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ISAs that you need to account separately for P7 Audit and

assurance

ISA 200 Overall objectives of the independent auditor ISA 300 Planning an Audit of F/S
and conduct of an audit in accordance with ISA's ISA 315 identifying and assessing risks of
ISA 210 Agreeing the terms of audit engagement material misstatement through
ISA 220 understanding the entity and its
ISQC 1 environment
ISA 230 Audit Documents ISA 320 materiality in planning and
ISA 240 The Auditor's responsibilities relating to performing an audit
fraud in an audit of F/S. ISA 330 The auditors response to
ISA 250 consideration of laws and regulations in an assessed risk
audit of F/S
ISA 260 Communication with those charged with ISA 402 Audit consideration relating to
governance entities using a service org
ISA 265 Communicating deficiencies in internal ISA 450 Evaluation of misstatements
control to those charged with governance and MGM identified during the audit

Nine SIX
ISA 500 Audit evidence ISA 600
ISA 501 Audit evidence--specific consideration for selected ISA 610 Using the work of internal auditor
items ISA 620 Using the work of an auditor's expert
ISA 505 external confirmation ISA 700 The auditors report on F/S
ISA 510 Opening balances ISA 705 Modification to opinions in the
ISA 520 Analytical procedures independent auditors report
ISA 530 Audit sampling ISA 706 Emphasis of matter paragraphs in
ISA 540 Audit accounting estimates, including fair value the independent auditors report
accounting estimates and related disclosure ISA 710 Comparative info --corresponding
ISA 550 Related Parties figures and comparative F/S
ISA 560 Subsequent event ISA 720 The auditors responsibilities relating
ISA 570 Going concern to other info in doc containing audited F/S
ISA 580 Written representation

Eleven Eight
ISA 200 Objectives of the independent auditor and conduct of the audit in accordance with ISAs

This ISA clarifies objective of audit and importance of conducting audit in accordance
with ISA. The objective of the independent auditor is to express an opinion whether the financial
statements represent true and fair view and are prepared, in all material respects, in accordance
with an applicable financial reporting framework. (I.e. Country specific regulation and
accounting standard). Most importantly the audit should be conducted by using the guideline of
International standards of auditing. Few terms need to be clearly understood:

Materiality: True and fair:

Information is material if its True means free from material error i.e. all
omission or misstatement could information presented in financial statement can be
influence the economic decision of evidenced by proper documents confirming that they
users taken on the basis of F/S. are true. In order to ensure the true status the auditor
Auditors have disagreement with should maintain professional skepticism during the
directors when they reveal audit.
material misstatements in financial
statements. Materiality can take both Fair implies free from bias, the informations should
quantitative and qualitative form not be presented in a way that implies or bring favor to
i.e. quantitative means in figures it client business in an unfair manner. In order to ensure
would be material to the reported the fair status the auditor should maintain
profit. On the other hand qualitative professional skepticism as well most importantly be
means nature of the information independent from client during audit.
leaving future impact.

ISA 210 agreeing the terms of audit engagements

This ISA clarifies what matters need to agreed prior starting audit work i.e. the Pre-conditions.
ISA 210 was revised as part of the International Auditing and Assurance Standards Boards Clarity
Project, with new requirements to perform specific procedures in order to establish whether the
preconditions for an audit are present.

ISA 210 defines preconditions for an audit as follows:

The use by management of an acceptable financial reporting framework in the preparation of the
financial statements and the agreement of management and, where appropriate, those charged with
governance to the premise on which an audit is conducted.

This means that the auditor must do two things.

