ISAs that you need to account separately for P7 Audit and

assurance
ISA 200 Overall objectives of the independent auditor
and conduct of an audit in accordance with ISA's
ISA 210 Agreeing the terms of audit engagement
ISA 220
ISQC 1
ISA 230 Audit Documents
ISA 240 The Auditor's responsibilities relating to
fraud in an audit of F/S.
ISA 250 consideration of laws and regulations in an
audit of F/S
ISA 260 Communication with those charged with
governance
ISA 265 Communicating deficiencies in internal
control to those charged with governance and MGM

ISA 300 Planning an Audit of F/S

ISA 315 identifying and assessing risks of
material misstatement through
understanding the entity and its
environment
ISA 320 materiality in planning and
performing an audit
ISA 330 The auditors response to
assessed risk

Nine

SIX

ISA 500 Audit evidence

ISA 501 Audit evidence--specific consideration for selected
items
ISA 505 external confirmation
ISA 510 Opening balances
ISA 520 Analytical procedures
ISA 530 Audit sampling
ISA 540 Audit accounting estimates, including fair value
accounting estimates and related disclosure
ISA 550 Related Parties
ISA 560 Subsequent event
ISA 570 Going concern
ISA 580 Written representation

ISA 600
ISA 610 Using the work of internal auditor
ISA 620 Using the work of an auditor's expert
ISA 700 The auditors report on F/S
ISA 705 Modification to opinions in the
independent auditors report
ISA 706 Emphasis of matter paragraphs in
the independent auditors report
ISA 710 Comparative info --corresponding
figures and comparative F/S
ISA 720 The auditors responsibilities relating
to other info in doc containing audited F/S

Eleven

Eight

ISA 402 Audit consideration relating to

entities using a service org
ISA 450 Evaluation of misstatements
identified during the audit

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

omission or misstatement could
influence the economic decision of
users taken on the basis of F/S.
Auditors have disagreement with
directors when they reveal
material misstatements in financial
statements. Materiality can take both
quantitative and qualitative form
i.e. quantitative means in figures it
would be material to the reported
profit. On the other hand qualitative
means nature of the information
leaving future impact.

True means free from material error i.e. all

information presented in financial statement can be
evidenced by proper documents confirming that they
are true. In order to ensure the true status the auditor
should maintain professional skepticism during the
audit.
Fair implies free from bias, the informations should
not be presented in a way that implies or bring favor to
client business in an unfair manner. In order to ensure
the fair status the auditor should maintain
professional skepticism as well most importantly be
independent from client during audit.

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.

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

The auditors use of

specialist
Deadlines
Complaints procedure
and jurisdictions
Use of the work of
internal audit

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

Contents
Objective
Method
Results
Conclusion

AT top the fundamentals

Client name
Period end
Subject
Prepared by(Date)
Reviewed by(Date)
Reference

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 noncompliance
has a material effect on the F/S, which
As auditors become aware that noncompliance 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
express a qualified opinion or DOP due to
financial statements reported figures
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
material to the F/S
written representations.

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
collected by auditors should be
to sufficient and
appropriate. Sufficient
refers to the quantity factor
i.e. whether numbers of
evidences collected are
material enough to deal with
the issue Appropriate refers
to the quality of evidence i.e.

Written evidence
better than verbal
evidence

Third party evidence

better than internal
evidence

Evidence generated
by auditors is high
quality than others
Evidence from original
copy is better than
photocopy etc

Some common audit procedures for obtaining

evidence

Analytical procedures: It is the analysis of financial and nonfinancial information to determine the reasonableness of reported
amounts and mainly estimated figures in financial statements. This
can be done by comparing current periods result with Prior
periods, Budgets and forecasts, Predictive estimates, Industry
information, ratio analysis

Enquiry of management and employees to ultimately take written

management representations as evidence.

Inspection of Assets/Entries in records/documents to confirm

existence and accuracy

Observation OF physical counts for inventories accuracy and

observation of Distribution of wages to identify possible fraud in
wages distribution.

Recalc lation: To ensure numerical accuracy of figures at a time both

manual and computerized check could be done to ensure accuracy of
figures.

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
sufficient audit evidence to conclude:
Opening balance is brought forward
correctly, not having any material
misstatements
Accounting policies are consistent
from year to year and incase if its
changed then adjustments are done as
per IAS8 i.e. retrospective adjustment

Use of current period information i.e. current events may give

rise to suspicions regarding previous years transactions. (A)
E.g. If during current years audit you find ghost employees then
you would naturally assume that previous years payroll figures
have been overstated.
Take written management representation (MR) i.e. take
written confirmation from high level management that all/any
change in accounting policy/estimate during the year have been
communicated to auditor and necessary adjustment in opening
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
opinion on the group financial statements. The auditors
of the subsidiary entities (component auditors) are a
source of evidence only.

Matters to consider before accepting

appointment as group auditor to a
group

The group auditors must decide how much reliance they will
place on the work performed by these component auditors. In
order to do this they will consider the qualifications,
experience and resources of the component auditors.

