ISA 200 - Overal Objective Of The Independent Auditor And Conduct of an Audit in Accordance with International Standads on Auditing Flashcards
ISA 200: Overall Objectives of the Independent Auditor
and
Conduct of an Audit in accordance with International Standards on Auditing.
> Overall objectives of an Independent Auditor.
Conduct Audit as per International Standards on Auditing.
International Standards on Auditing are applicable to Statutory or Independent Auditor.
To report on Financial Statements.
To give Reasonable Assurance.
ISA 200: Primary Objectives
> Examine and give opinion on Financial Statements.
Detect the misstatements to find out possibility of fraud.
ISA 200: Requirements of the Auditor
> Ethical Requirements - ZICA
1) Integrity
2) Objectivity
3) Independence
4) Professional Competence and Due Care
5) Confidentiality
6) Professional Behavior
> Professional Scepticism
- Critical Assessment - An Auditor must always have an inquisitive or questioning mind.
> Professional Judgement
- Auditing is subjective and purely judgemental from beginning to the end.
> Sufficient Appropriate Evidence
- Reasonable Assurance
- Opinion must be based on the supporting Evidence obtained.
> Audit Risk
- Risk that the Auditor will give an inappropriate Audit Opinion.
- Audit Risk can never be zero because of inherent limitations.
> Inherent Limitations in Audit
- Nature of Financial Reporting
- Nature of Audit procedure to be applied
- Time and Cost constraint
- Other Circumstances - Fraud, Related Party transactions, Compliance with the law.
> Thus, Audit should be done as per Standards on Auditing!!!.
- Understand every Standard.
- Understand Responsibility given by Standard.
- Consider every relevant Standard.
- In case of departure from a Standard, mention the alternative procedure followed.
> When Auditor is Not able to achieve the Objective of Audit.
- Auditor gives modified Opinion
> When Auditor is Not able to give modified Opinion
- Withdraw from the Engagement.
> Whatever the Auditor does, he has to document it!!!.
> ISA 200 is a very important Standard because
- It introduce you to all the terms in Audit Subject.
- It teaches Audit Language.
ISA 210: Agreeing the Terms of Audit Engagements
The International Standard on Auditing (ISA) 210 - “Agreeing the Terms of Audit Engagements,” is an auditing standard developed by the International Auditing and Assurance Standards Board (IAASB) to provide guidance and requirements for auditors when agreeing on the terms of an audit engagement with the entity’s management or those charged with governance.
According to the standard, auditors must use a letter of engagement or another appropriate form of agreement to formalize their understanding of the engagement’s requirements, including the audit’s goals, parameters, and restrictions. The engagement letter should also outline the duties of the auditor and those of the entity’s management or those in charge of governance, along with the basis for fees and any other terms or conditions of the engagement. Letter of engagement would be issued to the client by the auditor after its receipt of Letter of Appointment as external auditor from the formal. Therefore, Letter of Engagement affirms the auditors’ acceptance of the appointment by the audit client.
Before confirming the acceptance of an external audit appointment, the external auditor must evaluate the honesty of management and those in charge of governance and determine whether any circumstances would make it difficult for them to carry out the engagement successfully. Throughout the engagement, the auditor should communicate with the entity’s management or those in charge of governance to ensure that any significant changes or developments are addressed.
The purpose of ISA 210 is to establish a clear understanding between the auditor and the entity regarding the parameters, goals, and conditions of the audit engagement. By doing so, the audit is more likely to be carried out successfully and efficiently with minimal or no expectation gap.
ISA 210 has been adopted in Nigeria and the UK, with some similarities and differences in how the standard is used and interpreted in each country. The Institute of Chartered Accountants of Nigeria (ICAN) adopted the standard as part of its code of ethics and professional standards for auditors in Nigeria. ISA 210 has been instrumental in advising Nigerian auditors on how to build effective and transparent lines of communication with their clients, thus facilitating the efficient and transparent performance of audit engagements. In the UK, the Financial Reporting Council (FRC) adopted ISA 210 as part of its initiatives to modernize and align UK auditing standards with global best practices.
To ensure compliance with the standard, auditors must determine if they are competent, have the resources to perform the audit engagement and have the authority to handle the engagement in a professional manner. They must also determine the engagement’s conditions and the audit’s goals, secure the client’s approval on the engagement’s parameters and formalize the engagement’s terms using an engagement letter.
In conclusion, the implementation of ISA 210 in Nigeria and the UK has contributed to improving audit quality and increasing financial reporting accountability and transparency. Both countries have shown their commitment to upholding high levels of audit quality and fostering financial stability by harmonizing their auditing standards with global best practices.
