of operations
Review of compliance with external laws and regulations and

internal policy and procedures
Review and advice on the development of key organizational

systems and on the implementation of major change.
INTERNAL AUDITING CONT
The current focus of internal audit is on

adding value to an organization through risk
control and reviewing all types of risk and
recommending relevant controls. The
institute of internal Auditors definition has
changed the focus of internal audit toward a
more risk-based, consultancy type activity.
The internal audit can be referred as
An independent, objective assurance and

consulting activity
Designed to add value and improve an
organizations operations
Helps the organization accomplish its objectives
Bring systematic, disciplined approach to evaluate
and improve the effectiveness of risk
management, control and governance processes.
INTERNAL AUDITING cont

There
are four major areas of

importance for internal audit that
are addressed
Corporate governance
Risk management
Organizational control
Corporate objectives
INTERNAL AND EXTERNAL AUDITING

It is important to understand and
recognize the differences and
commonalities between internal and
external audit. Internal and external
auditor should work closely together,
in particular to coordinate activity and
maximize effectiveness and where
appropriate external audit may rely on
the work of internal audit. However,
there are number of fundamental
differences in their objectives, scope
and responsibility.
Internal auditing
External auditing
Objectives
To advise management on whether To provide an opinion on whether

the organization has sound
the financial statements provide
systems of internal controls to
a true and fair view
protect the organization against
loss
Legal basis
All
areas of the organization, Financial focus

operational as well as financial
Scope
All
areas of the organization, Financial focus

operational as well as financial
Approach
Increasingly risk base

Assess risks
Evaluate system of controls
Test operation of system
Make
recommendation
improvements
Responsibility To
Increasingly risk based

Test underlying transactions that
form the basis of the financial
statements
for
advice
and
make To form opinion on whether the
recommendations on the internal
financial statements provide a
control
and
corporate
true and fair view.
governance
ISA 610, CONSIDERING THE WORK OF INTERNAL

AUDITING
ISA 610 requires external auditors to

consider the activities of internal auditors
and their effect, if any, on the nature,
timing, and extent of the external auditors
procedures. The external auditor considers
the organizational status of the internal
audit function, the scope of its function, the
technical competence of its members and
the professional care they exercise when
assessing the work of the department.
The auditing process is very similar

between the external and internal auditors
however; the audit objectives are often very
different.
ISA 610, CONSIDERING THE WORK OF INTERNAL

AUDITING
There are number of factors to consider for an auditor to

rely on the
work of internal auditor:
(a) Organizational status: Specific status of internal auditing in
the entity and the effect this has on its ability to be objective. In
the ideal situation, internal auditing will report to the highest level
of management and be free of any other operating responsibility.
Any constraints or restrictions placed on internal auditing by
management would need to be carefully considered. In particular,
the internal auditors will need to be free to communicate fully
with the external auditor.
(b) Scope of function: The nature and extent of internal
auditing assignments performed. The external auditor would also
need to consider whether management acts on internal audit
recommendations and how this is evidenced.
(c) Technical competence: Whether internal auditing is
performed by persons having adequate technical training and
proficiency as internal auditors. The external auditor may, for
example, review the policies for hiring and training the internal
auditing staff and their experience and professional qualifications.
(d) Due professional care: Whether internal auditing is
properly planned, supervised, reviewed and documented. The
existence of adequate audit manuals, work programs and working
papers would be considered.
OUTSOURCING OF IA FUNCTION
The National Board of Accountants and Auditors Governing Board at

its 132nd meeting held on 11th April 2005, among other issues,
deliberated on the above professional issue and resolved that the
outsourcing of the Internal Audit function in the country is a
relatively new phenomenon, which needs some guidance. In view of
this, it was agreed that institutions wanting to outsource the Internal
Audit function may only do so under the following conditions:
(1) That the service be provided in the form of a consultancy by
competent, qualified accountants registered with the Board in the
registration category of CPA-PP.
(2) That the outsourced Internal Auditor be distinct from the
External Auditor of the entity.
(3) That the institution seeking such professional services should
have in place an Audit Charter.
(4) That such professional services be guided by very clearly
worked out Terms of Reference showing:
the scope of the audit
the number of man-days to be used
the reporting requirement including the types and frequencies
of reports to be prepared
the price of the consultancy
OUTSOURCING OF IA FUNCTION
(5) That the consultancy be for a specified time frame after

which there should be need to change the internal auditor.
(6) That the client (procuring entity) shall have the powers
to pre-maturely terminate the consultancy contract on
unsatisfactory performance of the outsourced Internal
Auditor (Consultant).
(7) That the Internal Audit process should be guided by
programmes and detailed working papers which should be
available for AQR purposes, should need arise.
(8) That the outsourcing of the Internal Audit function should
avoid any kind of conflict of interest among the parties.
(9) That the Internal Auditor should exercise the prerequisite independence when rendering such professional
services.
(10)That such professional services should be procured
based on competitive bidding processes.
All organizations / entities operating in Tanzania and the
general public are required to note this development and
observe the above guidelines.
SHIFT OF EMPHASIS OF AUDIT

The
emphasis in approaching an audit has

shifted from detailed checking of individual
items towards an overall review of the
systems in operation; followed by an
examination of the records and the financial
statements prepared from them. Amongst the
reason for this major shift of emphasis are:
The
increasing size and complexity of modern

enterprises
The development of more accurate and
sophisticated computerized systems
The requirement that the auditor should also report
on the profit and loss account, which entails a
review of all transactions during the period, not
simply of year-end balances as before.
INTERNAL AUDITING WORKED EXAMPLE
TPDC, parastatal organization dealing with industrial

research development has recently decided to appoint a
small internal audit team. The Chief Accountant has sent
to you as statutory auditor for a number of years for your
comment on the following job specification for the team
Job specification- internal audit
Your role is to
Review accounting systems and related internal controls

Examine financial and operating information for management,
including detailed testing of transactions and balances
Review the economy , efficiency and effectiveness of
operations and of non financial controls
Review the implementation of corporate policies, plans and
procedures.
TPDC also state that the new internal audit team should
enable the statutory auditors to reduce the amount of
testing they undertake and thus, to increase overall
efficiency and reduce the cost of the statutory audit.
INTERNAL AUDITING WORKED EXAMPLE

1.
2.
3.
4.
5.
6.
Describe the objectives and scope of internal audit

function according to ISA 610
Comment briefly on the four items in the internal audit
job specification indicating with examples the extent,
which they might impinge upon the work of the
statutory auditor.
List and explain five criteria which you would have to
consider accordance to ISA 610, before deciding how
much reliance you could place on the work done by the
internal auditor
Outline the response, which you would make to TPDC
regarding a possible reduction in the cost of the
statutory audit.
If the management of TPDC decided to outsource the
internal audit services. Comment briefly on possible
advantages and disadvantages of the procedure.
Describe major ethical matters in accordance to ISA
which external auditors to TPDC should consider in case
they decide to undertake the external audit assignment
AUDIT AS A COMMUNICATION MEDIUM
According to ISA 700, the objective of any audit

is for the auditor to obtain sufficient appropriate
audit evidence to be able to express an opinion
on the financial statements.
ISA 700, provides authoritative guidance on
audit reporting.
Audit report is the primary means of
communication between the auditor and the
shareholders of the company.
In order to convey information of a succinct
form, the audit report has become an extremely
formalized group of phrases, each of which has
special significance. These are similar to legal
phrases know as terms of art. Such phrases do
not mean merely what they appear to mean on
the face of it , and have significance much
greater that they first appear to. Any deviation
from the standard format is regarded by
accountants as being significant and may
provide more important extra information.
THE AUDITOR'S STANDARD UNQUALIFIED AUDIT REPORT
This is the most common type of audit report.
The standard unqualified audit report contains seven important

elements:
Title
Addressee
Introductory
paragraph
Scope paragraph
Opinion paragraph
Name of auditor
Date of report
Example of unqualified report

