ISA Implementation May2010

INTERNATIONAL
STANDARDS ON
AUDITING (ISA)
IMPLEMENTATION
IN NEW ZEALAND
2010 Copyright New Zealand Institute of Chartered Accountants
ISBN 978-1-877529-05-4
This publication is copyright. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under
the Copyright Act, no part shall be reproduced by any process without permission.
Note that changes identified here represent significant differences between Auditing Standards (AS) and the ISAs (NZ). What is significant
to any individual user will depend on the particular circumstances. Users of this comparison should note that it may not identify all the
differences between the ASs and the ISAs (NZ) that are significant to a particular engagement. Therefore readers should perform their own
review of the entire ISAs (NZ) and other relevant materials to understand how adoption of the ISAs in New Zealand will require changes to
their current practices, policies or methodologies.
Enquiries should be addressed to the publisher.
Published in May 2010 by

New Zealand Institute of Chartered Accountants
PO Box 11 342
Wellington 6142
New Zealand
Contents
Introduction
Why were the ISAs adopted?
Implications for auditors
Mapping from Existing Auditing Standards to New International Standards on Auditing (New Zealand)
Effective Dates
Other resources
Important acronyms
Key differences
Scope
Determining obligations diagram
Change of Focus
Financial Reporting Framework
Preconditions for an Audit/Premise on which an Audit is Conducted
Specific differences
Audit report
Comparison of Audit Reports under AS-702 and ISA (NZ) 700
10
Going Concern
12
Procedures Regarding Litigation and Claims
12
Consideration of Laws and Regulations in an Audit of Financial Statements
13
Attendance at Physical Inventory Counting
13
External Confirmations
13
Group Audits
13
Using the Work of Experts
13
Comparative Information
13
Summaries of main differences between ISAs and ASs
14
ISA (NZ) 200: Overall Objective of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing (New Zealand)
14
ISA (NZ) 210: Agreeing the Terms of Audit Engagements
15
ISA (NZ) 220: Quality Control for an Audit of Financial Statements
15
ISA (NZ) 230: Audit Documentation
16
ISA (NZ) 240: The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements
16
ISA (NZ) 250: Consideration of Laws and Regulations in an Audit of Financial Statements
17
ISA (NZ) 260: Communication with Those Charged with Governance
19
ISA (NZ) 265: Communicating Deficiencies in Internal Control to Those Charged with Governance
and Management
19
ISA (NZ) 300: Planning an Audit of Financial Statements
20
ISA (NZ) 315: Identifying and Assessing the Risks of Material Misstatement Through Understanding
the Entity and its Environment
20
ISA (NZ) 320: Materiality in Planning and Performing an Audit and ISA (NZ) 450: Evaluation of
Misstatements Identified During the Audit
21
ISA (NZ) 330: The Auditors Responses to Assessed Risks
22
ISA (NZ) 402: Audit Considerations Relating to an Entity Using a Service Organisation
22
ISA (NZ) 500: Audit Evidence
23
ISA (NZ) 501: Audit Evidence Specific Considerations for Selected Items
24
ISA (NZ) 505: External Confirmations
25
ISA (NZ) 510: Initial Audit Engagements - Opening Balances
25
ISA (NZ) 520: Analytical Procedures
26
ISA (NZ) 530: Audit Sampling
26
ISA (NZ) 540: Auditing Accounting Estimates, Including Fair Value Accounting Estimates,
and Related Disclosures
26
ISA (NZ) 550: Related Parties
27
ISA (NZ) 560: Subsequent Events
28
ISA (NZ) 570: Going Concern
29
ISA (NZ) 580: Written Representations
29
ISA (NZ) 600: Special Considerations Audits of Group Financial Statements (including the Work
of Component Auditors)
30
ISA (NZ) 610: Using the Work of Internal Auditors
31
ISA (NZ) 620: Using the Work of an Expert
31
ISA (NZ) 700: Forming an Opinion and Reporting on Financial Statements
32
ISA (NZ) 705: Modifications to the Opinion in the Independent Auditors Report
33
ISA (NZ) 706: Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent
Auditors Report
34
ISA (NZ) 710: Comparative Information - Corresponding Figures and Comparative Financial Statements
35
ISA (NZ) 720: The Auditors Responsibility in Relation to Other Information in Documents Containing Audited
Financial Statements
36
ISA (NZ) 800: Special Considerations - Audits of Financial Statements Prepared in Accordance with
Special Purpose Frameworks
36
ISA (NZ) 805: Special Considerations Audits of Single Financial Statements and Specific Elements, Accounts of
Items of a Financial statement
36
ISA (NZ) 810: Engagements to Report on Summary Financil Statements
37
Introduction
Why were the ISAs adopted?
In 2005, the Professional Standards Board (PSB) carried out
public consultation on the proposal to adopt the standards of
the IAASB. The majority of respondents to that consultation
recognised the benefits of achieving international convergence
with international standards that are widely accepted on a global
basis. Public confidence in audits and assurance engagements can
be maximised through the application of national standards that
reflect international best practice.
The PSB therefore decided that:
it would adopt the ISAs, the IAPSs and the ISQCs of the IAASB.
ISQC-1 would be incorporated into a revised version of PS-1:
Quality Control
it would adopt the IAASBs International Framework for
Assurance Engagements
the approach to the adoption of the international standards
would be primarily guided by the PSBs policy aim for adopting
those standards, which is to enable members of the New
Zealand Institute of Chartered Accountants to assert
compliance with the international standards in respect of their
professional engagements undertaken in New Zealand
Consequently, the ISAs (NZ) have exactly the same structure,

