Summary of Key ISAs

Question 1

ISA 200- objectives of the auditor

Answer 1

to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error

to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework

to report on the financial statements, and communicate as required by the ISAs, in accordance with the auditor’s findings

Question 2

ISA 200- responsibilities of management

Answer 2

preparation of the financial statements in accordance with the applicable financial reporting framework, including their fair presentation

internal control necessary to enable preparation of financial statements that are free from material misstatement, whether due to fraud or error

to provide the auditor with:
- access to all information relevant to the preparation of the financial statements
- unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain evidence

Question 3

ISA 200- audit risk

Answer 3

the risk of issuing an inappropriate opinion

Question 4

ISA 200- inherent risk

Answer 4

the susceptibility of an assertion about a class of transaction or account balance or disclosure to material misstatement before the consideration of any related internal controls

Question 5

ISA 200- detection risk

Answer 5

the risk that audit procedures do not detect material misstatements

Question 6

ISA 200- professional scepticism

Answer 6

an attitude that includes a questioning mind, being alert to conditions which indicate possible misstatement due to error or fraud and a critical assessment of audit evidence

Question 7

ISA 200- inherent limitations of audit

Answer 7

audit evidence is persuasive rather than conclusive because of:
-the nature of financial reporting
-the nature of audit procedures
-the need to conduct an audit within reasonable time and at reasonable cost

Question 8

ISA 210- the preconditions for an audit

Answer 8

the auditor must establish whether the preconditions for an audit are present:
- determine whether an acceptable financial reporting framework is to be applied in the preparation of the financial statements
- obtain agreement of management that it acknowledges and understands its responsibilities

Question 9

ISA 210- contents of engagement letter

Answer 9

-objective and scope of the audit
-responsibilities of the auditor
-responsibilities of management
-identification of the applicable financial reporting framework
-expected form and content of any reports to be issued

Question 10

ISA 230- objective of audit documentation

Answer 10

evidence of the basis for the independent auditors report

evidence that audit planned and performed in accordance with ISAs and legal/regulatory requirements

Question 11

ISA 230- what should audit documentation enable an experienced independent auditor to do?

Answer 11

audit documentation should enable an experienced independent auditor with no previous connection to the audit to understand:
-nature, timing and extent of audit procedures performed
-results of audit procedures performed
-significant conclusions and professional judgments made in reaching those conclusions

Question 12

ISA 240- objectives of the auditor relating to fraud

Answer 12

identify risks of material misstatement due to fraud

obtain sufficient appropriate evidence regarding assessed risks

respond appropriately to fraud or suspected fraud identified

Question 13

ISA 240- fraud definition

Answer 13

an intentional act involving use of deception to obtain unjust/illegal advantage

Question 14

ISA 240- two types of fraud

Answer 14

fraudulent financial reporting

misappropriation of assets

Question 15

ISA 260- communication with those charged with governance

Answer 15

those charged with governance are those with responsibility for overseeing the strategic direction of the entity.

Question 16

ISA 260- matters to be communicated to those charged with governance

Answer 16

auditors responsibility in relation to the fs audit

planned scope and timing of the audit

significant findings from audit

auditors independence (listed companies)

Question 17

ISA 300- benefits of planning

Answer 17

helps the auditor to devote appropriate attention to important areas of the audit

helps identify and resolve potential problems on a timely basis

assists in the selection of a suitable audit team

helps the direction and supervision of the audit team

assists the auditor to perform an efficient and effective audit

Question 18

ISA 300- content of audit strategy

Answer 18

characteristics of the engagement

reporting objectives (e.g. reporting timetable)

factors significant in directing the teams efforts

results of preliminary engagement activities

nature, timing and extent of resources

Question 19

ISA 300- content of audit plan

Answer 19

nature, timing and extent of:
planned risk assessment procedures

planned further audit procedures at the assertion level

other planned procedures required to comply with ISAs

Question 20

ISA 315- the components of the entity’s system of internal control

Answer 20

control environment

entity’s risk assessment process

the entity’s process to monitor the system of internal control

information system and communication

control activities

Question 21

ISA 315- transactions and events and related disclosures assertions

Answer 21

occurrence
completeness
accuracy
cut off
classification
presentation

Question 22

ISA 315- account balances and related disclosures assertions

Answer 22

existence
rights and obligations
completeness
accuracy
valuation and allocation
classification
presentation

Question 23

ISA 320- materiality

Answer 23

misstatements, including omissions, are considered to be material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements

Question 24

ISA 320- performance materiality

Answer 24

an amount set at less than materiality for the FS as a whole, to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the FS as a whole.

Question 25

ISA 265- matters to consider in determining whether a deficiency in internal control is significant

Answer 25

the likelihood of the deficiencies leading to material misstatements in the financial statements in the future

the susceptibility and complexity of determining amounts such as fair value accounting estimates

the susceptibility to loss or fraud of the related asset or liability

the financial statement amounts exposed to the deficiencies

the volume of activity that has occurred or could occur in the account balance or class of transactions exposed to the deficiency or deficiencies

the interaction of the deficiency with other deficiencies