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Chapter 10 Accounting Records
AUDIT EVIDENCE
By:Fadilla Primaria Dewi
(1406612256)
Introduction
Auditing is a systematic process of
objectively obtaining and evaluating
evidence regarding assertions about
economic actions and events.
The auditor shall design and perform
audit procedures that are appropriate in
the circumstances for the purpose of
obtaining sufficient appropriate audit
evidence.
Evidence is anything that can make a
person believe that a fact, proposition,
or assertion is true or false.
Audit evidence is all of the information
used by the auditor in arriving at the
conclusions on which the audit opinion
is based. Audit evidence includes the
accounting records and other
information in the financial statements.
Audit evidence is different from the
legal evidence required by forensic
accounting.
Legal evidence -> reasonable
doubt.
Audit evidence -> reasonable
assurance.
Accounting records, the primary basis
of audit evidence, generally include the
records of initial entries and supporting
records.
Initial entries include point of sales
transactions, electronic data
interchange (EDI), electronic fund
transfers (EFT), contracts, invoices,
shipping notices, purchase orders,
sales orders, the general and subsidiary
ledgers, journal entries, and other
adjustments to the financial statements.
.
Audit Procedures for Obtaining Audit
Evidence
Risk assessment procedures must be
supplemented by further audit
procedures in the form of tests of
controls and substantive procedures.
substantive procedures for material
classes of transactions, account
balances, and disclosures are always
required to obtain sufficient appropriate
audit evidence.
Evidence Gathering Techniques
An auditor obtains audit evidence by
one or more of the following evidence
gathering techniques:
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AUDIT PROCEDURES (EVIDENCE Recalculation Consists of Extending
GATHERING TECHNIQUES) checking the sales
arithmetical invoices and
Technique Definition Examples
Inquiry Consists of Obtaining accuracy of inventory,
seeking written or source adding
information of oral documents journals and
knowledgeable information and subsidiary
persons inside from the accounting records,
or outside the client in records or checking the
entity. response to performing calculation
specific independent of
questions calculations. depreciation
during the expense and
audit. prepaid
Observation Consists of Observation expense.
looking at a by the Reperformanc Consists of Use CAATs
process or auditor of e independent to check
procedure the counting execution of controls
being of procedures or recorded in
performed by inventories controls that the
others. by entitys were originally database.
personnel, performed as Reperform
site visit at part of the aging of
the clients entitys internal accounts
facilities. control. receivable.
Inspection Consists of Reviewing Confirmation Consists of Used to
examining sales orders, response to an confirm the
records, sales inquiry to existence of
documents, or invoices, corroborate accounts
tangible shipping information receivable
assets. documents, contained in and
bank the accounting accounts
statements, records. payable,
customer verify bank
return balances
documents, with banks,
customer cash
complaint surrender
letters, etc. value of life
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insurance, Tracing is an audit procedure whereby
notes the auditor selects sample items from
payable with basic source documents and proceeds
lenders or
forward through the accounting system
bondholders.
Analytical Consist of the Calculating to find the final recording of the
procedures analysis of trends in transaction (e.g. in the ledger).
significant sales over
ratios and the past few
Recalculation and Reperformance
trends years,
Recalculation consists of checking the
including the comparing
arithmetical accuracy of source
resulting net profit as
documents and accounting records or
investigation a percentage
of fluctuations of sales in of performing independent calculations.
and current year Re-performance is the auditors
relationships with the independent execution of procedures or
that are percentage controls that were originally performed
inconsistent of the as part of the entitys internal control,
with other preceding
relevant year,
Reliability and Cost of Audit
information or comparing
that deviate client current Procedures
from ratio to the assuming good internal controls and the
predictable industry ability to choose a specific method, a list of
amounts. current ratio, the most reliable to the least reliable
and
evidence-gathering techniques are
comparing
recalculation,
budgets to
inspection,
actual
reperformance,
results.
observation,

Vouching and Tracing confirmation,

Vouching is an audit process whereby analytical procedures,

the auditor selects sample items from inquiry.

