Consistency of financial statement means that accounting policies, standards, pattern of estimates, presentation, disclosures, and other information presented in the financial statement are comparable with the last accounting period. In other words, there has been consistency in using accounting policies and other choices to create ease for financial statement users. Example If the company adopted … Read more
Revenue expenditure is when the expense is related to the current accounting period under consideration. In other words, utility/benefits obtained against revenue expenditure were completely utilized in the current accounting period, and there is no need to record carry forward balance in the next accounting period. These operational expenses are directly recorded in the balance … Read more
Important definitions The emphasis of matter paragraph—This is a paragraph in the audit report that emphasizes or refers to the matter appropriately described, presented/disclosed in the financial statement. The auditor believes this presentation/disclosure is fundamental to the user’s understanding of the audit report and financial statement. Other matter paragraph—This paragraph contains additional information or information … Read more
Important definitions Pervasive—This term is used in the context of material misstatement due to an error of fraud. The misstatement is pervasive when its impact is not confined to specific elements of the financial statement, and if confined, it represents a substantial proportion of the financial statement. Similarly, in the context of disclosure, disclosure is … Read more
This ISA defines the auditor’s responsibility related to communicating key audit matters identified during the audit of a business financial statement. The purpose of this ISA is to enhance the audit report’s communicative value. It’s the auditor’s responsibility to identify the most judgmental and significant audit matters and communicate them in the audit report. Communicating … Read more
Requirements of ISA 700 The auditor must form an opinion if a business financial statement is prepared in compliance with the applicable financial reporting framework. The formation of an audit opinion requires the auditor to ensure sufficient and appropriate audit evidence is obtained. Additionally, evaluation must be made regarding qualitative aspects of accounting policies and … Read more
Scope of ISA 200 Isa 200 deals with the auditor’s overall responsibilities for conducting an audit of a financial statement in accordance with international standards of auditing. Audit of financial statement Objectives of auditor Following are the objectives of auditing financial statements. Requirements of ISA 200 Following are the requirements of ISA 200. Wrap up … Read more
Definition Performance materiality Performance materiality refers to the amount/amounts set by the auditor less than materiality for a financial statement to appropriately lower the probability that the aggregate of uncorrected/undetected misstatements does not exceed materiality for the financial statement. It’s a materiality of the particular classes of account balances, disclosures, transactions, etc. Overall materiality It’s … Read more
Definition It’s a written statement provided by management to confirm certain fact or to support other audit evidence obtained during audit fieldwork. Written representation as audit evidence It’s important to note that written representation is not appropriate audit evidence but support for the other evidence obtained during auditing financial statements. Scope of ISA 580 This … Read more
Important definitions External confirmation—Its audit evidence obtained via direct confirmation from third parties like banks and vendors in written or digital format. Positive confirmation request—This request requires the respondent to directly send confirmation to the auditor, regardless of whether they agree with the amount or not. Negative confirmation request– It’s a request that requires the … Read more