ISA 200 - Overall Objective of an Audit and Conducting an Audit in Accordance with ISAs

Question 1

1. What are the responsibilities of management in an audit?

Answer 1

1. To prepare financial statements in accordance with IFRS
2. To design and implement internal control
3. To provide all information to the auditor

Question 2

2. What is the responsibility of the auditor?

Answer 2

1. To obtain reasonable assurance
2. Provide a high level of assurance but not absolute assurance

Question 3

3. Why is absolute assurance not possible in an audit?

Answer 3

Due to inherent limitations of audit:
1. Estimates
2. Fraud
3. Management may not provide all information
4. Sampling

Question 4

What is required by auditors to obtain reasonable assurance?

Answer 4

1. Ethical requirements
2. Professional skepticism
3. Professional judgment
4. Sufficient appropriate audit evidence (SAAE)

Question 5

5. What are the ethical requirements for an audit?

Answer 5

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behavior

Question 6

6. What is professional skepticism?

Answer 6

1. An attitude that includes a questioning mind
2. Being alert to conditions that may indicate possible misstatement due to error or fraud
3. Critical assessment of audit evidence

Question 7

7. What are examples of professional skepticism?

Answer 7

1. Audit evidence that contradicts other audit evidence.
2. Information that brings into question the reliability of documents
3. Condition that may indicate the possibility of fraud

Question 8

8. What are the advantages of professional skepticism?

Answer 8

Maintaining professional skepticism throughout the audit is necessary to reduce the risk of:
a. Overlooking unusual transactions
b. Overgeneralizing when drawing conclusions from audit observations
c. Using inappropriate assumptions in determining the nature, timing, and extent of audit procedures and evaluating results

Question 9

9. What is professional judgment in an audit?

Answer 9

1. The application of relevant training, knowledge, and experience within the context of auditing, accounting, and ethical standards
2. Used to make informed decisions about appropriate actions in the circumstances

Question 10

10. What is the role of professional judgment in auditing?

Answer 10

1. Materiality and audit risk
2. Nature, timing, and extent (N, T, & E) of audit procedures used to obtain audit evidence
3. Evaluating whether sufficient appropriate audit evidence (SAAE) has been obtained
4. Evaluating management judgment in applying accounting and reporting frameworks (ARF)
5. Drawing conclusions based on audit evidence obtained
   Example: Assessing the reasonableness of management estimates