an account and goes backwards The evidence-gathering procedures in

through the accounting system to find order of cost from costliest to least costly

the source documentation that supports are in general:

the item selected (e.g. a sales invoice). confirmation (most costly),


inspection,
recalculation,
reperformance,
observation,
analytical procedures,
inquiry (least costly).
External Confirmations
audit evidence from external sources
(e.g. external confirmation of cash
account received from a bank) is more
reliable than evidence generated
internally.
Evidence obtained directly by the
auditor is more reliable than that
obtained from the client entity and more
reliable than evidence obtained
indirectly or by inference (e.g. inquiry
about the application of a control).
Written documents are the second most
reliable audit evidence. External
confirmation combines direct
participation by the auditor and written
documentation from an external source.
Confirmation
Confirmation is the auditors receipt of a
written or oral response from an
independent third party verifying the
accuracy or information requested.
Advantage: Highly persuasive
evidence.
Disadvantage: Costly and time-
consuming and an inconvenience to those
asked to supply them.
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Four key characteristics of
confirmations
1 Information requested is by the client
auditor.
2 Request and response is in writing, sent to
the auditor.
3 Response comes from an independent
third party.
4 Positive confirmation involves a receipt of
information.
Two types of positive confirmations
1 Positive confirmation with the request for
information to be supplied by the recipient.
2 Positive confirmation with the information
to be confirmed included on the form.
Confirmation of Management
Assertions
External confirmation of an account
receivable provides strong evidence
regarding the existence of the account
as at a certain date, evidence regarding
the operation of cutoff procedures.
Confirmation in Response to a
Significant Risk
An auditor may use a confirmation in
response to a significant risk. For example,
if the auditor determines that management
is under pressure to meet earnings
expectations, there may be a related risk
that management is inflating sales by
entering into sales agreements that include
terms that preclude revenue recognition or
by invoicing sales before delivery. In these

circumstances, the auditor may design
external confirmations not only to confirm
outstanding amounts, but also to confirm
the details of the sales agreements,
including date, any rights of return and
delivery terms.
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negative confirmation request asks
the respondent to reply only in the
event of disagreement with the
information provided in the request. The
auditor must not use negative
confirmation requests as the sole
substantive audit procedure to address

Confirmation of Accounts Receivable an assessed risk of material

The confirmation of accounts misstatement at the assertion level

receivable is typical of the confirmation unless all of the following are present: 1

process. First the auditor either decides to the assessed level of inherent

take a random sample of customer and control risk is low;

accounts or, alternatively, looks through a large number of small,
accounts receivable subsidiary ledgers and homogeneous account balances
picks out some customers based on his are involved;
professional judgment (e.g., customers with a substantial number of errors is
very large balances or very small balances, not expected (exception rate is
customers that are slow in paying, and/or low);
customers that buy erratically). The auditor the auditor has no reason to
then gives this list to the client to prepare a believe that respondents will
confirmation letter requesting that disregard these requests.
customers reply directly to the auditor. Then
the auditor, not the client, mails these
No Response to Confirmation Letter
letters. The auditor should check randomly
In case the auditor does not receive a
to see if the letters are addressed to the
reply to a positive confirmation request, he
same customers the auditor chose and for
ordinarily sends out a second confirmation
the amounts shown on the books.
letter.

Positive and Negative Confirmations

If Audit Client Does Not Allow
positive confirmation asks the
Confirmations
recipient (debtor, creditor, or other third
If the auditor concludes that managements
party) to confirm agreement or by
refusal to allow the auditor to send a
asking the recipient to provide written
confirmation request is unreasonable, or
information.