AUDITORS REPORT TO .....
We have audited the financial statements of ABC
Company for the year ended December 31, 19X0, from
which the summarized financial statements were
derived, in accordance with International Standards on
Auditing (or refer to relevant national standards or
practices). In our report dated March 10, 19X1 we
expressed an unqualified opinion on the financial
statements from which the summarized financial
statements were derived.
In our opinion, the accompanying summarized financial
statements are consistent, in all material respects, with
the financial statements from which they were derived.
For a better understanding of the Companys financial position
and the results of its operations for the period and of the
scope of our audit, the summarized financial statements
should be read in conjunction with the financial statements
from which the summarized financial statements were derived
and our audit report thereon.
AUDITOR
Date
Address
QUALIFIED REPORT
A qualified report is less common and is where an auditor

disagrees with the view presented in the accounts, or if he
has not been able to form an opinion because of
inadequate evidence.A sample of it can be obtained on ISA
800 appendix 643 as an appendix 4.
Reasons for qualification
departure from IFRS

Scope limitation
The auditor is not independent
Example of qualified report
AUDITORS REPORT TO .....

We have audited the financial statements of ABC Company for
the year ended December 31, 19X0, from which the
summarized financial statements were derived, in accordance
with International Standards on Auditing (or refer to relevant
national standards or practices). In our report dated March 10,
19X1 we expressed an opinion that the financial statements
from which the summarized financial statements were derived
gave a true and fair view of (or presented fairly, in all material
respects) ...except that inventory had been overstated by ....
In our opinion, the accompanying summarized financial statements are
consistent, in all material respects, with the financial statements from
which they were derived and on which we expressed a qualified opinion.
For a better understanding of the Companys financial position and the
results of its operations for the period and of the scope of our audit, the
summarized financial statements should be read in conjunction with the
financial statements from which the summarized financial statements
were derived and our audit report thereon.
AUDITOR
Date
Address
Other reports
In summary the audit report must contain; the heading which

shows the independence of the auditor, the fact that the report
is addressed to the shareholders and the name of the company;
Respective responsibilities of directors and auditors; the basis
of opinion and the opinion. (Please visit google search on the
Internet for various samples of audit report).
Other forms
Qualified
Denial/Disclaimer
Adverse
AUDIT QUALIFICATION MATRIX
Nature of
Circumstance
Material but not Fundamental

fundamental
Limitation of
Scope
Except for
..might
Disclaimer
Disagreement
Except for
Adverse opinion
AUDIT QUALIFICATION MATRIX cont.
Except for ..might auditors disclaim an opinion on a

particular aspects of the accounts which is not considered
fundamental
Disclaimer of Opinion- Auditor state they are unable to form

an opinion in the truth and fairness
Except for , auditor expresses adverse opinion on particular

aspects of accounts which is not considered fundamental
Adverse opinion, auditors state that accounts do not give a

true and fair view.
AUDIT QUALIFICATION MATRIX
Limitation of Scope,
Absence of accounting records
Ownership of material assets
Disagreement
Inappropriate accounting policies
Facts /amount
Manner or extent of disclosure
Failure to comply with legislation
cont
REPORTING UNCERTAINITY
Inherent
uncertainty, an uncertainty
whose resolution is dependent upon
uncertain future event outside the control
of the reporting entitys directors at the
date financial statement are approved.
Fundamental Uncertainty, is an inherent
where the magnitude of its potential
impact is so great that, without a clear
disclosure of nature and implication of
uncertainty the view given by the f/s
would be seriously misleading.
E.g.
Going concern
Major
litigation
Worked Example
During the course of your audit of the fixed assets of

NEDCO LTD at 31 March 2004 two problems have arisen.
The calculations of the cost of direct labour incurred on
assets in course of construction by the companys
employees have been accidentally destroyed for the
early part of the year. The direct labour cost involved is
Tshs. 10,000,000/=
The company has received a government grant of
Tshs25, 000,000/= towards the cost of plant and
equipment acquired during the year and expected to
last for ten years. The grant has been credited in full to
the profit and loss account as exceptional income.
Other relevant financial information is as follows.
Tshs.
Profit before tax 100,000,000/=
Fixed asset additions 133,000,000/=
Assets constructed by company
34,000,000/=
Fixed asset at net book value 666,667,000/=
Worked Example
Required:
List the general forms of qualification available to
auditors in drafting their report and state the
circumstance in which each is appropriate.
State whether you feel that a qualified audit
report would be necessary with respect to the
treatment of the government grant, draft the
section of the report describing the matter (the
whole report is not required).
On the assumption that you decide that a
qualified audit report is necessary with respect to
the treatment of the government grant, draft the
section of the report describing the matter (the
whole report is not required).
Outline the auditor general responsibility with
regard to the statement in the directors report
concerning the valuation of land and buildings.
MISCELLANEOUS MATTERS
Timing of Audit work
At or after year end- suitable for small business

Interim and final audit
Interim test of controls, planning
Final - Substantive balance sheet audit
Continuous audit the auditor is present throughout the year ,

suitable for the large client
Responsibilities of directors
Safeguard assets
Prevent fraud and errors
Ensure proper accounting records as per Companies act
Prepare financial statements
Prepare companys return to registrar of companies
Set up system of IC
Directors are responsible to adopt consistent and appropriate
accounting policies for f/s, they must comply with Companies act
and comply with accounting standards
Miscellaneous Issues cont
Responsibilities of Auditors
End result work for f/s on their true and fairness
The auditors should have
Deep understanding and knowledge of accounting

Directors
will consult auditors of accounting policies to
adopt
Ultimately auditors must stand back from accounting
function
Social Audit
In Narrow sense it is a financial audit

It
adds value
Efficiency of markets and investment funds
Measuring social, ethical and Environmental

conduct to ensure
CSR,
accountability and transparency
Ensures that in an ever competitive corporate

environment management do not sacrifice their
social value in quest for higher profitability
AGENCY THEORY
Principal- Agent to perform task on his behalf
Agent will not act against the interest of the principal
Directors are like agents to shareholders
LETTER OF ENGAGEMENT
It is a letter send by an auditor before

commencing any professional work, it show an
agreement in writing, the precise scope and
nature of the work to be undertaken
Purpose
To define clearly the extent of the auditors

responsibilities
To minimize misunderstandings between auditor firm

and client
To confirm in writing the verbal agreement
To confirm acceptance by the auditor of his engagement
To inform and educate the client
Avoidance of implied contracts arising out of the articles

of Association or previous conduct of the auditor
LETTER OF ENGAGEMENT
Timing
To all new clients before any professional work has been

started
To all existing clients who have not previously had such a letter
Whenever there is significance changes of circumstances ( e.g.

new ISAs , major change in management.
The letter should be reviewed every year to see if there is a

need for revised letter
To each member of the company of the group ( if it is a group)
Procedures and Content

Before
acceptance discuss the precise

terms with the management( board
for a company)
Draft
and sign the letter before

commencing any part of an
assignment
Receive
the clients written

acceptance
Every
year review the letter and

consider if revision is necessary
CONTENTS OF LETTER OF ENGAGEMENT
The Boards responsibilities according to company Act

The auditors responsibilities to report on f/s and
consistency of view of directors report
The scope of auditors work
Auditing standards
Accounting systems review
Collection of audit evidence
Tests and reliance on internal controls
Sending of letter of weakness to the management

Any special factors
Relation with internal audit

Audit of division and branches
Any overseas location problems
Other auditors if any
Significance reliance on supervision of the directors in small
proprietary companies
CONTENTS OF LETTER OF ENGAGEMENT
Any special factors
Relation with internal audit

Audit of division and branches
Any overseas location problems
Other auditors if any
Significance reliance on supervision of the directors in small
proprietary companies
The need for a letter of representation from the

management
Irregularities and fraud the directors primary
responsibility
The auditors planning of his audit to have a reasonable

expectation of discovering material misstatement in accountsnon reliance on the auditor to uncover irregularities and frauds
Any agreement for the auditors to carry out work of a

bookkeeping or accounting nature- this could be covered
on separate letter
CONTENTS OF LETTER OF ENGAGEMENT CONT.