formatting and paragraph numbering as the ISAs. Further,
compliance with ISAs (NZ) will automatically achieve compliance
with ISAs and this may be asserted in the auditors report.
What are the implications for auditors?

For audits of financial statements for periods beginning on or after
1 October 2009, all 36 International Standards on Auditing
(New Zealand) (ISAs (NZ)) will be effective. This completes the
phased replacement of the previous Auditing Standards(AS). One
AS has been withdrawn (AS-210), there is one new Standard
(ISA (NZ) 265) and two ISAs (NZ) include material that was
previously in an Audit Guidance Statement (and was therefore
non-mandatory).
While there is significant overlap between the previous auditing
standards (AS) there are important differences and members
should ensure that their internal procedures are compliant with the
new requirements under ISAs (NZ).
the standards will be amended to make them applicable in New

Zealand by making additions, deletions or other amendments
to the extent permitted by the IAASBs guidance for achieving
international convergence with International Standards while
retaining all requirements in the International Standards.
This states that National Standard Setters (NSS) will limit additions to an International Standard to the following:
(a)
National legal and regulatory requirements
(b)
Other requirements or guidance that are not inconsistent with the current requirements or guidance in the international standard.
Deletions and other amendments will be limited to:
(a)
The elimination of options provided for in the international standard
(b)
Requirements of guidance, the application of which law or regulation does not permit, or which require amendment to be consistent with law or
regulation.
(c)
Requirements or guidance where the international standard recognises that different practices may apply in different jurisdictions and the NSS is in
such a jurisdiction.
Mapping from Existing Auditing Standards to New International

Standards on Auditing (New Zealand)
Existing Standard
ISA (NZ)
AS-100 Objective of and General Principles

Governing an Audit
ISA (NZ) 200 Overall Objectives of the Independent Auditor and

the Conduct of an Audit in Accordance with International
Standards on Auditing (NZ)
AS-202 Agreeing the Terms of an Audit

Engagement
ISA (NZ) 210 Agreeing the Terms of Audit Engagements
AS-204 Documentation
ISA (NZ) 230 Audit Documentation
AS-206 The Auditors Responsibility to Consider

Fraud in an Audit of a Financial Report
ISA (NZ) 240 The Auditors Responsibilities Relating to Fraud in an

Audit of Financial Statements
AS-208 Consideration of Laws and Regulations

of an Audit
ISA (NZ) 250 Consideration of Laws and Regulations in an Audit of

AS-210 Auditing in a Computer Information

Systems Environment
Withdrawn
AS-710 Communication with the Entity on

Matters Arising from the Audit
ISA (NZ) 260 Communication with Those Charged with Governance
New Standard
IAS (NZ) 265 Communicating Deficiencies in Internal Control to