the auditor is unable to obtain relevant and
reliable audit evidence from alternative
audit procedures, the auditor shall
communicate with those charged with
governance. The auditor also shall
determine the implications for the audit and
the auditors opinion.
10.5 Sampling
The objective of audit sampling, is to
provide a reasonable basis for drawing
conclusions about the population (e.g.,
invoices, shipping documents, and
other original source material) from
which the sample is selected. 2
Audit sampling (sampling) is the
application of audit procedures to less
than 100% of items within a population
of audit relevance such that all
sampling units have a chance of
selection in order to provide the auditor
with a reasonable basis on which to
draw conclusions about the entire
population.
Sampling risk is the risk that the
auditors conclusion based on a sample
may be different from the conclusion if
the entire population were subjected to
the same audit procedure. Sampling
risk can lead to two types of erroneous
conclusions:
1. In the case of a test of controls,
that controls are more effective
than they actually are, or in the
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case of a test of details, that a
material misstatement does not
exist when in fact it does. The
auditor is primarily concerned
with this type of erroneous
conclusion because it affects
audit effectiveness and is more
likely to lead to an inappropriate
audit opinion.
2. In the case of a test of controls,
that controls are less effective
than they actually are, or in the
case of a test of details, that a
material misstatement exists
when in fact it does not. This
type of erroneous conclusion
affects audit efficiency as it
would usually lead to additional
work to establish that initial
conclusions were incorrect.
Audit of Estimates
An accounting estimate is an
approximation of a monetary amount in
the absence of a precise means of
measurement.
Estimate audit standards are ISA 540
Auditing Accounting Estimates,
Including Fair Value Accounting
Estimates, and Related Disclosures3.
Risk Assessment Procedures and
Related Activities

In order to provide a basis for the
identification and assessment of the
risks of material misstatement for
accounting estimates, the auditor must
obtain an understanding of how
management identifies accounting
estimates that are needed and how
these estimates are made.
The auditor also must determine how
management makes the accounting
estimates, and an understanding of the
data on which they are based,
including:
The method and model used in
making the accounting estimate;
Relevant controls;
Whether management has used
an expert;
The assumptions underlying the
accounting estimates;
Whether there has been, or
ought to have been, a change
from the prior period in the
methods for making the
accounting estimates, and if so,
why; and
Whether and, if so, how
management has assessed the
effect of estimation uncertainty.
Responses to the Assessed Risks of
Material Misstatement
Based on the assessed risks of
material misstatement, the auditor must
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determine whether management has
appropriately applied the requirements of
the applicable financial reporting framework
and whether the methods for making the
accounting estimates are appropriate and
have been applied consistently and also
determine whether changes from the prior
period in accounting estimates or in the
estimation method are appropriate in the
circumstances.
In responding to the assessed risks of
material misstatement, the auditor shall test
how management made the accounting
estimate and the data on which it is based
and also tested is the operating
effectiveness of the controls over how
management made the accounting
estimate.
The auditor develops a point estimate
or a range to evaluate managements point
estimate. The auditor must identify whether
there are indicators of possible
management bias. The auditor must obtain
sufficient appropriate audit evidence about
whether the estimates are disclosed in
accordance with the financial reporting
framework.
Written Representations and
Documentation
The auditor must obtain written
representations from management and,

where appropriate, those charged with
governance, saying that they believe
significant assumptions used in making
their accounting estimates are
reasonable.
The auditor must include in the audit
documentation 4 the basis for the
auditors conclusions about the
reasonableness of accounting
estimates and their disclosure that give
rise to significant risks; and indicators of
possible management bias, if any.
Evaluation of Misstatements
Identified During the Audit
(ISA 450)
the objective of the auditor is to evaluate
the effect of identified misstatements on the
audit; and the effect of uncorrected
misstatements5 on the financial
statements.6
Consideration of Identified
Misstatements as the Audit
Progresses
The auditor must accumulate
misstatements identified during the audit,
other than those that are clearly trivial.
Communication and Correction of
Misstatements
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if misstatements are found, the auditor
asks management to correct them. If
management corrects the
misstatements that were detected, the
auditor must still perform additional
audit procedures to determine whether
misstatements remain.
If management refuses to correct some
or all of the misstatements
communicated by the auditor, the
auditor should take into account
managements reasons for not making
the corrections
The auditor must determine whether
uncorrected misstatements are
material, individually or in aggregate.
the auditor is required to communicate
with those charged with governance
(usually the board of directors) any
uncorrected misstatements and the
effect that they have on the opinion in
the auditors report.
The auditors communication will
identify material uncorrected
misstatements individually and request
that uncorrected misstatements be
corrected.
The auditor also communicates the
effect of uncorrected misstatements
related to prior periods.
The auditor must request a written
representation from management and,
where appropriate, those charged with
governance whether they believe the