Any
agreement to provide taxation services

this could be a separate letter
The CHINNESE WALL IDEA; where accounting
and tax services are carried out the staff may
be different from those engaged on audit work
and so information given to tax or accounting
staff is not thereby given to audit staff.
The fees and the basis on which they are
charged
A request for written acknowledgement of the
letter and that it creates a contractual
obligations. In the case of a company the letter
of acknowledgement should be signed on
behalf of the board
CONCEPT OF MATERIALITY
According to ISA 320, the auditor should

consider materiality and its relationship
with audit risk when conducting an audit.
Also glossary number 139 defines
materiality as MaterialityInformation 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 cutoff point rather than being a
primary qualitative characteristic which
information must have if it is to be useful.
CONCEPT OF MATERIALITY
Auditors hope that their audit procedures will

uncover any large errors in the financial
statements they are auditing. Materiality
should be considered by the auditor when:
Determining the nature, timing and extent of audit

procedures;
Evaluating the effect of misstatements.
Materiality is defined as the expression for the

relative significance or importance of a
particular matter in the context of financial
statements as a whole. A matter is material if
its omission or misstatement would reasonably
influence the decisions of an addressee of the
auditors report. Materiality is not capable of
the general mathematical definition as it has
both qualitative and quantitative aspects.
CONCEPT OF MATERIALITY CONT
Auditors responsibility is to plan and perform

their audit to provide reasonable assurance
that the financial statements are free of
material misstatement and give a true and
fair view. From audit point of view anything
that would distort the view given by accounts
must lead to qualification but only if it is
material.
Example things that will fit the above
definition include
Inclusion of deferred revenue expenditure,
such as advertising costs, in debtors and
prepayments
A loan which could not quickly be recalled
shown under money at call at short notice
Omission of an item of stock
CONCEPT OF MATERIALITY CONT
The key problem in practice is that of

how large an item has to be for it to
be considered as material.
An initial assessment of materiality

during audit planning assists in the
determination of an efficient and
effective audit approach. The
preliminary materiality assessment
helps auditor to decide such factors as
what items to examine and whether to
use sampling techniques and which
ones. This enables them to select
audit procedures that will reduce audit
risk to an acceptable level.
MATERIALITY CONCEPT CONT.
Auditors must use their professional judgment in coming

to a decision as to whether an item is, or is not, material.
Important points to take into consideration are as follows:
What qualitative aspects are involved, such as the

inaccurate or inadequate description of an accounting
policy?
Relatively small amounts, such as a small error in a

month end procedure, can cumulatively have a
material effect, if repeated.
Materiality is relative factor and should be considered

in relative terms. Shs.1,000,000 may be absolutely
immaterial in the accounts of a larger company ,
whereas in a small organization the reverse would
probably be true. Further, under this heading and
amount must considered in relation to:-
MATERIALITY CONCEPT CONT.
Items in the overall financial statement level
Items at individual account balance or transaction level
Statutory and other disclosure requirements which may require

disclosure regardless of value , such as those relating to
directors emoluments.
The corresponding amount in previous years
What degree of latitude is allowable in

deciding on the amount attributable to a
particular item? Some items, such as
directors fees, are capable of exact
definition; other, such as depreciation and
provisions for obsolete or damaged stock, are
at best an intelligent estimate. The
overriding consideration must be whether
the accounts disclose a true and fair view. It
is also clearly important that such items are
consistently treated from year to year.
Materiality Cont..
Auditors must use their professional

judgment in deciding whether or not an item
is material. They must consider:
Qualitative aspects
The cumulative effect of small amounts
The relative nature of materiality
The degree of latitude that is allowable.
According to ISA 320:400, in evaluating
whether the financial statements give a true
and fair view, auditors should assess the
materiality of the aggregate of uncorrected
misstatements. This indicates that the overall
effect of misstatements should be evaluated.
Materiality Cont..
If the auditor believes that the aggregate

of uncorrected misstatement may be
material, they may wish to extend their
audit testing to obtain more audit
evidence in the relevant area, or request
the directors to adjust the financial
statements according to ISA 260
Communication of audit matters to those
who are charged with Governance. In
practice, once the directors have been
informed of the misstatements in the draft
accounts, they are likely to be happy for
accounts to be adjusted. If the directors
refuse any adjustments, the auditor
should consider the implications for the
audit report.
Materiality Cont..
The following are some of audit tests to

determine whether an item is material.
Who are the relevant users?
What are their decision making

needs?
For a given item, what is the

appropriate context for assessing its
materiality?
In what range of values do items

become critical in terms of
materiality
Materiality Cont..
The following are some of audit tests to

determine whether an item is material
For a given item, what is the appropriate
context for assessing its materiality?
Securities and Exchange Commission in US
(main regulator of US securities Laws)
takes the following rule of thumb for
materiality.
Errors over 10% - material
Errors between 5% and 10% may be
material
Errors less than 5% - not material. But
note that these are figures as
guidelines only, judgment is required.
General Principles of an Audit
The auditor should comply with the Code of Ethics for

Professional Accountants issued by the International Federation
of Accountants. Ethical principles governing the auditors
professional responsibilities are:
Independence;
Integrity;
Objectivity;
Professional
competence and due
care;
Confidentiality; Professional behavior;
and
Technical standards.
Integrity
A professional accountant should be straightforward and honest in

performing professional services.*
Objectivity
A professional accountant should be fair and should not allow

prejudice orbias, conflict of interest or influence of others to
override objectivity.
Professional Competence and Due Care

A professional accountant should perform professional
services with due care, competence and diligence and has a
continuing duty to maintain professional knowledge and skill
at a level required to ensure that a client or employer
receives the advantage of competent professional service
based on up-to-date developments in practice, legislation
and techniques.
Confidentiality
A professional accountant should respect the confidentiality
of information acquired during the course of performing
professional services and should not use or disclose any such
information without proper and specific authority or unless
there is a legal or professional right or duty to disclose.
Professional Behavior
A professional accountant should act in a manner consistent with
the good reputation of the profession and refrain from any conduct
which might bring discredit to the profession. The obligation to
refrain from any conduct which might bring discredit to the
profession requires IFAC member bodies to consider, when
developing ethical requirements, the responsibilities of a
professional accountant to clients, third parties, other members of
the accountancy profession, staff, employers, and the general
public.
Technical Standards
A professional accountant should carry out professional services in
accordance with the relevant technical and professional standards.
Professional accountants have a duty to carry out with care and
skill, the instructions of the client or employer insofar as they are
compatible with the requirements of integrity, objectivity and, in the
case of professional accountants in public practice. In
addition, they should conform with the technical and professional
standards promulgated by:
.
.
.
.
IFAC (e.g., International Standards on Auditing);