First, the auditor must determine the acceptability of the financial reporting framework to be applied
in the preparation of the financial statements. In most cases this will simply be a matter of
confirming with the client that the financial statements will be prepared under International
Financial Reporting Standards, or other national reporting framework.
Second, the auditor must obtain the agreement of management that it acknowledges and understands
its responsibility:

For the preparation of the financial statements in accordance with the applicable financial
reporting framework
For internal controls to enable the preparation of financial statements which are free from
material misstatement, whether due to fraud or error
To provide the auditor with access to all information necessary for the purpose of the audit

If everything goes right an engagement letter will be sent before the audit. Engagement letter
specify the nature of the contract between the audit firm and the client It minimizes risk of
misunderstanding auditors role. It must be updated in accordance with the change in the
context or scope of the audit work after initial auditor appointment

Contents of a typical engagement letter may include:

Objective of the audit i.e. to give an opinion.F/S. The auditors use of


Management responsibility of the F/S i.e. to prevent fraud , specialist
prepare F/S etc Deadlines
Scope of the audit including relevant standards i.e. IAS or Complaints procedure
ISA and jurisdictions
A description of the audit procedure including their Use of the work of
inherent limitation i.e. work based on sampling internal audit
The form of report to be issued
Access to all informations for collecting evidence

Quality Control (ISA 220 and ISQC 1)

Why is that required?

The ACCA and IFAC codes of conduct both require that members should perform their professional work with
due skill and care and with a proper degree of technical competence. Audit work may be performed by
members of a large team of auditors (the engagement team). If so, the members may have different levels of
knowledge and experience. To satisfy the professional requirements for due skill and care and technical
competence, audit firms need to have a strong system of quality control.

Quality Control is basically done in two levels or aspects:

Quality Control within the firm


Quality Control on specific engagement or assignment
Quality Control within the firm (ISQC 1)

Quality control policies and procedures at a firm level are set out in ISQC 1 Quality control for firms that
perform audits and reviews of financial statements, and other assurance and related services engagements.
Quality within the firm can be achieved through:

Quality recruitment where qualified people will be selected and they will be given an intensive
training.
A strong environment where partners will be determined on having good quality audit practice
within the firm.
A separate partner who will be designated only for ensuring quality within the firm and will
continuously work to setting the standards up.
Documented policies and procedures for the staff to follow.
Linking up appraisal of the staffs within the firm with quality of audit.
While selecting engagement team for a specific audit take special care on the skills, experience and
overall work load of that particular auditor. For example for a relatively complex audit assignment
make sure that a more skillful auditor or rather a senior auditor is appointed, but slowly it needs to
be balance out so that the fresher or relatively new auditors slowly enters into that league as well.
Regular Cold Review which means time to time (e.g. every 6 months) choose one of the project of an
audit partner and review whether quality was there on that assignment or not. Though nothing can
be done as it is a previous work but still for future reference they can be used.

Quality Control on specific engagement or assignment (ISA 220)

The objective of the auditor as set out in ISA 220 Quality control for an audit of financial statements is to
implement quality control procedures at the engagement level to provide reasonable assurance that:

The audit complies with professional standards and applicable legal and regulatory regulations.

The audit report is issued is appropriate.

Quality of a specific audit assignment can be achieved through:

1) Proper Clients acceptance procedures


2) Selecting appropriate and skillful engagement team
3) Proper delegation of duties, planning and risk assessment is done through engagement planning
meeting.
4) Strong supervision system
5) Detailed review of the work done by the junior auditors
Audit documentation (ISA 230)

This ISA clarifies why documents need to be retained and relevant retention rules. Some reason
of having working papers includes:

Its essential to prove that the auditors have worked in accordance with ISA and the
procedures being recorded in the form of documents will act as an important
support for the auditors report.
If its not recorded means no work is done, so no basis for the audit opinion.
The work papers should be in a manner that makes it easily understandable, so that it is
easier to spot anything that has been omitted,
To ensure that the time spent by senior staff reviewing the audit file is minimized.

Working papers contents and retaining rules

As per ISA 230 working paper is the property of the auditor and must be retained at
least 5 years; and hence all preventative and security measures should be taken to
preserve it.
E.g. archiving older files; Back up It based files; Secure storage of recent files by any
relevant means

Working paper

AT top the fundamentals


- Client name
- Period end
- Subject
- Prepared by(Date)
- Reviewed by(Date)
- Reference
Contents
- Objective
- Method
- Results
- Conclusion
ISA 240: the Auditor's responsibilities relating to fraud in an audit of F/S.
This ISA help auditor in distinguishing between fraud and error during their audit work and
also their implication on audit approach. It further guides on the need to report to third
parties when fraud affects public interest

Fraud comprises both the use of deception to obtain an unjust or illegal financial advantage
and intentional misrepresentations affecting the financial statements by one or more individuals
among management, employees or third parties.