effects of uncorrected misstatements
are immaterial, individually and in
aggregate, to the financial statements
as a whole.
A summary of such items shall be
included in or attached to the written
representation.
In their workpaper documentation
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the auditor must include :
The amount below which misstatements
would be regarded as clearly trivial;
All misstatements accumulated during
the audit and whether they have been
corrected; and
The auditors conclusion as to whether
uncorrected misstatements are
material, individually or in aggregate
and the basis for that conclusion.
Related Parties
A related party transaction is a
transfer of resources or obligations
between related parties, regardless of
whether a price is charged.
examples of these risk-increasing
circumstances are:
Related parties may operate through an
extensive and complex range of
relationships and structures, with a
corresponding increase in the
complexity of related party transactions.
Information systems may be ineffective
at identifying or summarizing
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transactions and outstanding balances
between an entity and its related
parties.
Related party transactions may not be
conducted under normal market terms
and conditions; for example, some
related party transactions may be
conducted with no exchange of
consideration.
Procedures to Discover Related Party
Transactions
CIRCUMSTANCES THAT MAY INDICATE
UNIDENTIFIED RELATED PARTIES
During the course of the audit, the
auditor needs to be alert for transactions
that appear unusual in the circumstances
and may indicate the existence of
previously unidentified related parties.
Examples include:
Transactions which have abnormal
terms of trade, such as unusual prices,
interest rates, guarantees, and
repayment terms.
Transactions which lack an apparent
logical business reason for their
occurrence.
Transactions in which substance differs
from form.
Transactions processed in an unusual
manner.
High-volume or significant transactions
with certain customers or suppliers as
compared with others.

Unrecorded transactions such as the
receipt or provision of management
services at no charge.
Understanding the Entitys Related
Party Relationships and Transactions
To acquire and understanding, the auditor
will inquire of management regarding:
The identity of the entitys related
parties, including changes from the
prior period;
The nature of the relationships between
the entity and these related parties; and
Whether the entity entered into any
transactions with these related parties
during the period and, if so, the type
and purpose of the transactions.
The controls, if any, that management
has established to:
o Identify, account for, and disclose
related party relationships and
transactions in accordance with the
applicable financial reporting
framework;
o Authorize and approve significant
transactions and arrangements with
related parties; and
o Authorize and approve significant
transactions and arrangements
outside the normal course of
business.
Maintaining Alertness for Related
Party Information When Reviewing
Records or Documents
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The auditor should review information
provided by the directors and management
identifying related party transactions while
being alert for other material related party
transactions.
The auditor may perform the following
procedures to determine completeness of
this information:
review prior year working papers for
names of known related parties;
review the entitys procedures for
identification of related parties;
inquire as to the affiliation of
directors and officers with other
entities;
review shareholder records to
determine the names of principal
shareholders or, if appropriate,
obtain a listing of principal
shareholders from the share register;
review minutes of the meetings of
shareholders and the board of
directors and other relevant statutory
records such as the register of
directors interests;
inquire of other auditors currently
involved in the audit, or predecessor
auditors, as to their knowledge of
additional related parties;
review the entitys income tax returns
and other information supplied to the
regulatory agencies.
If the auditor identifies significant
transactions outside the entitys normal