International Accounting Standards Board;
The members professional body or other regulatory body; and
Relevant legislation.
The auditor should plan and perform an

audit with an attitude of professional
skepticism recognizing that circumstances
may exist that cause the financial
statements to be materially misstated
An attitude of professional skepticism means
the auditor makes a critical assessment, with a
questioning mind, of the validity of audit evidence
obtained and is alert to audit evidence that
contradicts or brings into question the reliability of
documents or management representations
In planning and performing an audit, the auditor
neither assumes that management is dishonest
nor assumes unquestioned honesty. (Remember
Mautz and Sharaf audit postulates).
Accordingly, representations from management
are not a substitute for obtaining sufficient
appropriate audit evidence to be able to draw
reasonable conclusions on which to base the audit
opinion.
SCOPE OF AUDIT
The term scope of an audit refers to the audit

procedures deemed necessary in the circumstances to
achieve the objective of the audit. The procedures
required to Conduct an audit in accordance with ISAs
should be determined by the auditor having regard to
the requirements of ISAs, relevant professional bodies,
legislation, regulations and, where appropriate, the
terms of the audit engagement and reporting
requirements.
An audit in accordance with ISAs is designed to provide

reasonable assurance that the financial statements
taken as a whole are free from material misstatement.
Reasonable assurance is a concept relating to the
accumulation of the audit evidence necessary for the
auditor to conclude that there are no material
misstatements in the financial statements taken as a
whole. Reasonable assurance relates to the whole audit
process.
SCOPE OF AUDIT
REASONABLE ASSURANCE Vs ABSOLUTE ASSURANCE
An auditor cannot obtain absolute assurance because there are

inherent limitations in an audit that affect the auditors ability to
detect material misstatements. These limitations result from
factors such as:
The use of testing.
The inherent limitations of internal control (for example, the

possibility of management override or collusion).
The fact that most audit evidence is persuasive rather than

conclusive.
REASONABLE Vs ABSOLUTE ASSURANCE..
Also, the work undertaken by the auditor to form an audit

opinion is permeated by judgment, in particular regarding:
The gathering of audit evidence, for example, in deciding

the nature, timing,
and extent of audit procedures; and
The drawing of conclusions based on the audit evidence

gathered, for
example, assessing the reasonableness of the estimates

made by management
in preparing the financial statements.
QUALITY CONTROL
According to ISA 220, the audit firm should implement quality

control policies and procedures designed to ensure that all
audits are conducted in accordance with ISAs or relevant
national standards or practices. The nature, timing and extent of
an audit firms quality control policies and procedures depend
on a number of factors such as the
size and nature of its practice,
its geographic dispersion,
its organization and
appropriate cost/benefit considerations.
QUALITY CONTROL
The firms general quality control policies and procedures

should be communicated to its personnel in a manner that
provides reasonable assurance that the policies and procedures
are understood and implemented. Further, The auditor should
implement those quality control procedures, which are, in the
context of the policies and procedures of the firm, appropriate
to the individual audit.
OBJECTIVES OF QC
(a) Professional requirements:

Personnel in the firm are to adhere to the principles of
independence, integrity, objectivity, confidentiality
and professional behavior.
(b) Skills and competence:
The firm is to be staffed by personnel who have
attained and maintain the technical standards and
professional competence required to enable them to
fulfill their responsibilities with due care.
(c) Assignment:
Audit work is to be assigned to personnel who have
the degree of technical training and proficiency
required in the circumstances.
(d) Delegation:
There is to be sufficient direction, supervision and
review of work at all levels to provide reasonable
assurance that the work performed meets appropriate
standards of quality.
OBJECTIVES OF QC
(e)
Consultation:
Whenever necessary, consultation within or
outside the firm is to occur with those who
have appropriate expertise.
(f) Acceptance and retention of clients:
An evaluation of prospective clients and a
review, on an ongoing basis, of existing clients
is to be conducted. In making a decision to
accept or retain a client, the firms
independence and ability to serve the client
properly and the integrity of the clients
management are to be considered.
(g) Monitoring:
The continued adequacy and operational
effectiveness of quality control policies and
procedures is to be monitored.
PRINCIPLES OF DELEGATION IN QC.
Any delegation of work to assistants would be in a

manner that provides reasonable assurance that such
work will be performed with due care by persons having
the degree of professional competence required in the
circumstances. In due course the following matters will be
considered:
Direction
Supervision
Review
Principles of Delegation in QC
Direction
Assistants to whom work is delegated need appropriate direction. Direction

involves informing assistants of their responsibilities and the objectives of
the procedures they are to perform. It also involves informing them of
matters, such as the nature of the entitys business and possible accounting
or auditing problems that may affect the nature, timing and extent of audit
procedures with which they are involved. The audit program is an important
tool for the communication of audit directions. Time budgets and the overall
audit plan are also helpful in communicating audit directions.
PRINCIPLES OF DELEGATION IN QC..
Supervision
Supervision is closely related to both direction

and review and may involve elements of both.
Personnel carrying out supervisory
responsibilities perform the following functions
during the audit:
Monitor
the progress of the audit to consider whether:
Assistants
have the necessary skills and competence to carry

out their assigned tasks;
Assistants understand the audit directions; and
The work is being carried out in accordance with the overall
audit plan and the audit program;
Become
informed of and address significant

accounting and auditing questions raised during the
audit, by assessing their significance and modifying
the overall audit plan and the audit program as
appropriate; and
Resolve any differences of professional judgment
between personnel and consider the level of
consultation that is appropriate.
PRINCIPLES OF DELEGATION IN QC.
Review
The work performed by each assistant needs

to be reviewed by personnel of at least
equal competence to consider whether:
The
work has been performed in accordance

with the audit program;
The work performed and the results obtained
have been adequately documented;
All significant audit matters have been
resolved or are reflected in audit conclusions;
The objectives of the audit procedures have
been achieved; and
The conclusions expressed are consistent with
the results of the work performed and support
the audit opinion.
THINGS TO BE REVIEWED ON TIMELY BASIS
The overall audit plan and the audit program;

The assessments of inherent and control risks, including
the results of tests of control and the modifications, if
any, made to the overall audit plan and the audit
program as a result thereof;
The documentation of the audit evidence obtained from
substantive procedures and the conclusions drawn
there from, including the results of consultations; and
The financial statements, proposed audit adjustments
and the proposed auditors report.
The process of reviewing an audit may include,

particularly in the case of large complex audits,
requesting personnel not otherwise involved in the
audit to perform certain additional procedures before
issuing the auditors report.
CONTEMPORARY AUDIT ISSUES AS PART OF AQR
Adhering generally to auditing standards and Guidelines
Obtaining confirmation direct from the companys bankers of

bank balances and other important matters known to the
bankers.
Obtaining direct confirmation of balances owed by debtors
Attendance at stocktaking.
NATURE AND SOURCE OF AUDIT EVIDENCE
ISA defines audit evidence as all of the information used by

the auditor in arriving at the conclusions on which the audit
opinion is based. Audit evidence 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.
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 firms quality control procedures for client acceptance and
continuance.
The auditor seeks to obtain sufficient appropriate audit

evidence at the class of transactions, account balance, and
disclosure level in such a way that enables the auditor, at
the completion of the audit, to express an opinion on the
financial statements taken as a whole at an acceptably low
level of audit risk. Auditors use various approaches to
accomplish that objective.
AUDIT EVIDENCE CON..
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 entitys
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
SUFFICIENCY,APPROPRIATENESS AND RELIABILITY OF EVIDENCE
An auditor has to obtain sufficient, appropriate and reliable audit

evidence as to a material financial statement assertion.
Sufficiency is the measure of the quantity of audit evidence.