Those Charged with Governance and Management
AS-220 Quality Control for Audits of Historical

Financial Information
ISA (NZ) 220 Quality Control for an Audit of Financial Statements
AS-300 Planning
ISA (NZ) 300 Planning of an Audit of Financial Statements
AS-302 Knowledge of the Audit Environment
ISA (NZ) 315 Identifying and Assessing the Risks of Material

Misstatement through Understanding the Entity and Its
Environment
AS-402 Risk Assessment and Internal Control
ISA (NZ) 330 The Auditors Reponses to Assessed Risks
AS-304 Audit Materiality
ISA (NZ) 320 Materiality in Planning and Performing an Audit

ISA (NZ) 450 Evaluation of Misstatements Identified during the
Audit
AS-404 Audit Considerations Relating to Entities

Using Service Organisations
ISA (NZ) 402 Audit Considerations Relating to an Entity Using a

Service Organisation
AS-500 Audit Evidence

AS-512 Enquiry Regarding Litigation and Claims
ISA (NZ) 500 Audit Evidence

ISA(NZ)
also contains
material
from
AGS-1004
Contains
material
from
AGS-1006
ISA (NZ) 501 Audit Evidence Specific Considerations for Selected

Items
ISA (NZ) 505 External Confirmations
AS-502 Initial Engagements Opening Balances
ISA (NZ) 510 Initial Audit Engagements Opening Balances
AS-504 Analytical Procedures
ISA (NZ) 520 Analytical Procedures
AS-506 Audit Sampling
ISA (NZ) 530 Audit Sampling
Existing Standard
ISA (NZ)
AS-508 Auditing of Accounting Estimates
ISA (NZ) 540 Auditing Accounting Estimates, Including Fair Value

Accounting Estimates, and Related Documents
AS-545 Auditing Fair Value of Measurements

and Disclosures
AS-510 Related Parties
ISA (NZ)550 Related Parties
AS-514 Management Representatives
ISA (NZ)580 Written Representations
AS-516 Comparatives
ISA (NZ) 710 Comparative Information Corresponding Figures

and Comparative Financial Statements
AS-518 Other Information in a Document

Containing an Audited Financial Report
ISA (NZ) 720 The Auditors Responsibilities

Relating to Other Information in Documents
Containing Audited Financial Statements
AS-520 Going Concern
ISA (NZ) 570 Going Concern
AS-522 Subsequent Events
ISA (NZ) 560 Subsequent Events
AS-602 Using the Work of An Other Auditor
ISA (NZ) 600 Special Considerations Audits of Group Financial

Statements (Including the Work of Component
Auditors)
AS-604 Considering the Work of Internal Audit
ISA (NZ) 610 Using the Work of Internal Auditors
AS-606 Using the Work of an Expert
ISA (NZ) 620 Using the Work of an Auditors Expert
AS-702 The Audit Report on an Attest Audit
ISA (NZ) 700 Forming an Opinion and Reporting on Financial

Statements
ISA (NZ) 705 Modifications to the Opinion in the Independent
Auditors Report
ISA (NZ) 706 Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditors Report
ISA (NZ) 810 Engagements to Report on Summary Financial
Statements
ISA (NZ) 800 Special Considerations Audits of Financial Statements Prepared in Accordance with Special Purpose
Frameworks
ISA (NZ) 805 Special Considerations Audits of Financial
Statements and Specific Elements, Accounts or
Items of a Financial Statement
Summarised Timetable of Effective Dates for ISAs (NZ)
Expected Effective Date