Error would be unintentional mistakes in financial statements (including the omission of an


amount or disclosure).

Procedures when there is an indication that fraud or error may exist:

First task would be to obtain an understanding of the nature of the event and
circumstances in which it has occurred. Along, assessing the possible effects on F/S
The auditors should document their findings and communicate them to the
appropriate level of management. This would usually be the board of directors or the
audit committee. But remember if fraud affects public interest then reporting to third
party may be essential.

Situation when reporting to third parties would be essential

The following matters should be taken into account when deciding whether disclosure is justified
in the public interest:

The extent to which the suspected or actual fraud is likely to affect members of the
public
Whether the directors have rectified the matter or are taking, or are likely to take,
effective corrective action.
The extent to which non-disclosure is likely to enable the suspected or actual fraud to
recur.
The seriousness of the matter and the weight of available evidence and the degree of the
auditors suspicion that there has been an instance of fraud.

If the auditors conclude that the matter ought to be reported to an appropriate authority in the
public interest, they should notify and request the directors in writing to disclose voluntarily.
If the entity does not report the matter or is unable to provide evidence that the matter has
been reported, auditor has an obligatory duty to report it themselves.

Where a suspected or actual instance of fraud casts doubt on the integrity of the directors,
auditors should make a report direct to the proper authority in the public interest without
delay, informing the directors in advance.
ISA 250 Consideration of law and Regulations

Procedures when possible non- The auditors report


compliance is discovered
Disagreement Where auditor concludes non-
As auditors become aware that non- compliance has a material effect on the F/S, which
compliance with law and regulations may has not been amended, he should express a
exist, they should obtain an understanding qualified (adverse) opinion.
of the nature of the act and the
circumstances in which it has occurred Limitation on scope Where adequate information
and sufficient other information to about compliance or suspected noncompliance
evaluate the possible effect on the cannot be obtained, the auditor may need to
financial statements reported figures express a qualified opinion or DOP due to
limitation on the scope of the audit.
Any non-compliance with law or
regulations should be documented and Withdrawal from the engagement The auditor may
discussed with the appropriate level of conclude that withdrawal from the engagement is
management. Auditors should consider necessary when the entity does not take remedial
the implications in relation to other aspects action that auditor considers necessary in the
of the audit, particularly the reliability of circumstances, even when the non-compliance is not
written representations. material to the F/S
ISA 260 (Communication to those charges with governance)

Threshold of significance (ISA 265)

This new standard requires auditors to establish a threshold of significance to be applied


when:

A control is designed, implemented or operated in such a way that it is unable to prevent


or detect misstatements on a timely basis
Such a control, as necessary to prevent and detect misstatements, is missing

Auditors duties

The auditor must ask Are the identified deficiencies, either individually or collectively,
significant?
Any significant deficiencies must be communicated in writing to those charged with
governance.
Other, insignificant, deficiencies should at least be verbally communicated to management
ISA 300 Planning of Audit

This ISA clarifies why planning before starting audit work is essential and objective of doing so.
ISA 315 IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT
THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT

This ISA clarifies and gives clear direction to auditor on how to gain a comprehensive idea about
the internal control environment of a business. This ultimately helps auditor to prioritize weak
areas for substantive testing as information generated from weak internal control systems are
prone to fraud and error.
ISA 320 MATERIALITY IN PLANNING AND PERFORMING AN AUDIT
This ISA clarifies and gives clear direction to auditor on how to conclude whether disagreement
between auditors and management reported figures/disclosures or accounting treatment
results in material misstatements in F/S. In clear words this ISA offers the definition and
evaluation criteria for materiality

Materiality concerns the F/S as a whole; information is material if its omission or misstatement
effects the economic decision of users of financial statements. It would differ from industry to
industry E.g. to 1% of turnover, 1 to 2% of assets; 5 to 10% of results etc ISA 320.