Appropriateness is the measure of the quality of audit evidence; that is,
its relevance and its reliability in providing support for, or detecting
misstatements in, the classes of transactions, account balances, and
disclosures and related assertions.
The quantity of audit evidence needed is affected by the risk of
misstatement (the greater the risk, the more audit evidence is likely to
be required) and also by the quality of such audit evidence (the higher
the quality, the less may be required). Accordingly, the sufficiency and
appropriateness of audit evidence are interrelated. However, merely
obtaining more audit evidence may not compensate for its poor quality.
For example, inspection of records and documents related to the
collection of receivables after the period end may provide audit
evidence regarding both existence and valuation, although not
necessarily the appropriateness of period-end cutoffs.
On the other hand, the auditor often obtains audit evidence from
different sources or of a different nature that is relevant to the same
assertion. For example, the auditor may analyze the aging of accounts
receivable and the subsequent collection of receivables to obtain audit
evidence relating to the valuation of the allowance for doubtful
accounts.
Furthermore, obtaining audit evidence relating to a particular assertion,
for example, the physical existence of inventory, is not a substitute for
obtaining audit evidence regarding another assertion, for example, the
valuation of inventory.
FACTORS INFLUENCING RELIABILITY OF AUDIT

EVIDENCE
The
reliability of audit evidence is influenced by its source and by
its nature and is dependent on the individual circumstances
under which it is obtained. While recognizing that exceptions may
exist, the following generalizations about the reliability of audit
evidence may be useful
Audit evidence is more reliable when it is obtained from
independent sources outside the entity.
Audit evidence that is generated internally is more reliable
when the related controls imposed by the entity are effective.
Audit evidence obtained directly by the auditor (for example,
observation of the application of a control) is more reliable than
audit evidence obtained indirectly or by inference (for example,
inquiry about the application of a control).
Audit evidence is more reliable when it exists in documentary
form, whether paper, electronic, or other medium (for example, a
contemporaneously written record of a meeting is more reliable
than a subsequent oral representation of the matters discussed).
Audit evidence provided by original documents is more reliable
than audit evidence provided by photocopies or facsimiles.
When information produced by the entity is used by the auditor to perform

audit
procedures, the auditor should obtain audit evidence about the accuracy
and completeness of the information.
FACTORS INFLUENCING RELIABILITY OF AUDIT

EVIDENCE..
The auditor ordinarily finds it necessary

to rely on audit evidence that is
persuasive rather than conclusive;
however, to obtain reasonable
assurance, the auditor is not satisfied
with audit evidence that is less than
persuasive. The auditor uses professional
judgment and exercises professional
skepticism in evaluating the quantity and
quality of audit evidence, and thus its
sufficiency and appropriateness, to
support the audit opinion.
USE OF ASSERTIONS FOR AUDIT EVIDENCE
The auditor should use assertions for classes of transactions,

account balances, and presentation and disclosures in sufficient
detail to form a basis for the assessment of risks of material
misstatement and the design and performance of further audit
procedures. The auditor uses assertions in assessing risks by
considering the different types of potential misstatements that
may occur, and thereby designing audit procedures that are
responsive to the assessed risks. Other ISAs discuss specific
situations where the auditor is required to obtain audit evidence
at the assertion level.
Assertions used by the auditor fall into the following categories:

Assertions about classes of transactions and events for the
period under audit:
Occurrencetransactions and events that have been recorded have

occurred and pertain to the entity.
(ii) Completenessall transactions and events that should have
been recorded have been recorded.
Accuracyamounts and other data relating to recorded transactions
and events have been recorded appropriately.
Cutofftransactions and events have been recorded in the correct
accounting period.
Classificationtransactions and events have been recorded in the
proper accounts.
ASSERTIONS CONT.
Assertions about account balances at the period end:
Existenceassets, liabilities, and equity interests exist.

Rights and obligationsthe entity holds or controls the rights to assets,
and liabilities are the obligations of the entity.
Completenessall assets, liabilities and equity interests that should have
been recorded have been recorded.
Valuation and allocationassets, liabilities, and equity interests are
included in the financial statements at appropriate amounts and any
resulting valuation or allocation adjustments are appropriately recorded.
Assertions about presentation and disclosure:
Occurrence and rights and obligationsdisclosed events, transactions,

and other matters have occurred and pertain to the entity.
Completenessall disclosures that should have been included in the
financial statements have been included.
Classification and understandabilityfinancial information is
appropriately presented and described, and disclosures are clearly
expressed.
Accuracy and valuationfinancial and other information are disclosed
fairly and at appropriate amounts.
AUDIT PROCEDURES FOR OBTAINING AUDIT EVIDENCE
Obtain an understanding of the entity and its

environment, including its internal control, to assess
the risks of material misstatement at the financial
statement and assertion levels (audit procedures
performed for this purpose are referred to in the ISAs
as risk assessment procedures);
When necessary or when the auditor has determined
to do so, test the operating effectiveness of controls in
preventing, or detecting and correcting, material
misstatements at the assertion level (audit procedures
performed for this purpose are referred to in the ISAs
as tests of controls); and
Detect material misstatements at the assertion level
(audit procedures performed for this purpose are
referred to in the ISAs as substantive procedures
and include tests of details of classes of transactions,
account balances, and disclosures and substantive
analytical procedures).
TEST OF CONTROLS
Tests of controls are necessary in two

circumstances. When the auditors risk assessment
includes an expectation of the operating
effectiveness of controls, the auditor is required to
test those controls to support the risk assessment.
In addition, when substantive procedures alone do
not provide sufficient appropriate audit evidence,
the auditor is required to perform tests of controls
to obtain audit evidence about their operating
effectiveness.
Examples of tests
Walkthrough tests this includes taking a few

transactions and following them through every stage of the
system, from material requisition to settlement of
suppliers invoice.
Test of controls- Taking a representative sample of
transactions, and testing certain significant controls. For
purchases, test control over payments by checking
purchases invoices have been authorized before payments
Substantive procedures Taking a larger sample of
balances, and testing for completeness and accuracy. For
creditors, compare suppliers statements with purchases
ledger to ensure creditors are stated at their correct
amount.
EVIDENCE IN E-COMMERCE
The nature and timing of the audit procedures to be used may

be affected by the fact that some of the accounting data and
other information may be available only in electronic form or
only at certain points or periods in time. Source documents,
such as purchase orders, bills of lading, invoices, and checks,
may be replaced with electronic messages. For example,
entities may use electronic commerce or image processing
systems. In electronic commerce, the entity and its customers
or suppliers use connected computers over a public network,
such as the Internet, to transact business electronically.
Purchase, shipping, billing, cash receipt, and cash
disbursement transactions are often consummated entirely by
the exchange of electronic messages between the parties. In
image processing systems, documents are scanned and
converted into electronic images to facilitate storage and
reference, and the source documents may not be retained
after conversion. Certain electronic information may exist at a
certain point in time. However, such information may not be
retrievable after a specified period of time if files are changed
and if backup files do not exist. An entitys data retention
policies may require the auditor to request retention of some
information for the auditors review or to perform audit
procedures at a time when the information is available.
USE OF CAAT TO OBTAIN ELECTRONIC EVIDENCE
When the information is in electronic form, the

auditor may carry out certain of the audit
procedures described below through CAATs
Inspection of Records or Documents

Inspection of Tangible Assets
Observation -consider ISA 501, Audit Evidence
Additional Considerations for Specific Items
Inquiry- consider ISA 580, Management
Representations for further guidance on written
representations.
Confirmation- consider ISA 505, External
Confirmations for further guidance on
confirmations.
Recalculation
Reperformance
Analytical Procedures consider ISA
520,Analytical Procedures for further guidance
on analytical procedures.
MANAGEMENT ASSERTIONS
Example inventory
Existence- inventory in the balance sheet physically exists.
Inventory is held for sale or use in the ordinary course of
business
Completeness
Inventory
quantities include all items on hand, in transit and

stored at outside locations. Inventory listings are accurately
included in the inventory accounts.
Rights and Obligations the company has legal title or

similar rights of ownership to the inventory. Inventory
excludes items billed to customers or owned by others..
Valuation inventory is properly stated at cost. Valuation is
reduced , where appropriate, to the market lower than cost
Presentation and Disclosure inventory is properly
classified as a current asset. Major inventory categories
and their valuation bases are adequately disclosed in
notes. Pledge or assignment of inventory as collateral is
appropriately disclosed in notes
EXISTENCE TESTS CUT OFF PROCEDURES
CUTOFF REFERS TO RECOGNIZING ASSETS AND