Periods beginning on or after
First full Year Period ends
Batch 1
240, 300, 315, 330
1 January 2008
31 December 2008
Batch 2
230, 260, 600, 720
1 July 2008
30 June 2009
Batch 3
540, 560, 580
1 January 2009
31 December 2009
Batch 4
250, 550, 570
1 January 2009
31 December 2009
Batch 5
200, 320, 450, 530, 610
1 April 2009
31 March 2010
Batch 6
220, 500, 501, 505, 520, 620
1 July 2009
30 June 2010
Reporting
700, 705, 706, 800, 805, 810
1 October 2009
30 September 2010
Batch 7
210, 265, 402, 510, 710
1 October 2009
30 September 2010
1 July 2010
30 June 2011
Quality Control
ISQC-1 PS-1
Other resources
Readers may find the following of interest:
ISA Implementation Resources
Summaries of ISAs (NZ)
Detailed comparisons of the differences between the Auditing Standards (ASs) and the International
Standards on Auditing (ISAs)
To access these documents visit www.nzica.com/eps
Publications
Auditing and Assurance Standards - a new publication that contains all of the International Standards on Auditing (NZ)
and International Assurance Engagements (NZ) issued by NZICA as at January 2010.
For more information on this publication visit www.nzica.com/publications
Professional Development
The e-learning Advanced Audit Series
For more information on this series visit http://www.nzica.com/events/
Important Acronyms
IAASB
International Auditing and

Assurance Standards Board
The Board of IFAC which is charged with serving the public interest by:
setting, independently and under its own authority, high quality standards
dealing with auditing, review, other assurance, quality control and related
services, and
facilitating the convergence of national and international standards.
This contributes to enhanced quality and uniformity of practice in these areas

throughout the world, and strengthened public confidence in financial reporting.
Further information can be found on its website at: www.ifac.org/iaasb.
IAPSs
International Auditing Practice

Statements
IAPSs are issued by the IAASB to provide interpretive guidance and practical
assistance to professional accountants in implementing ISAs and to promote
good practice.
IFAC
International Federation of
Accountants
IFAC is the global organisation for the accountancy profession. It has 159
members and associates in 124 countries and jurisdictions and represents
2.5 million accountants employed in public practice, industry and commerce,
government and academia. Further information can be found on its website at:
www.ifac.org.
ISAs
International Standards on
Auditing
Standards developed and approved by the IAASB to be applied when conducting

an audit of financial statements comprising historical financial information and
are to be adapted as necessary in the circumstances when applied to audits of
other historical financial information.
ISAs (NZ)
Auditing (New Zealand)
Standards developed by the Professional Standards Board of NZICA and

approved by the Council of NZICA to be applied by members when conducting
audits of financial statements. These are based on ISAs with minimal
amendments.
ISAEs
Assurance Engagements
Standards developed and approved by the IAASB to be applied when conducting

assurance engagements other than audits and reviews of financial statements.
ISAEs (NZ)
Assurance Engagements (New
Zealand)

assurance engagements other than audits and reviews of financial statements.
ISQCs
International Standards on Quality ISQCs are issued by the IAASB to establish standards regarding a firms
Control
responsibilities for its systems of quality control and are to be applied for all
services falling under the IAASBs Engagement Standards.
SAEs
Standards on Assurance
Engagements

assurance engagements over specific subject matter.
Key Differences
Scope
Audits and other assurance engagements not specifically covered
by the ISAs (NZ) should now be performed in compliance with
International Standards on Assurance Engagement (New Zealand)
(ISAE (NZ)) 3000, Assurance Engagements Other than Audits or
Reviews of Historical Financial Information and, in the case of
compliance audits, the Standard on Assurance Engagement (SAE)
3100, Compliance Engagements. This is summarised in the
diagram on the next page.
The most obvious difference is in the scope of the standards. The

