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
Definition Going concern assumption means the entity is able and intends to continue its operations for the foreseeable future. If the entity is a going concern, financial statement should reflect the concept in terms of assets realization and liabilities discharge. Scope of ISA 570 This ISA defines the auditor’s responsibilities regarding going concern implications used … Read more
Important definitions Financial statement date – The latest date covered by the financial statement under consideration. Financial statement approval date– The date on which financial statements were approved. Date of audit report– The date the financial statement is audited or the auditor signs the audit report. Date of the financial statement issued– The date the … Read more
Important definitions Arm’s length transaction—This refers to the terms and conditions of the transaction between independent and informed parties in the market. Related party– The Party is related if it has significant control/influence directly or indirectly on the reporting entity. Additionally, the party is related in the following ways. Scope of ISA 550 This ISA … Read more
Important definitions Accounting estimates – The monetary amount exposed to estimate uncertainty. Estimate uncertainty– It’s a lack of precision/accuracy in the measured/estimated amount. Management bias– Audit management may be motivated to window-dress financial statements. Scope of ISA 540 ISA 540 defines the auditor’s responsibilities regarding accounting estimates and related disclosures in the business financial statement. … Read more
Important Definitions Audit sampling is when the auditor decides to perform audit procedures on less than 100% of transactions/balances in the population (not testing all transactions in the accounting ledger). Sampling risk—Sampling risk refers to the risk of not detecting material misstatement because 100% of transactions/balances were not audited. Non-sampling risk– Audit risk because of … Read more
Definition Analytical procedures are the evaluation of relevant financial and non-financial information given in the business financial statement. The evaluation aims to identify logical/plausible relations between different numbers/balances, business information, market conditions/competitors, trends, related figures, deviations from expected values, and other information available. If inconsistencies or serious fluctuations are identified (not making sense), the auditor … Read more
ISA 510 discussed Initial audit engagement and is relevant when. Scope of ISA 510 This ISA defines the auditor’s responsibility related to opening balances. Additionally, the disclosures/facts/contingencies/commitments that existed at the beginning of the accounting period are included in the scope of ISA 510. Requirements of ISA 510 ISA 510 requires auditors to execute the … Read more
Important definitions Accounting records—An accounting record refers to the initial record of entries, supporting documents such as bills, payment details, checks, funds transfer receipts, spreadsheets, and other supporting documents. Sufficient – the quantity of the audit evidence should be reasonable to support the audit report’s conclusion. Appropriate—The quality of the audit evidence should be reliable … Read more
The other matter paragraph (OMP) is an additional paragraph or information added to the audit report. This information is not included in the financial statement but in the audit report only. It is the auditor’s discretion/professional judgment whether they want readers of the audit report to consider/read this specific information included in the audit report. … Read more