LIABILITIES AS OF A PROPER DATE AND ACCOUNTING FOR
REVENUE, EXPENSE AND OTHER TRANSACTIONS IN THE
PROPER PERIOD.
SIMPLE CUT OFF ERRORS CAN OCCUR
When last December sales invoices are record for
goods not actually shipped until January or when cash
receipts are recorded through the end of the week
( e.g.., Friday, January 4) and the last batch for the
year should have been processed on December 31
In Auditors jargon, the cutoff date refers to the client's
year end balance sheet date. Proper cutoff means
accounting for all transactions that occurred during the
period and neither postponing some recordings to the
next period nor accelerating next-period transactions
into the current- year accounts.
GENERAL AUDIT PROCEDURES

Management
Assertions
and Audit
Objectives
Sufficient
appropriate
Evidence
General
Audit
procedures
Audit
Working papers
The auditors use seven basic types of evidence an seven general

procedures to gather it. One or more of these procedures may be
used no matter what account balance , control procedures, class of
transactions or other other information is under audit. The auditor
arrange the procedures in an AUDIT PROGRAM
TYPES OF EVIDENCE AND RELATED AUDIT PROCEDURES

TYPES OF EVIDENCE
EVIDENCE GATHERING PROCEDURES
Physical observation, inspection
Observation and Examination by the

Auditor
Auditors calculations
Recalculation by the auditor
Statement by independent parties
Confirmation letter
Statement by client personnel
Verbal inquiry and written representations
Documents prepared by independent

parties
Examination of documents ( vouching or

tracing)
Documents prepared by the client
Examination of documents ( vouching or

tracing)
Data interrelationship
Scanning and Analytical procedures
INTERNAL CONTROLS
Internal control system is the whole system of

controls, financial and otherwise, established by
the management in order to carry on the
business of enterprise in an orderly and efficient
manner ensure adherence to management
policies, safeguard the assets and secure as far
as possible the completeness and accuracy of
the records.
Types of internal control
Organizational
Plan
of an organization
Define and allocate responsibilities
Identify lines of reporting
Authority to purchase items of plant may be vested in BoD
Segregation of Duties
No
one person should be responsible for the recording and

processing of the entire transaction.
Several people reduces the risk of intentional or accidental
manipulation or error
Authorization, execution and custody , recording
INTERNAL CONTROLS.
Physical
Authorization and approval
Limit access to authorized personnel only

Documentation of access
Controls for valuables , portable , exchangeable or desirable assset e.g .locking of securities,in
safe with procedures for the custody and use of keys
Approval by authorized person, limits of authorization should be specified e.g credit sale must
be approved by the credit control dept.
Arithmetical and accounting
Controls in the recording function which check that the transactions have been authorized,
they are all included and that they are correctly recorded and accurately processed.
Checking the arithmetical accuracy of the records the maintenance and checking of total,
reconciliations
Personnel
Procedures to ensure that personnel operating a system are competent and motivated to carry
out the task to them as the proper functioning of a system depends upon the competence and
integrity of operating personnel
Appropriate remuneration and promotion and career development prospects, selection of
people with appropriate personal characteristics and training , and , assignment to the task of
the right level
Supervision
Previews, bank reconciliation
All actions by all levels of staff should be supervised. Responsibility for supervision should be
clearly laid down and communicated to the persons being supervised.
Management
Controls exercised by mgt which are outside and over and above the day to day routine of the
system
Overall supervision controls, reviews of mgt controls, comparisons with budgets , internal
audits
INTERANL CONTROLS..
Other controls
Acknowledgement of Performance
A person performing data processing operations should

acknowledge their activities by means of signatures,
initials , rubber stamps.
Budgeting
Is a quantitative plan of action
Budgets can be compared with actual turn and differences

investigated
AUDIT TESTING
WALK THROUGH TESTS

An auditor must record the accounting system and its associated
internal controls
When the record has been prepared in the previous year or earlier or
when it has been prepared by the staff of the client, it is necessary
for the auditor to be sure that the record correctly describes the
system as it exists and is operated. To test the correctness of the
description, the auditor takes a few transactions of each type. This
means tracing the transaction from its initiation to the entry in the
books of account, looking at all documents and records produced,
the manner of preparation and the internal controls applied. The
objective is not to test the effectiveness of the system but that the
auditor has a correct description and understanding of the system.
The walk through test should also be applied

In situation where the auditor has not obtained his description of the
system from a personal investigation of the system by the
questioning operating staff and examining documents and records
At the final audit when he needs to review the system form the date
of the interim completion of the year end . She must determine if the
system has changed and walk through checks will achieve this.
COMPLIANCE TESTS
Those tests which seek to provide audit evidence that provides audit
evidence that internal control procedures are being applied as
prescribed.
COMPLIANCE TESTS
The first stage is preliminary review of the effectiveness of
the system by using an internal control evaluation
questionnaires which contains key questions.
E.g. can wage be paid to piecework personnel for work not
done?
The system would then be inspected o see if it included

procedures to ensure that this could not happen.
If the system appears to be defective or weak then the auditor
may need to abandon the system approach and apply
substantive test. If the system is effective, then the next stage is
for the auditor to obtain evidence that the system is effective ,
then the next stage is for the auditor to obtain evidence that the
system is applied as his description at all times. This evidence is
obtained by examining a sample of the transactions to determine
if each has been treated as required by the system.
NOTE:
Compliance tests is the application of the system that is
being tested not the transactions although the testing is
through the medium of the transactions
If the discovery is made that the system was not complied
with in any particular, then;
She may need to revise his system description and re-appraise

its effectiveness
She will need to determine if the failure of compliance was an
isolated instance or was symptomatic.
SUBSTANTIVE TESTS
Are those tests (other than compliance tests) of transactions

and balances and other procedures such as analytical review,
which seek to provide evidence as to the completeness ,
accuracy and validity of the information contained in the
accounting records or the financial statements.
Substantive test is any test which seeks direct evidence of the

correct treatment of a transaction, a balance , an asset , a
liability, or any item in the books or accounts.
Examples
Transactions
A balance e.g. deposit account
Analytical review
Completeness of information
Accuracy of information
Validity of information
TECHNIQUES OF AUDIT TESTING

Inspection
Observation
Inquiry
Computation
ROTATIONAL
Rotation
TESTS
of audit emphasis the auditor

performs a systems audit on all areas of the
clients business every year but each year he
select one are ( wages, sales, stock control,
purchasing) for special in-depth testing
Visit rotation where the client has numerous
branches , factories, locations, etc, it may be
impractical to visit them all each year.
AUDIT WORKING PAPERS
The audit work must be adequately planned, controlled and

recorded.
The purpose of working papers
To control current years work, the record of work done is essential for
the audit clerk, supervisor, manager and partner and other person who
will review the work done.
To form the basis for the plan of the audit of the following year
Evidence of the work carried out.
The working papers should contain
Information and documents which are continuing importance to each

annual audit
Audit planning and control information
Details of the clients system and records with the auditors evaluation
of them
Schedules in support of the accounts additional to, or summarizing the
detail in the clients Books.
Details of the audit work carried out, notes of queries raised with action
taken thereon and the conclusion drawn by the audit staff concerned
Evidence that the wok of the audit staff has been properly reviewed by
more senior people
A summary of significant points affecting the financial statements and
the audit report ( e.g. the guarantee above), showing how these points
were dealt with
FORMS OF WORKING PAPERS
The Permanent file
The permanent file usually contains documents and matters

continuing importance which will be required for more than one
audit
Statutory materials- governing conduct, accounts and audit of the