ISAs (NZ) apply to audits of financial statements and are to be
adapted, as necessary in the circumstances, when applied to audits
of other historical financial information. In contrast, of the 30 ASs,
12 applied to all audits, 2 applied to attest audits and 16 applied
to audits of financial reports. Therefore members performing
certain types of audits, for example audits of compliance with
regulations; environmental audits, audits of internal control; up
until now have been required to comply with the 12 auditing
standards which applied to all audits, covering topics such as
planning, documentation, evidence, using experts and so on.
Determining Obligations when Performing Engagements
Does the engagement involve the expression of an

opinion designed to provide assurance to
intended users
Yes
No
Apply
Framework for Assurance
Will the opinion be given on historical

financial information?
Yes
No
Is it a reasonable assurance engagement

or a limited assurance engagement?
Reasonable
Apply
Limited
ISAE (NZ) 3000

Apply
ISAs (NZ)
Apply
RS-1
AND any relevant ISAE (NZ) or SAE

(NZ)
[Currently on issue: SAE 3100]
Apply relevant
Non-Assurance Standards
[Currently on issue:
APS-1 AES-1
AES-2 SES-1
SES-2 FAES]

Note that the Explanatory Foreword states at paragraph 14 that ISAs (NZ) are written in the context of an audit of financial statements comprising
historical financial information (financial statements) by an independent auditor. They should also be applied, as appropriate, to all audits.
1
Change of focus
After Enron et al, there has been a clear change of focus in the
ISAs. Assessment of risk is now a key part of the audit process.
Some of the results of this have been:
adoption of new terminology. For example:
the risk of material misstatement this comprises inherent
risk and control risk (inherent risk and control risk now receive
much less mention in the standards)
significant risk a risk that requires special audit
consideration
risk assessment procedures audit procedures performed
to obtain an understanding of the entity and its environment,
including its internal control, to assess the risks of material
misstatement at the financial statement and assertion levels.
There are now three types of audit procedures: risk assessment
procedures, tests of controls and substantive procedures (which
include tests of details and substantive analytical procedures).
Analytical procedures can be used as risk assessment
procedures or substantive analytical procedures.
a clear emphasis on risk assessment. For example, the auditor
was previously required to gain an understanding of the entity
and its environment in order to identify and understand the
events, transactions and practices that may have a significant
effect on the audit subject matter. Now, the auditor is required
to obtain an understanding of the entity including its internal
control, sufficient to identify and assess the risks of material
misstatements and sufficient to design and perform further audit
procedures.
The main ISAs (NZ) reflecting this change are ISA (NZ) 315,
Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and its Environment and ISA
(NZ) 330, The Auditors Responses to Assessed Risks. As these
standards have been effective for some time (for periods beginning
on or after 1 January 2008), audit methodologies should already
have been updated for this.
Financial Reporting Framework

As the ISAs have been developed to apply in many different
jurisdictions, the term applicable financial reporting framework is
used when referring to the framework adopted in the preparation
of the financial statements. The ISAs also draw a distinction
between a fair presentation framework and a compliance
framework. A fair presentation framework is one with a fair
presentation (or true and fair) override, that is the framework
acknowledges that, in order to achieve fair presentation, additional
disclosures may be required or it may be necessary to depart from
a requirement in the framework. Many entities subject to audit
in New Zealand are required to comply with generally accepted
accounting practice in New Zealand and give a true and fair view
of the matters to which the financial statements relate. This is an
example of a fair presentation framework.
Preconditions for an Audit/Premise on which

an Audit is Conducted
Prior to accepting or continuing an engagement, the auditor is
now required to establish whether the preconditions for an audit
are present. This requires the auditor to (a) determine whether
the financial reporting framework is acceptable and (b) obtain
agreement from those charged with governance to the premise on
which the audit is conducted.
The premise is that those charged with governance have
acknowledged and understand that they have various
responsibilities in relation to the preparation of the financial
statements, internal control and during the audit engagement.
(See further detail of these responsibilities in ISA (NZ) 200).
Specific Differences
As each batch of proposed ISAs (NZ) were released for comment
detailed comparisons of the proposed standards with the existing
standards were made available on the New Zealand Institute of
Chartered Accountants website. . Many of the differences noted in
these comparisons are minor. However, there are some important
changes of which members should be aware.
Now (ISA (NZ) 700)
1. Audit Report
This is perhaps the area of most significant change. Both
the standard wording and the format of the audit report will
change. Some of the differences between the two standards are
summarised in the following table.
Then (AS-702)
Important Because:
Date of the Audit Report

