ISA 200 Overall Objectives of an Auditor Flashcards
What are different types of Frameworks.
- General Purpose
- Special Purpose
- Fair presentation Framework
- Compliance Framework.
Give some examples of General Purpose Frameworks.
- IFRS
- IFRS for SMEs
- National Framework (or Financial Reporting Framework of Jurisdiction X) e.g. US GAAP
- XYZ Law of Jurisdiction X
Give some examples of Special Purpose Frameworks.
- Regulatory Basis
- Tax Basis
- Cash Basis
- Contractual Basis
What will be impact on audit report if management uses Special Purpose Framework:
- Emphasis of Matter Paragraph in report (to explain basis of accounting)
- Other Matter Paragraph in report (to restrict distribution of report, if necessary)
How auditor’s opinion is expressed in Fair Presentation Framework?
- “financial statements give true and fair view in accordance with the framework”, or
- “financial statements are presented fairly, in all material respects, in accordance with the framework”.
(Both phrases are equivalent)
How auditor’s opinion is expressed in Compliance Framework?
“financial statements are prepared, in all material respects, in accordance with the framework”.
What shall be auditor’s course of action if Compliance framework is misleading/not acceptable.
Request management to change framework. If not changed, auditor shall not accept engagement (unless required by law).
Management describes AFRF in following terms “Financial statements are in substantial compliance with IFRS”. Is it acceptable?
No, as it is partial compliance (qualifying/limiting language) of AFRF.
What is the difference between Management and TCWG?
- Management = persons responsible for conduct of entity’s operations (e.g. CFO, CEO).
- TCWG = persons responsible for Overseeing the strategic direction and Accountability (e.g. Directors).
- In some entities, Management and TCWG may be same.
What are management’s responsibilities in an audit?
- For preparation of financial statements in accordance with AFRF
- For design and implementation of internal controls;
- To provide auditor relevant information.
What are auditor’s overall objectives in an audit?
- To obtain reasonable assurance whether financial statements are free from material misstatement, and
- To report on the financial statements, and
- To communicate as required by the ISAs in accordance with the auditor’s findings.
List some major stakeholders/users of an assurance report.
- Existing or Prospective Shareholders.
- A holding company.
- Lenders.
- Donors.
- Tax Authorities.
List some common examples of expectation gap.
- Auditor prepares financial statements.
- Auditor checks 100% transactions of entity.
- Auditor provides absolute assurance (i.e. he certifies or guarantees).
- Auditor is responsible to detect fraud.
- Auditor expresses opinion on internal controls.
- Emphasis of Matter, Other Matter Paragraph, and Material Uncertainty related to Going Concern Paragraph are modified opinions.
What is included (and not included) in the scope of audit.
Scope of audit includes expressing opinion on Financial Statements. It may also include opinion on other matters (if required by local laws).
Scope of audit does not include assurance on future viability of entity, or efficiency/effectiveness of management.
What are different levels of assurance.
- Limited Assurance.
- Reasonable Assurance.
- Absolute Assurance (not provided to clients).