course of business the auditor should ask
management about the nature of these
transactions and if related parties are
involved.
Risks of Material Misstatement
Associated with Related Party
Relationships and Transactions
the auditor must identify and assess the
risks associated with related party
relationships and transactions and
determine whether any of those risks
are significant risks.
the auditor must treat identified
significant related party transactions
outside the entitys normal course of
business as giving rise to significant
risks.
The auditor may identify fraud risk
factors (including circumstances relating
to the existence of a related party with
dominant influence) when performing
procedures in connection with related
parties.
If the auditor identifies arrangements or
information that suggests the existence
of related party relationships, the
auditor must promptly communicate the
relevant information to the other
members of the engagement team.
The auditor should reconsider the risk
that other unidentified related parties
may exist. If the non-disclosure by
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management appears intentional, this
may be indicative of fraud.
The auditor may identify significant
related party transactions outside the
entitys normal course of business
the auditor should inspect the
underlying contracts or agreements,
and evaluate whether the business
rationale (or lack of rationale) for the
transactions suggests that they may
have been entered into to engage in
fraudulent financial reporting or to
conceal misappropriation (theft) of
assets.
When considering the contracts, the
auditor should also determine if the
terms of the transactions are consistent
with managements explanations and
that the transactions have been
appropriately authorized, approved and
disclosed.
PROCEDURES TO IDENTIFY RELATED
PARTIES TRANSACTIONS
During the course of the audit, the
auditor carries out procedures that may
identify the existence of transactions with
related parties. Examples include:
Performing detailed tests of transactions
and balances.
Reviewing minutes of meetings of
shareholders and directors.
Reviewing accounting records for large
or unusual transactions or balances,
paying particular attention to

transactions recognized at or near the
end of the reporting period.
Reviewing confirmations of loans
receivable and payable and
confirmations from banks. Such a
review may indicate guarantor
relationship and other related party
transactions.
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have been appropriately accounted for
and disclosed.
The auditor shall communicate with
those charged with governance
significant matters arising during the
audit in connection with the entitys
related parties (unless all of those

Reviewing investment transactions, for charged with governance are involved

example, purchase or sale of an equity in managing the entity).
interest in a joint venture to another The auditor shall include in the audit
entity. documentation the names of the
identified related parties and the nature
of the related party relationships. 9
Auditor Opinion, Written
Representations and Documentation
In forming an opinion on the financial
statements in accordance with ISA 700 8: Written Representations (Letter
the auditor must evaluate whether the of Representation)
identified related party relationships and
Written representation is a written
transactions have been appropriately
statement by management provided to the
accounted for and disclosed. Further,
auditor to confirm certain matters or to
he should consider whether the effects
support other audit evidence.
of the related party relationships and
transactions prevent the financial
Written Representations from
statements from achieving fair
Management
presentation or make them misleading.
Written representations are necessary
the auditor must obtain written
information that the auditor requires in
representations from management and
connection with the audit of the entitys
those charged with governance that
financial statements.
they have disclosed to the auditor the
Written representations are audit
identity of the entitys related parties
evidence.
and all the related party relationships
and transactions of which they are
aware; and that these relationships