Not explicitly stated, but shall be no earlier
than the date on which the auditor has
obtained sufficient appropriate audit evidence
on which to base the auditors opinion.
Dated the date the auditor physically signs the The subsequent events review has to
audit report (provided that this is after the date extend from the balance date until
that the governing body approves the financial the date of the audit report.
statements).
Terminology
The auditors opinion is either unmodified or
modified.
The auditors opinion was either unqualified

or qualified.
A modified opinion is either qualified,

adverse, or a disclaimer of opinion.
A qualified opinion was either except-for,

adverse or a disclaimer of opinion.
The auditor can add an
The auditor could add an explanatory

paragraph to highlight matters relevant to
a proper understanding of the basis of the
opinion.
The audit report now needs to

distinguish between the two types of
paragraph.
The title must indicate that it is the report of

an independent auditor.
Required a title to distinguish the audit report

from other information published with it and
stated that it may be appropriate to refer to
the audit report having been provided on an
independent basis.
Title now should be:

Independent Auditors Report (or
similar).
The order of paragraphs where an opinion is

modified or an emphasis of matter or other
matter paragraph is used is mandated as:
Order was not specified.
Auditors who have used a nonstandard order, for example to put

the opinion first will no longer be
able to do so.
Emphasis of Matter paragraph to

draw users attention to a matter that is
fundamental to their understanding of the
financial statements; or
Opinion paragraph in audit report

headed differently.
an Other Matter paragraph to draw

users attention to a matter that is relevant
to their understanding of the audit.
Format
Basis for modification paragraph
All matters reported included in the opinion

paragraph.
Opinion paragraph
(only opinions relating to the financial
statements)
Emphasis of matter paragraph
Other matter paragraph
Other Reporting Responsibility
Statement on information and

explanations and opinion on
accounting records must now be in a
separate paragraph entitled Report
on Other Legal and Regulatory
Requirements.
Now (ISA (NZ) 700)
Then (AS-702)
Important Because:
The audit report must contain a clear

expression of opinion. There is no standard
wording.
Phrases such as fairly reflect can

no longer be used in the opinion.
Strictly speaking splitting the opinion
between compliance with, say, gaap
and fair presentation is no longer
permitted (unless legislation or
regulation allows it).
Wording of Opinion
Unless otherwise required by law or
regulation, the opinion is required to use one
of the following phrases:
The financial statements present fairly,

in all material respects, in accordance
with [the applicable financial reporting
framework]; or
The financial statements give a true and
fair view of in accordance with [the
applicable financial reporting framework].
Note, however, that entities subject

to the Financial Reporting Act 1993
(issuers and companies) are not
affected by this as Sections 16 and
17 of that Act dictate the wording of
the opinion.
See the next page for a comparison of a typical audit report prepared under AS-702 and one prepared under ISA (NZ) 700.
Comparison of Audit Reports under AS-702 and ISA (NZ) 700

Audit Report under AS-702
Audit Report
under ISA (NZ) 700
Comments
Not-for-Profit Entity (not subject to any legislation or regulation)

Audit Report
INDEPENDENT AUDITORS REPORT
To the Members of ABC Sports Club
[Appropriate Addressee]
We have audited the financial report on

pages ..... to ..... The financial report
provides information about the past
financial performance of the club and
its financial position as at (date). This
information is stated in accordance with
the accounting policies set out on page
.....
We have audited the financial statements

of ABC Sports Club on pages to ,
which comprise the balance sheet as
at December 31, 20X1, and the income
statement, and cash flow statement for
the year then ended, and a summary of
significant accounting policies and other
explanatory information.
Management Committees Responsibilities