enterprise
The rules and regulations of the enterprise , example article and
memorandum of association
Copies of documents of continuing importance such as letter of
engagement, minutes of appointment of auditor; trade, license, and
royalty agreements entered into by client, debenture notes, guarantees
and indemnities entered into.
An organization chart; the principal dept and subdivision thereof with
note for number of peoples involved; and names of responsible officials
List of books and other records and where they are kept, names ,
positions, specimens of signature and initials of persons responsible
for books and documents should also be included. Account codes and
classifications should also be held
An outline history of organization eg. Share capital , reserves,
provisions, prospectuses, ; acquisition of subsidiaries and businesses.
There should also be a record of important account ratios
List of accounting matters of importance. E.g. accounting policies for
stock, work in progress, depreciation,
Notes of interviews and correspondence ( internal control matters and all past
letters of weakness)
Clients internal audit and accounting instructions
List of directors , their shareholdings and service contracts
List of companys properties and investments with notes on verification
A list of company advisors, bankers, solicitors, lawyers
It is important that the permanent file is updated on the occasion of each

audit.
THE WORKING PAPERS
The current file
A copy of accounts being audited, authenticated by directors signatures

An index of the file
A description of the ICS in the form of an ICQ, flowchart, or written
description together with specimen documents
An audit programme
A list of work to be carried out by audit staff
A list with details of tests actually carried out
The result so the tests and the conclusions drawn from them
Cross reference to IC record and letter of weakness
Were rotational testing over a period of years is used , reference to appropriate part
of Permanent File
A schedule for each items in the profit and Loss Account showing its make up
Checklist for compliance with statutory disclosure requirements; IAS
A schedule of each item in the Balance sheet. Each schedule should show;
The item at the beginning of the year, changes during the year and the balance at
the end
Details of how its existence , ownership , value and appropriate disclosure have
been verified
Documents of external verification e.g. bank letter
A record showing queries raised during the audit and coming forward from
previous years. This record will show how the queries have been dealt with,
by whom ( i.e. audit clerks, supervisor, manager or partner) and if not
satisfactory answered, the treatment adopted which may be a qualification of
the auditors report, and contingent liabilities.
Current File cont.
Schedule of important statistics. These will include

quantitative matters such as the output, sales
composition, employment, and also accounting ratios
such as capital employed , gross and net profit rations
and liquidity rations. Comparison of these statistics with
those of previous years( note din the Permanent File)
must be made to determine significant variation. The
variations need to be investigated and explanation
sought
A record or abstract from the minutes of
The company
The directors
Any internal committee of the company whose deliberations
are important to the auditor . E.g. internal audit committee,
a budget committee, a capital expenditure committee.
Copies of letters to the client setting out internal control

weaknesses
Letters of Representation- these are letters written by
the Directors ( or equivalent in organization other than
companies) to the auditors, being written confirmation of
information given or opinions expressed by the directors
on such matters as the value of stock, value of
properties, uncertain obligations
Working papers cont..
Both
the permanent and current files

contain material on IC. It a matter of
opinion where this data is filed; some audit
firms adopt a filing system whereby IC
matters are stored in a third file, the
Internal Control File.
Throughout the current file , reference
should be as to how each item is used as
audit evidence. Conversely , for each type
of transactions and balance , the nature of
the audit evidence supporting it should be
demonstrated. The evidence may be from
internal control reliance , substantive
testing or from analytical review or form a
combination of these sources.
INTERNAL CONTROL QUESTIONNAIRES
Functions:
A method of ascertainment of the system
Enabling the auditor to review and assess the adequacy of

the system
Enables the auditor to identify the areas of weakness
Enabling the auditor to design a series of tests. In effect this

means enabling the auditor to draw up his audit programme
Enables the auditors staff to familiarize themselves with the

system quickly and comprehensively.
I.C.Q CONT.
Advantages
The use of standardized I.C.Q. ensures that all the important

questions are asked and the important characteristics of a
system are brought out
The I.C.Q. is a comprehensive , all in , inclusive method of

ascertaining , recording g, and evaluating a system of IC
An example of a part of I.C.Q includes separate columns for ;

questions, Answers- if possible Yes/N; assessment of IC
strength; Disposal of weakness and cress reference to audit
programmme
INTERNAL CONTROL EVALUATION QUESTIONNAIRES
Some
audit firms uses ICQ's exclusively,

others prefer to ascertain the system by
questioning staff and recording the system
by means of flowcharts or by written
notes.
I.C.E.Q is a standardized set of questions
which has the advantage, like the I.CQ. , of
ensuring all right questions are asked and
the strength and weakness of a system are
brought about.
The basic questions in an I.C.E.Q are called
control questions, an example from the
sale area is can sales be invoiced but not
recorded in the books? Each control
questions requires an answer Yes or No.
FLOWCHARTS
Flowcharts are a relatively new method of recording internal control

system form the auditor's standpoint
Advantages
It enable the system to be recorded in such a way that it can be understood

by
New staff coming to the audit
Supervisors, managers, and partners
Client staff, who can have weaknesses pointed out more easily
The overall picture of the firm can be seen , and in particular the auditor
can be assured he has the whole picture as slow lines going nowhere can
be easily spotted
Flowcharting is a consistent system of recording
Flowcharting is a disciplined method of recording
Flowcharting highlights relationship between different pats of a system
Weaknesses are easier to spot
Flowcharts are permanent record but are easily updated
In complex cases, flowcharting is the only way to gain an understanding of
the system
Disadvantages
Time consuming
Can become a fetish i.e. ends in themselves
They are of little use in systems 9 e.g. small concerns) where internal
control is ineffective or very simple
Numerous symbol systems abound which can cause confusion
FLOWCHARTING CONT.
The objective of a flowchart is that it is complete in itself and can be
read and understood quickly and comprehensibly.
The following are important in preparing flowcharting
An organization chart is an essential concomitant
Simplicity and clarity are fundamental
It must not be congested
Use only horizontal and vertical lines
Chart the flow of goods and documents on separate charts
Serial number the operations
Cross reference to ICQ, ICEQ, Audit program , letter of weakness
It must show
Initiation for each document and operation

Sequence of all operational on documents and all copies of documents ,
especially operations of control, inspecting, checking, comparing and
approving
To ultimate destination
Sections or individuals who perform the operations
Use chart symbols only , if possible
Specimens of documents should be attached and cross referenced
AUDIT PROGRAMME
It is simply a list of work an auditor does on the

occasion of his audit.
Advantages
Example: vouch three months There would be columns

for the periods selected and of the initial of the audit clerk
and the date of the test.
They provide a clear se of instructions on the work to be
carried out
They provide a clear record of the work carried out and by
whom
Work can be reviewed by supervisors, managers
Work will not be duplicated
No important work will be overlooked
Evidence of work done is available for use in defense
actions for negligence
Disadvantages
Work may become mechanical