Form and Content of Representations
Letter
The management representation letter
should be addressed to the auditor and
contain the information requested by the
auditor, be appropriately dated as near as
practicable to, but not after, the date of the
auditors report on the financial statements,
and signed. The members of management
who have primary responsibility for the
entity and its financial aspects, usually the
senior executive officer and the chief
financial officer, should sign the letter.
Matters that are ordinarily included in a
management representation letter are:
managements acknowledgement
that it has fulfilled its responsibility
for the preparation of the financial
statements in accordance with the
applicable financial reporting
framework, including, where
relevant, their fair presentation, as
set out in the terms of the audit
engagement
management has provided the
auditor with all relevant information
and access as agreed in the terms
of the audit engagement
all transactions have been recorded
and are reflected in the financial
statements.
the selection and application of
accounting policies are appropriate
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matters such as the following, have
been recognized, measured,
presented or disclosed in
accordance with the applicable
financial accounting framework:
o plans or intentions that may
affect the carrying value or
classification of assets and
liabilities;
o liabilities, both actual and
contingent;
o title to, or control over, assets,
the liens or encumbrances on
assets, and assets pledged as
collateral; and
o aspects of laws, regulations and
contractual agreements that
may affect the financial
statements, including non-
compliance.
If management refuses to provide
representations that the auditor considers
necessary, this will be considered a
limitation on scope. This scope limitation
would mean that the auditor should express
a qualified opinion or a disclaimer of
opinion.
If management does not provide one or
more of the requested written
representations, the auditor must
o discuss the matter with
management.
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o reevaluate the integrity of
management and evaluate the
effect that this may have on the
reliability of representations (oral or
written) and audit evidence in
general.
o take appropriate actions, including
determining the possible effect on
the opinion in the auditors report.
 15
spreadsheets, computer and manual logs,
computations, reconciliations, and
disclosures.
10.10 Summary
The auditor performs risk assessment
Auditing is a systematic process of
procedures in order to provide a basis for
objectively obtaining and evaluating
the assessment of risks. Risk assessment
evidence regarding assertions about
procedures by themselves do not provide
economic actions and events. The auditor
sufficient appropriate audit evidence on
shall design and perform audit procedures
which to base the audit opinion, however.
that are appropriate in the circumstances
Risk assessment procedures must be
for the purpose of obtaining sufficient
supplemented by further audit procedures
appropriate audit evidence. Evidence is
in the form of tests of controls and
anything that can make a person believe
substantive procedures.
that a fact, proposition, or assertion is true
An auditor obtains audit evidence by
or false. Audit evidence is different from the
one or more of the following evidence
legal evidence required by forensic
gathering techniques: inquiry, observation,
accounting. In a civil lawsuit, evidence must
inspection (of tangible assets, records or
be strong enough to incline a person to
documents), reperformance, recalculation,
believe one side or the other. In a criminal
confirmation, and analytical procedures.
case; evidence must establish proof of a
Inquiry consists of seeking information from
crime beyond a reasonable doubt. Audit
knowledgeable persons inside or outside
evidence provides only reasonable
the entity. Observation consists of looking
assurance.
at a process or procedure being performed
Accounting records, the primary basis
by others. Inspection consists of examining
of audit evidence, generally include the
records, documents or tangible assets.
records of initial entries and supporting
Reperformance is the auditors
records. Initial entries include point of sales
independent execution of procedures or
transactions, electronic data interchange
controls that were originally performed as
(EDI), electronic fund transfers (EFT),
part of the entitys internal control.
contracts, invoices, shipping notices,
Recalculation consists of checking the
purchase orders, sales orders, the general
arithmetical accuracy of source documents
and subsidiary ledgers, journal entries, and
and accounting records or of performing
other adjustments to the financial
independent calculations. Confirmation
statements. Supporting records examples
consists of the response to an inquiry to
are computer files, databases, worksheets,

corroborate information contained in the
accounting records. There are two forms of
confirmations: positive and negative.
In general, audit evidence from
external sources (e.g. external confirmation
of cash account received from a bank) is
more reliable than evidence generated
internally. Evidence obtained directly by the
auditor is more reliable than that obtained
from the client entity and more reliable than
evidence obtained indirectly or by inference
(e.g. inquiry about the application of a
control). Written documents are the second
most reliable audit evidence. External
confirmation combines direct participation
by the auditor and written documentation
from an external source. Confirmation
consists of the response to an inquiry of a
third party to corroborate information
contained in the accounting records.
Confirmation is the auditors receipt of a
written or oral response from an
independent third party verifying the
accuracy of information requested. It is the
act of obtaining audit evidence from a third
party in support of a fact or condition.
Because confirmations from independent
third parties are usually in writing, and are
requested directly by the auditor, they are
highly persuasive evidence.
The objective of the auditor, when
using audit sampling, is to provide a
reasonable basis for drawing conclusions
about the population (e.g., invoices,
16
shipping documents, and other original
source material) from which the sample is
selected. Audit sampling (sampling) is the
application of audit procedures to less than
100% of items within a population of audit
relevance such that all sampling units have
a chance of selection in order to provide
the auditor with a reasonable basis on
which to draw conclusions about the entire
population. This enables the auditor to
obtain and evaluate audit evidence about
some characteristic of the items selected in
order to form or assist in forming a
conclusion concerning the population from
which the sample is drawn. Audit sampling
can use either a statistical or a non-
statistical approach. Sampling risk is the
risk that the auditors conclusion based on
a sample may be different from the
conclusion if the entire population were
subjected to the same audit procedure.
Some financial statement items cannot
be measured precisely, but can only be
estimated. These items are accounting
estimates. An accounting estimate is an
approximation of a monetary amount in the
absence of a precise means of
measurement. This term is used for an
amount measured at fair value where there
is estimation uncertainty, as well as for
other amounts that require estimation. The
nature and reliability of information
available to management to support the
making of an accounting estimate varies