The group auditor must participate

sufficiently in the audit of the group to
enable them to give an opinion on the
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
inform the group auditors of any matter they discover during
their audits that might be relevant to the audit of the group
F/S.

Matters to discuss with the component auditors

The component auditors must be informed of the use that is
to be made of their work. They should also be advised of the
standard and scope of work required, together with
reporting deadlines
It is common practice to ask the component auditors to
complete a checklist to confirm that they have applied the
required audit procedures.

Issues arising when a subsidiary is located

foreign:

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
policies used by the parent entity in order to
consolidate properly.
There may be cultural problems unique to the
country in which the subsidiary operates. The group
auditor will need to be sensitive to these during
dealings with the other auditors.
Language problems may arise. This problem can be
easily overcome by using staff who can speak the
relevant language or by a translator.
There may be issues in existence which are specific
to the country in which the subsidiary operates. For
example, in some countries in the continent of Africa,
inflation runs at in excess of 100% per annum. F/S
produced in these circumstances will need to be
adjusted prior to consolidation with the parent
entity.

The materiality of the portion of the

financial statements which they do not
audit
The degree of their knowledge regarding
the business of the subsidiaries
The nature of their relationship with the
component auditors
Their ability where necessary to perform
additional procedures to enable them to act
as group auditors; and the risk of material
misstatements in the F/S of the
subsidiaries audited by component
auditors

The correct classification of investments

An investment is treated as a subsidiary when the
parent entity has dominant influence over that
invested entity. Where significant influence is held
the investment is treated as an associate in
accordance with IAS 28.

The auditors need to consider how an

investment fits into the activities of the
group. They should review board minutes
for evidence of the degree of influence
exercised by the parent entity. They should
also discuss the matter with the parent
entity directors.
The existence of other significant
shareholders may indicate that the parent
entity has little influence. The auditors
should check the register of members to
determine the level of shareholding and
potential influence held by other
shareholders.
The auditors should also consider how easy
it is to obtain information about the
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

made between a parent entity and its
subsidiary or fellow subsidiary under
which one entity agrees to provide
support, in the form of funding, to the
other entity in order that it may meet
its debts and liabilities.

After receiving and reviewing the financial

statements from all subsidiaries and associates, the
group auditor must audit the group financial
statements. The main procedures would be as
follows:

A letter of support may be required from

the parent entity where it appears that a
subsidiary is not a going concern and
will be unable to pay non-group
creditors as they fall due.

Audit work

The auditor needs to determine

whether the parent entity has
the power to provide a letter of
support. The following should be
obtained:
Written confirmation from the
parent entitys solicitors to the
effect that the giving of the
support is permitted under the
constitution, is not beyond the
entitys powers, and that it is
within the powers of The board
of directors to give the support;
or
If the transaction is not
permitted by the constitution, a
certified copy of the special
resolution amending the
constitution to authorize the
parent entity to give the letter of
support.

Check the transcription of the audited F/S of

each invested entity to the consolidation
schedule.
Check that adjustments on consolidation are
relevant and consistent with prior years.
The adjustments could be permanent or current
year adjustments.
The consolidation schedules should be checked
for arithmetical accuracy.
The group F/S should be checked for
compliance with IFRS.
An opinion should be formed on the truth and
fairness of the group financial statements.

Implications for the auditors report

where a subsidiary has been qualified

In a group situation, materiality and risk must

be assessed in the context of the group as a
whole. It is possible therefore for a qualification
in a subsidiary to be wholly immaterial in the
group financial statements. If this is the case, an
unqualified opinion could be given on these
financial statements.

Where the group auditors conclude that

adequate evidence about the work of the
component auditors cannot be obtained and
they have been unable to perform sufficient
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

of subjectivity involved in the area

-ensure independence and objectivity i.e. experts not

having significant financial interest

-Materiality of area in relation to

the F/S key figures

-Should be qualified i.e. relevant updated professional

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

an unmodified audit report. The main elements
of standard audit report include:

the independent auditors report

This ISA outlines possible ways of
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

audited F/S and along the previous
years comparatives as per IAS. This
allows the S/H to have a glance on how
performances have changed from last
year. So entity may take this chance to
misguide users, hence auditors be
alert!!!

-We can review the relevant accounting policies for

consistencies in their application i.e. search for changes
in recognition, Measurement and presentation basis
e.g. Depreciation charged in COS now shown under
expenses as a result comparatives should be same too.

What we can do here

- Review documents such as board minutes i.e. Any

major change in accounting policy is likely to be evidenced
by the discussion of directors in board minutes

Ensure that the comparatives are

correctly reported and under
appropriate classifications. I.e. Liabilities
and asset not mixed up being current
and non-current from previous year to
current year

-Agree all the figures of comparatives to last years

signed audited Financial Statements.

-Take written management representation i.e. take

written confirmation from high level management that
there have been no change in accounting estimate and
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.