Parts may be executed without regard to whole system.
ACCOUNTANTS LIEN
Accountants are considered to have a particular lien over

any books of account, files and papers which their clients
have delivered to them and also over any documents which
have come into their possession in the course of their
ordinary professional work
In particular the lien gives the possessor the right to retain

goods until a debt arising in connection with those goods is
paid
REPORT TO MANAGEMENT
The
ISA on IC indicates that the auditor

should report to his client's management on
all significant weaknesses that they came
across in the course of his audit whilst
pointing out that there may be other
weaknesses which were not discovered.
The title to the letter to management varies
from firm to firm , such titles include ;
letter of weakness, management
letter, post audit letter, letter of
comment, letter of recommendation,
internal control letter, follow up letter
REPORTING TO MGT CONT..
Purposes
To enable the auditor to give his comments on the

accounting records, systems and controls
To enable the auditor to bring to the attention of mgt

areas of weakness that might lead to material errors.
In some audit engagements there is a requirement

to make a report. These includes local authorities,
stock exchange firms
To enable the management to be right matters that

may otherwise have led to audit report qualification
To enable the auditor to point out areas where

management could be more efficient or more
effective or where economies could be made or
resources used more effectively. E.g unnecessarily
large balances may occur occasionally in the bank.
LETTER OF WEAKNESS
Procedures
As weaknesses or breakdowns are
identified they should be discussed in
detail with the operating staff included
and / or with more senior management. It
is vital that the auditor has his facts right
The report should be written, and then
discussed with addressee
The report should then be sent
An acknowledgement should be obtained
form management stating what they
propose to do about the weaknesses
The weakness should be followed up on
the next visit.
LETTER OF WEAKNESS CONTENTS
The list of weaknesses in the structure of

accounting systems and internal controls
A list of deficiencies in operation of the records or
controls.
Unsuitable accounting policies and practices
Non-compliance with accounting standards and
legislation
Explanations of the risks arising from each
weakness
Comments on inefficiencies as well as weaknesses
Recommendations for improvement
The first to third items may require the auditor to
qualify the report to the MEMBERS as required by
statutes ( e.g. companys Act) on proper
accounting records, accounting requirements and
true and fair view and professional duty
LETTER OF WEAKNESS - FORMAT
An
opening paragraph explaining the

purpose of the report
A note that it contains only those matters
which came to the auditors ATTENTION
and cannot be a comprehensive list of all
weaknesses
If required that report may be tiered by
having major weaknesses separated from
minor weaknesses
A request that management should reply
to each point made
TRACING AND VOUCHING
Vouching
in the examination of documents is

the direction of the search for audit evidence.
In vouching , an item of financial information
is selected from an account( e.g. , the posting
of a a sales invoice in a customers master file
record), then the auditor goes backward
through the accounting and control system to
find the source documentation that supports
the item selected. The auditor finds the
journal entry or data input list, the sales
summary , the sales invoice copy and the
shipping documents, and finally , the
customers purchase order. Vouching does not
provide evidence to show whether all events
were recorded . This can be shown by tracing
VOUCHING AND TRACING
Tracing in the examination of documents

takes the opposite direction from vouching .
When an auditor performs tracing, he or she
selects sample items of basic source
documents and proceeds forward through
the accounting and control system to find
the final recording of the accounting
transactions. For example, samples of
payroll payments are traced to cost and
expense accounts , sales invoices to sales
accounts , cash receipts to accounts
receivable subsidiary accounts, and cash
disbursements to accounts payable
subsidiary accounts.
AUDIT WORKING PAPERS

Working
papers are the auditors record

of compliance with ISAs
They should contain support for the
decisions regarding procedures
necessary in the circumstances and all
other important decisions made during
the audit.
Though the auditor is the legal owner of
the working papers professional ethics
require that they not be transferred
without consent of the client because of
the confidential information recorded in
them.
TYPES OF WORKING PAPERS
There are three categories
The permanent file papers
Audit administrative papers
Audit evidence papers
The last two categories are often called the current file
because they relate to the audit of one year.
PERMANENT FILE PAPERS
The
permanent file contains information

of continuing interest over many years
audits of the same client. This file can
be used year after year, while each
years current audit evidence papers are
filed away after they have served their
purpose.
The documents include
Copies
or excerpts of the corporate charter

and bylaws, or partnership agreements;
Copies or excerpts of continuing contracts,
such as leases, bond indentures, and royalty
agreements;
PERMANENT FILE CONT.
A History of the company,its products, and its

markets
Copies of excerpts of stock holders, directors,

and committee minutes on matters of lasting
interest
Continuing schedule of accounts whose balances

are carried forward for several years, such as
owner's equity, retained earnings
Copies of prior years financial statements and

audit reports may also be included.
The permanent file is a ready source of information

for familiarization with the clients by new
personnel on the engagement.
AUDIT PLANNING AND ADMINISTRATIVE WORKING PAPERS
The following items are usually among the

administrative working papers in each years current
working paper file
Engagement letter
Staff assignment
Clients organization chart
Memoranda of conferences with management
Preliminary analytical review notes
Initial risk assessment notes
Initial materiality assessment notes
CURRENT PAPER FILE CONT.
Engagement planning memorandum
Audit engagement time budget
Internal control questionnaire and control analyses
Management controls questionnaire
Computer control questionnaire
Internal control system flow chart
Audit program
ISA REQUIRES AUDIT WORKING PAPERS TO EXHIBIT
The clients accounting records agree with

or reconcile with the financial statement s
The work was adequately planned and
supervised
A sufficient understanding of control
structure obtained
Sufficient competent evidential matters
was obtained as a reasonable basis for an
audit opinion
Should be able to sufficiently show that the
financial statements conforms with IFRS
and that the disclosure are adequate.
WORKING PAPERS ARRANGEMENT AND INDEXING
Indexing- each paper is given an index number, like a

book page number
Cross indexing- numbers or memoranda related to to

other papers carry the index of the papers so that
connections can be followed
Heading each paper is titled with the name of the

company , audit period and descriptive title of contents
of the working paper
WORKING PAPERS ARRANGEMENT AND INDEXING
Signatures
and initials the auditor who

performs the work and the supervisor
who reviews it must sign the papers so
personnel can be identified
Dates of audit work the date of
performance and review are recorded on
the working papers so reviewers of
papers can tell when the work work
preformed
Tick marks and explanations- tick marks
are auditors\s shorthand for abbreviating
comments about work performed

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COURSE OUTLINE

AUDIT OF FINANCIAL STATEMENTS AND RELATED

DEVELOPMENT OF MODERN AUDITING

Concept of a company as a separate legal entity came into

This led to the separation of ownership (shareholders) from

DEVELOPMENT OF MODERN AUDITING

Before 19th Century

appointed auditor duties to discover fraudulent

After ( late 19th Century)

However in later part of nineteenth century, there was a growing

DEVELOPMENT OF MODERN AUDITING

The Kingston Cotton Mill case of 1896, established the

The audit involves the clients staff and

that accounts show a true and

Other organization with published accounts

to all users of accounts , that

Private organizations such as partnerships

that accounts are reliable

In addition they provide reliable accounts to regulatory bodies such

DEVELOPMENT OF MODERN AUDITING

previous years it was part of the

DEVELOPMENT OF MODERN AUDITING

The Kingston Cotton Mill case of 1896, established the

out procedures designed to obtain

AUDIT AND AUDITING

examination of the financial

What is true and fair

What is true and fair view?

information is factual and

What is true and fair

information is free from

detect errors and fraud ( Consider

responsibility for preparation and

opinion is not a guarantee of the future

impracticality of examining all items within an

Material misstatement may exist in financial statement and

In carrying out his work the auditor should adopt an

The purpose of the independent audit is to ensure that the

LEGAL FRAMEWORK OF AUDITING

work of an auditor is regulated by:

The Act requires auditors to have a recognized

pronouncements include the rules of

ethical principles that govern auditors

competence an due care

Audit, carried because the law

ISSUES AFFECTING THE PROFESSION

THE RELATIONSHIP OF EVIDENTIAL MATTER

Rights and obligations

Valuation and allocation

Presentation and disclosure

KEY STAGES OF AUDIT

KEY STAGES OF AUDIT

acceptance and continuance

the terms of the

AUDITING, ATTESTATION, AND ASSURANCE SERVICE

occurs when a practitioner is

The effectiveness of internal control

Financial information other than the financial statements

Future-oriented financial information

Compliance with statutory, regulatory, or contractual obligations

Managements discussion and analysis

According to ISA, Audit client is an entity in respect of

ISA 100 Assurance Engagements, an assignment

There is a broad range of assurance engagements ,