Evaluation criteria

Materiality is concerned not just with size / value but also with the nature of the matter
and the circumstances of the entity
Judgments about materiality are made in the light of the surrounding circumstances and
are affected by the size and nature of a misstatement, or a combination of both
Judgments about matters that are material to users of the financial statements are
based on a consideration of the common financial information needs of users as a
group
The audit firm must be concerned with identifying material errors, inclusions,
omissions and misstatements.
A misstatement or omission can be considered material if, individually or in
aggregate, it would reasonably be expected to influence the economic decisions of
users of the F/S.
ISA 330 The auditors response to assessed risk
This ISA guides auditor on identifying Audit risk under three categories after evaluating
internal control and devise appropriate audit procedures in response to this three risk namely
Inherent risk, Control risk and detection risk
ISA 402 Audit consideration relating to entities using a service org
This ISA clarifies and gives clear direction to auditor on how to decide on whether to rely
on information given by third parties i.e. those offering other services to client for
auditing purpose.

Its important because sometime knowledge of reported information may be confined


to third party only. For instance if the payroll functions or receivable function is
outsourced then the payroll and receivable figure would be generated by data
provided by third party.

Client may outsource- Information processing, Pay roll, Safe custody of asset, Receivable
collection. As they are third party, likely to be independent but auditor must design and
perform appropriate audit test to confirm:

Ensure independence and objectivity of third party by assessing the fees charged etc
They are qualified and have a reputation indicating their service can be relied upon
That the third party has maintained appropriate documentation

ISA 450 Evaluation of misstatements identified during the audit


ISA 450 (new clarified) deals with the auditors responsibility to evaluate the effect of
identified misstatements on the audit and of uncorrected misstatements, if any, on F/S

Misstatement is defined as a difference between the amount, classification, presentation, or


disclosure as per managements reported figures and auditors finding. Misstatement can arise
from error or fraud.

For these kinds of identified misstatements, the auditor should determine whether the nature
and the circumstances of their occurrence indicate the existence of other misstatements,
which could be material individually or in aggregate. I.e. fraud in one area may suggest fraud
in other areas too.

The auditor should also consider whether there is a need to revise the audit strategy and audit
plan. Does the initial conclusion need to be reconsidered? This would definitely affect the risk
assessment, audit strategy and audit plan.

The auditor will consider:

The size and nature of the misstatements, and the particular circumstances of the
occurrence and their effect on prior periods.
The auditor will communicate the uncorrected misstatements and their implication on
the auditors report to those charged with governance.
The auditor will also request a written representation (including a summary of
uncorrected misstatements) from management and, where appropriate to those charged
with governance as to whether they believe the effects of uncorrected misstatements
are immaterial, individually and in aggregate to the F/S as a whole.
ISA 500 Audit evidence
This ISA guides auditor on collecting audit evidence i.e. what are the different ways of collecting
and along how many evidence need to be collected and what qualitative characteristic should
be met

The basic guideline is evidence Some common audit procedures for obtaining
collected by auditors should be
evidence
to sufficient and
appropriate. Sufficient
refers to the quantity factor Analytical procedures: It is the analysis of financial and non-
i.e. whether numbers of financial information to determine the reasonableness of reported
evidences collected are amounts and mainly estimated figures in financial statements. This
material enough to deal with can be done by comparing current periods result with Prior
the issue Appropriate refers periods, Budgets and forecasts, Predictive estimates, Industry
to the quality of evidence i.e. information, ratio analysis

Written evidence
Enquiry of management and employees to ultimately take written
better than verbal management representations as evidence.
evidence Inspection of Assets/Entries in records/documents to confirm
Third party evidence existence and accuracy
better than internal
evidence Observation OF physical counts for inventories accuracy and
observation of Distribution of wages to identify possible fraud in
Evidence generated wages distribution.
by auditors is high
quality than others u
Recalc lation: To ensure numerical accuracy of figures at a time both
Evidence from original manual and computerized check could be done to ensure accuracy of
copy is better than figures.
photocopy etc
Confirmation (auditor): Taking independent third party
confirmations about reported figures in F/S, it can be qualitative audit
evidence.