The Management Committee is
responsible for the preparation of a
financial report which fairly reflects
the financial position of the club as
at (balance date) and the results of
operations and cash flows for the (period)
ended on that date.
Auditors Responsibilities
It is our responsibility to express to you
an independent opinion on the financial
report presented by the Management
Committee.
Basis of Opinion
An audit includes examining, on a test
basis, evidence relevant to the amounts
and disclosures in the financial report. It
also includes assessing:
the significant estimates and
judgements made by the Management
Committee inthe preparation of the
financial report; and
10
Management Committees Responsibility

for the Financial Statements
The management committee is
responsible for the preparation and fair
presentation of these financial statements
in accordance with generally accepted
accounting practice in New Zealand; this
includes the design, implementation
and maintenance of internal
control relevant to the preparation
and fair presentation of financial
statements that are free from material
misstatement, whether due to fraud or
error.
Auditors Responsibility
Our responsibility is to express an opinion
on these financial statements based on
our audit. We conducted our audit in
accordance with International Standards
on Auditing (New Zealand). Those
standards require that we comply
with ethical requirements and plan
and perform the audit to obtain
reasonable assurance about whether
the financial statements are free
from material misstatement.
Slight change to heading
Need to identify the title of each

statement that comprises the financial
statements
Expanded statement of governing body

responsibilities.
Basis of Opinion section merged into

Auditors Responsibilities
Extra statement
Audit Report
under ISA (NZ) 700
whether the accounting policies are

appropriate to the clubs circumstances,
consistently applied and adequately
disclosed.
An audit involves performing procedures

to obtain audit evidence about the
amounts and disclosures in the financial
statements. The procedures selected
depend on the auditors judgement,
including the assessment of the risks of
material misstatement of the financial
statements, whether due to fraud or
error. In making those risk assessments,
the auditor considers internal control
relevant to the entitys preparation and fair
presentation of the financial statements in
order to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the entitys internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of accounting
estimates, as well as evaluating the overall
presentation of the financial statements.
We conducted our audit in accordance

with New Zealand Auditing Standards.
Weplanned and performed our audit
so as to obtain all the information and
explanations which we considered
necessary in order to provide us with
sufficient evidence to obtain reasonable
assurance that the financial report is free
from material misstatements, whether
caused by fraud or error. In forming
our opinion we also evaluated the
overall adequacy of the presentation of
information in the financial report. Other
than in our capacity as auditor we have no
relationship with, or interests in, the club.
Unqualified Opinion
In our opinion the financial report on
pages ..... to ..... fairly reflects the financial
position of ABC Sports Club as at (balance
date) and the results of its operations and
cash flows for the (period) ended on that
date.
Our audit was completed on ..... and our
unqualified opinion is expressed as at that
date.
Auditor
Address (city)
Comments
New statement required
We believe that the audit evidence we

have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Other than in our capacity as auditor we
have no relationship with, or interests in,
the club.
Opinion
In our opinion, the financial statements
present fairly, in all material respects,
(or give a true and fair view of) the
financial position of ABC Sports Club as at
December 31, 20X1, and (of) its financial
performance and its cash flows for the
year then ended in accordance with
generally accepted accounting practice
in New Zealand.
Different heading for Opinion section
True and fair expanded
[Auditors signature]
[Date of the auditors report]
[Auditors address]
Presentation of date is not specified in

either Standard
11
Audit Report
under ISA (NZ) 700
Comments
Entity Subject to the Financial Reporting Act

Unqualified Opinion
Opinion
We have obtained all the information and

explanations we have required.
In our opinion the financial statements of

XYZ Limited for the year ended December
31, 20X1:
In our opinion:
proper accounting records have been
kept by the company as far as appears
from our examination of those records;
and
the financial report on
pages ...... to ......:
complies with generally accepted
accounting practice in New Zealand;
gives a true and fair view of the
financial position of XYZ Limited and
the results of its operations and cash
flows for the (period) ended on that
date.
comply with generally accepted

accounting practice in NewZealand;
give a true and fair view of the financial
position of XYZ Limited as at December
31, 20X1 and the results of its
operations and cash flows for the year
ended on that date.
Other Reporting Responsibilities
We have obtained all the information and
explanations we have required.
In our opinion proper accounting records
have been kept by the company as far as
appears from our examination of those
records.
2. Going Concern
3.Procedures Regarding Litigation and Claims
AS-520 is more onerous than ISA (NZ) 570. For example AS-520
requires the auditor to:
AS-512 is more extensive than the corresponding section of ISA

