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BOD
Preparation of FS
S/H
Credibility Gap
Auditors
Reasonable Assurance
Limited Assurance
Moderate Level
No Assurance
Zero Level
High Level
Related Services
Review Engagement
In a review engagement, the auditor provides a moderate level of assurance that the information subject to review is free of material misstatement. This is expressed in the form of negative assurance.
The Objective of an Audit of Financial Statements To enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework.
Assertions
Refers to management representations that embodied in F/Ss components, records or systems The assertion is made through the F/Ss
Auditor
Assertions
Accuracy Completeness Cut-off Understandability Classification Occurrence Valuation & Allocation Existence Rights & Obligation
Scope of an Audit
Audit procedures deemed necessary in the circumstances to achieve the objective of the audit. Should be determined by the auditor having regard to the requirements of SLAuSs, the ICASL legislation, regulations and, where appropriate, the terms of the audit engagement and reporting requirements.
Reasonable Assurance
An auditor cannot obtain absolute assurance because there are inherent limitations in an audit that affect the auditors ability to detect material misstatements.
The use of testing. The inherent limitations of internal control The fact that most of audit evidences are persuasive rather than conclusive.
Detection Risk
Inherent Risk
Control Risk
Detection Risk
The risk that the auditor will not detect a misstatement that exists in an assertion that could be material, either individually or when aggregated with other misstatements. A function of the effectiveness of an audit procedure and of its application by the auditor. Cannot be reduced to zero because the auditor usually does not examine all of a class of transactions, account balance, or disclosure and because of other factors.
Your firm is helping to Mr.Namal, a sole trader, prepare his accounts for the taxation authorities. He has asked your advice on the following matters. You are Required to advise on (1) The advantages to the business of having its accounts Audited. (2) Whether the audit undertaken on his small company would be the same as an audit undertaken on a large one (3) Whether he has any alternatives to audit that would still provide him a degree of assurance.