ISA 501 Audit evidence--specific consideration for selected items


This ISA guides auditor on how to take external confirmation for auditing purpose, what are the
different types and what audit procedures need to be applied on the replies received
ISA 510 Opening balances
This ISA informs auditor on the possibility of misstatements being carried forward from
previous years, and further tells what audit procedures need to be applied to ensure such not
happening

Its very important because they Recommended audit work

Represent prior period comparatives ( Review previous audit report (D) i.e. being qualified or confirm
ISA 710) -May contain errors that Whether amendments to F/S have been done as per advice of
distort current figures E.g. Overstated auditors.
provision relieved in current year to
show huge profit Review of opening balances i.e. Confirm whether closing figures
of previous years audited F/S have been forwarded
What we can do here is , try to obtain
Use of current period information i.e. current events may give
sufficient audit evidence to conclude:
rise to suspicions regarding previous years transactions. (A)
E.g. If during current years audit you find ghost employees then
Opening balance is brought forward
you would naturally assume that previous years payroll figures
correctly, not having any material
have been overstated.
misstatements
Take written management representation (MR) i.e. take
Accounting policies are consistent written confirmation from high level management that all/any
from year to year and incase if its change in accounting policy/estimate during the year have been
changed then adjustments are done as communicated to auditor and necessary adjustment in opening
per IAS8 i.e. retrospective adjustment balance done

ISA 520 Analytical procedures


This ISA informs auditor on how analytical procedures can be used as the most effective
substantive audit procedure besides being used for other purpose. Along highlights the
different tools of analytical procedures under this ISA.

AP is the analysis of financial (reported numeric figures) and non-financial information


(Available facts) to determine reasonableness (is it logical?) of reported amounts and mainly
estimated figures (subjective) in F/S.

This can be done by comparison of key Limitations


relationship between- Quality of available information
-Comparing Prior period results to this year i.e. Consistency of calculation methods
useful in judging provision of bad debt or Its unlikely that logical conclusion regarding
warranty relationship of certain items can be understood
-Industry average i.e. applicable mostly in getting through ratio calculations
an estimated Stage of use -Planning stage -During Audit to
outflow in lawsuit consequence justify accounting estimates
-Examine for inconsistent fluctuation and As Substantive audit procedure -In Overall
Establish explanations i.e. Documentary evidence review stage i.e. after completion of audit
may exist but yet fact creating contradiction scratching out any material discrepancy
ISA 530 Audit sampling
This ISA helps auditor in picking out the items which would be worked on for the purpose of
audit i.e. the basis of sampling
ISA 540 Audit accounting estimates, including fair value accounting
estimates and related disclosure
This ISA helps auditor to be aware of the fact that estimates are subjective figures and objective
evidence are unlikely to be available. As a result preparing them by this ISA with different
audit procedures to be applied for ensuring accuracy of reported figures

Estimates may include


ISA 550 Related parties

There is a basic assumption that businesses trade with other parties at arms length.
However, if there is a relationship between two businesses, this assumption may not reflect
reality because one business may have a high level of control or influence over the other.

Parties are considered to be related if one party has the ability to control the other party or both
parties are subject to common control. According to IAS 24, material related party transactions
must be disclosed in the financial statements.
The auditor has an obligation to perform audit procedures to obtain sufficient appropriate evidence
regarding the disclosure of related party transactions and the control of the entity in the financial
statements.

The management is responsible for the identification and disclosure of related party transactions.
The auditor should review the information provided by the management and should be alert for
other material related party transactions.
Example 5

During the audit, the auditor should be aware that certain transactions may indicate
existence of unidentified RP. Examples include: transactions which have abnormal terms of
trade such as unusual prices, interest rates, guarantees and repayment terms.

Transactions which seem to lack a logical business reason for their occurrence.
Transactions where the substance differs from the legal form.
Transactions processed or approved in a non-routine manner.
Unusual transactions which are entered into shortly before or after the year end.
A high volume of transactions with one supplier or customer compared with others.
Unrecorded transactions such as receipt or provision of MGM services at no charge.

The auditors should obtain written representations from management concerning the
completeness of information provided about related parties and disclosures in the financial
statements.