widely, affecting the risks of material
misstatement of accounting estimates,
including their susceptibility to unintentional
or intentional management bias.
It is the auditors responsibility when
forming an opinion on the financial
statements to conclude whether reasonable
assurance has been obtained about
whether the financial statements as a
whole are free from material misstatement.
The auditors conclusion takes into account
his evaluation of uncorrected
misstatements. Therefore, the objective of
the auditor is to evaluate the effect of
identified misstatements on the audit; and
the effect of uncorrected misstatements on
the financial statements.
Parties are considered to be related if
one party has the ability to control the other
party or exercise significant influence over
the other party in making financial and
operation decisions. A related party
transaction is a transfer of resources or
obligations between related parties,
regardless of whether a price is charged.
The nature of related party relationships
and transactions may, in some
circumstances, contribute to higher risks of
material misstatements than transactions
with unrelated parties.
The initial audit procedure in the
closing cycle is usually to evaluate
governance evidence, the evidence
pertaining to the company and
17
management. This means, among other
things, obtaining written representation
from management (sometimes called
management representations letter).
Written representation is a written
statement by management provided to the
auditor to confirm certain matters or to
support other audit evidence. Written
representations in this context do not
include financial statements, the assertions
therein, or supporting books and records.
International Standard on Auditing 580,
Written Representations states 10 the
auditor shall request management to
provide a written representation that it has
fulfilled its responsibility for the preparation
of the financial statements in accordance
with the applicable financial reporting
framework, including, where relevant, their
fair presentation, as set out in the terms of
the audit engagement.
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10.11 Notes
1
Ibid ISA 505. External Confirmation. Paragraph 15.
2
IFAC. 2012. International Standards on Auditing 530 (ISA 530). Audit Sampling. Paragraph 4. .Handbook of
International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements Part 1 2012
Edition. International Federation of Accountants. New York.
3
IFAC. 2012. International Standards on Auditing 540 (ISA 540), Auditing Accounting Estimates, Including Fair
Value Accounting Estimates, and Related Disclosures. Handbook of International Quality Control, Auditing, Review,
Other Assurance, and Related Services Pronouncements Part 1 2012 Edition. International Federation of Accountants,
New York.
4
IFAC. 2012. International Standards on Auditing 230 (ISA 230), Audit Documentation. Paragraphs 9-11 and A6.
Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services
Pronouncements Part 1 2012 Edition. International Federation of Accountants. New York.
5
Uncorrected misstatements Misstatements that the auditor has accumulated during the audit and that have not been
corrected.
6
IFAC. 2012. International Standards on Auditing 450 (ISA 450). Evaluation of Misstatements Identified
during the Audit. Paragraph 3. Handbook of International Quality Control, Auditing, Review, Other Assurance,
and Related Services Pronouncements Part 1 2012 Edition. International Federation of Accountants, New York.
7
Ibid. ISA 230, Audit Documentation. paragraphs 811, and A6
8
IFAC. 2012. International Standards on Auditing 700 (ISA 700), Forming an Opinion and Reporting on Financial
Statements. paragraphs 10-15. Handbook of International Quality Control, Auditing, Review, Other Assurance, and
Related Services Pronouncements Part 1 2012 Edition. International Federation of Accountants. New York.
9
Ibid. ISA 230. Audit Documentation. paragraphs 811, and paragraph A6
10
IFA., 2012. International Standards on Auditing 580 (ISA 580), Written Representations. paragraph 10.
Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services
Pronouncements Part 1 2012 Edition. International Federation of Accountants. New York.