Audit conclusions and reporting

If the auditors are unable to obtain sufficient appropriate evidence regarding related parties and
transactions with such parties, this gives rise to a limitation of scope. If the auditors conclude that
the disclosure of related party transactions is not adequate, this gives rise to a modification on the
grounds of material misstatement.
ISA 560 Subsequent event
This ISA helps auditor to be aware of their duties during subsequent event period and also the
fact that events after reporting date may have implication on the audit i.e. may affect reported
figures. So, under this ISA its important to learn the audit procedures to be conducted on
subsequent event.
ISA 570 Going concern
This ISA helps auditor to be aware of the possible indicators which might threaten the going
concern status of the entity. Further more clarifies what audit procedures need to be conducted
to get a conclusive idea about the going concern status. The third issue is the implication on
audit report due to the existence of going concern threats.
ISA 580 written representation
This ISA guides auditor to take safeguard by taking written consent from management on those
areas where management disagreeing with auditor generated figure or denying to provide
evidence or placed a limitation of scope on the work of auditor.
ISA 600 using the work of another auditor
The group auditors have sole responsibility for the Matters to consider before accepting
opinion on the group financial statements. The auditors appointment as group auditor to a
of the subsidiary entities (component auditors) are a
source of evidence only.
group

The group auditors must decide how much reliance they will
The group auditor must participate
place on the work performed by these component auditors. In sufficiently in the audit of the group to
order to do this they will consider the qualifications, enable them to give an opinion on the
experience and resources of the component auditors. group F/S. Before accepting appointment
as group auditor they should consider:
Generally group auditors should have the right to ask the
component auditors for all information and explanations. In
addition, ISA 600 states that the component auditors should The materiality of the portion of the
inform the group auditors of any matter they discover during financial statements which they do not
their audits that might be relevant to the audit of the group audit
F/S. The degree of their knowledge regarding
the business of the subsidiaries
Matters to discuss with the component auditors The nature of their relationship with the
component auditors
Their ability where necessary to perform
The component auditors must be informed of the use that is additional procedures to enable them to act
to be made of their work. They should also be advised of the as group auditors; and the risk of material
standard and scope of work required, together with misstatements in the F/S of the
reporting deadlines subsidiaries audited by component
auditors
It is common practice to ask the component auditors to
complete a checklist to confirm that they have applied the
required audit procedures. The correct classification of investments
An investment is treated as a subsidiary when the
Issues arising when a subsidiary is located parent entity has dominant influence over that
foreign: invested entity. Where significant influence is held
the investment is treated as an associate in
accordance with IAS 28.
Different accounting policies might be used in the
overseas country. Under IAS 27, the subsidiary F/S
must be brought into line with the accounting The auditors need to consider how an
policies used by the parent entity in order to investment fits into the activities of the
consolidate properly. group. They should review board minutes
There may be cultural problems unique to the for evidence of the degree of influence
country in which the subsidiary operates. The group exercised by the parent entity. They should
auditor will need to be sensitive to these during also discuss the matter with the parent
dealings with the other auditors. entity directors.
Language problems may arise. This problem can be The existence of other significant
easily overcome by using staff who can speak the shareholders may indicate that the parent
relevant language or by a translator. entity has little influence. The auditors
should check the register of members to
There may be issues in existence which are specific determine the level of shareholding and
to the country in which the subsidiary operates. For potential influence held by other
example, in some countries in the continent of Africa,
shareholders.
inflation runs at in excess of 100% per annum. F/S
produced in these circumstances will need to be The auditors should also consider how easy
adjusted prior to consolidation with the parent it is to obtain information about the
entity. invested entity. This could also be an
indicator of significant influence.
Letters of support Group consolidation - audit procedures
A letter of support is an agreement After receiving and reviewing the financial
made between a parent entity and its statements from all subsidiaries and associates, the
subsidiary or fellow subsidiary under group auditor must audit the group financial
which one entity agrees to provide statements. The main procedures would be as
support, in the form of funding, to the follows:
other entity in order that it may meet
its debts and liabilities. Check the transcription of the audited F/S of
each invested entity to the consolidation
A letter of support may be required from schedule.
the parent entity where it appears that a Check that adjustments on consolidation are
subsidiary is not a going concern and relevant and consistent with prior years.
will be unable to pay non-group The adjustments could be permanent or current
creditors as they fall due. year adjustments.
The consolidation schedules should be checked
for arithmetical accuracy.
Audit work The group F/S should be checked for
The auditor needs to determine compliance with IFRS.
whether the parent entity has An opinion should be formed on the truth and
the power to provide a letter of fairness of the group financial statements.
support. The following should be
obtained:

Written confirmation from the Implications for the auditors report


parent entitys solicitors to the where a subsidiary has been qualified
effect that the giving of the
support is permitted under the In a group situation, materiality and risk must
constitution, is not beyond the be assessed in the context of the group as a
entitys powers, and that it is whole. It is possible therefore for a qualification
within the powers of The board in a subsidiary to be wholly immaterial in the
of directors to give the support; group financial statements. If this is the case, an
or unqualified opinion could be given on these
financial statements.
If the transaction is not
permitted by the constitution, a
certified copy of the special Where the group auditors conclude that
resolution amending the adequate evidence about the work of the
constitution to authorize the component auditors cannot be obtained and
parent entity to give the letter of they have been unable to perform sufficient
support. additional procedures with respect to that
subsidiary, they should consider the
implications for the audit report.
ISA 610 using the work of internal auditor
This ISA guides auditor by giving the set of criteria based on which they can decide whether to
use the work of internal auditor.
ISA 620 using the work of an auditor's expert
This ISA gives certain factors that the auditors can consider prior placing reliance on area of work
done by an expert. The areas are likely to be subjective in nature. All auditors are not supposed to be
intellect in all issues some technical expertise might be missing, thus they may choose to rely
on experts when they find it appropriate, efficient and cost effective. However they do not refer
the reliance on experts in report but must assess the quality of experts work. Factors to
consider may include:

Is the expert really needed? Assessing experts work

-Complexity of the area i.e. extent -ensure independence and objectivity i.e. experts not
of subjectivity involved in the area having significant financial interest

-Materiality of area in relation to -Should be qualified i.e. relevant updated professional


the F/S key figures qualification

-Availability of other objective audit -Sufficient appropriate evidence (Reliable, relevant


evidence and consistent) and maintains appropriate
documentation
ISA 700 the auditors report on F/S ISA 705 Modification to opinions in
This ISA outlines the contents to be included in the independent auditors report
an unmodified audit report. The main elements This ISA outlines possible ways of
of standard audit report include: modifying the opinion in specific
circumstances.
ISA 706 Emphasis of matter paragraphs in the independent auditors
report
This ISA clarifies the purpose for which Emphasis of matter paragraph can be used in
independent auditors report

ISA 710 Comparative info --corresponding figures and comparative F/S


This ISA aware the auditor of the possibility of misstatements in previous year F/S which is
presented to S/H along with current year F/S

Very important because we know Recommended audit work

-An entity need to present current year -We can review the relevant accounting policies for
audited F/S and along the previous consistencies in their application i.e. search for changes
years comparatives as per IAS. This in recognition, Measurement and presentation basis
allows the S/H to have a glance on how e.g. Depreciation charged in COS now shown under
performances have changed from last expenses as a result comparatives should be same too.
year. So entity may take this chance to
misguide users, hence auditors be -Agree all the figures of comparatives to last years
alert!!! signed audited Financial Statements.

What we can do here - Review documents such as board minutes i.e. Any
major change in accounting policy is likely to be evidenced
Ensure that the comparatives are by the discussion of directors in board minutes
correctly reported and under
appropriate classifications. I.e. Liabilities -Take written management representation i.e. take
and asset not mixed up being current written confirmation from high level management that
and non-current from previous year to there have been no change in accounting estimate and
current year accounting policy during the current year
ISA 720 Auditors responsibilities relating to other info in doc containing
audited F/S
This ISA guides auditor on what to do if there is material discrepancy or misstatement of fact
in other information in relation to reported figures in F/S.

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