(NZ) 501. Further AS-512 contains a lot of useful discussion.
Significant differences in the relevant requirements are:
request a written statement from management (governing body)

confirming their view on whether or not the adoption of the
going concern assumption is appropriate. This statement must
specifically address any known matters that may indicate that
the going concern assumption is not appropriate
make enquiries of management and obtain sufficient
appropriate audit evidence to support managements view
plan and perform procedures specifically designed to identify
material matters that could cast doubt on the appropriateness of
the going concern assumption, and
consider the period ending one year after the approval of the
financial report.
In contrast ISA (NZ) 570 only requires the auditor to specifically
address going concern when events or conditions are identified
which may cast doubt on the entitys ability to continue as a going
concern. Further, the period of time that is relevant is one year
from balance date.
12
Opinion split into two sections
ISA (NZ) 501 requires the auditor to carry out audit procedures
in order to become aware of any litigation and claims that may
result in material misstatement, whereas AS-512 requires the
auditor to obtain sufficient appropriate audit evidence regarding
whether all material legal matters have been identified AND
the probability and estimated amount of any material revenue
or expense arising from legal matters AND the adequacy of the
accounting treatment of legal matters including disclosure
AS-512 requires the auditor to request written representations
from all solicitors with whom the entity has consulted on
material legal matters. The auditor is required to qualify
the audit opinion if unable to obtain these representations
(limitation of scope). ISA (NZ) 501 only requires direct
communication with the entitys legal counsel when the auditor
assesses a risk of material misstatement regarding litigation or
claims that have been identified or when the auditor believes
they may exist. A scope limitation will exist if the entity refuses
to give the auditor permission to communicate and a scope
limitation may exist if the legal counsel refuses to respond.
4. Consideration of Laws and Regulations in an Audit of

AS-208 identifies three categories of laws and regulations and
specifies the auditors responsibility in relation to each, whereas
ISA (NZ) 250 only specifically refers to two categories. In relation
to laws and regulations that are fundamental to operations,
AS-208 requires the auditor to obtain sufficient appropriate audit
evidence about compliance with these laws and regulations. ISA
(NZ) 250 requires the auditor to perform procedures to help
identify instances of non-compliance with this category specifically
enquiring as to whether the entity is in compliance and inspecting
correspondence with the relevant licensing or regulatory authority.
AS-208 requires more conclusive evidence than enquiry and
inspection of correspondence.
5. Attendance at Physical Inventory Counting
AGS-1004 being a Guidance Statement does not contain
mandatory requirements on the audit of inventory (existence
and valuation). ISA (NZ) 501 contains standards relating to the
audit evidence required regarding the existence of inventory. One
of the most notable effects of this is that, under ISA (NZ) 501,
attendance at the entitys physical inventory count is required
unless impracticable. If the auditor is unable to attend on the date
planned due to unforeseen circumstances, the auditor is required
to take or observe some physical counts on an alternative date
and perform audit procedures on intervening transactions. Where
attendance is impracticable the auditor shall consider whether
alternative procedures provide sufficient appropriate audit evidence
of existence and condition to conclude that the auditor need not
make reference to a scope limitation.
8. Using the Work of Experts

AS-606 deals with both the use of experts (specialists engaged
by the auditor or engaged or employed by the entity). An expert
is defined to be someone possessing special skill, knowledge and
experience in a particular field other than auditing. A specialist
employed by the auditor is considered an assistant and therefore
subject to the firms quality control procedures and processes.
ISA (NZ) 620, on the other hand deals only with the use of
auditors experts (specialists engaged or employed by the auditor).
An expert now specifically excludes specialists in accounting.
Managements experts are now dealt with in ISA (NZ) 500.
9. Comparative Information
AS-516 deals with the auditors responsibilities in relation to
comparatives which is defined to be corresponding amounts or
other disclosures for the preceding reporting period(s) presented
for comparison purposes as part of the current periods audited
information.
ISA (NZ) 710 has expanded the coverage to include corresponding
figures and comparative financial statements and has differing
requirements for each type of comparative information.
6. External Confirmations
ISA (NZ) 505 mandates certain procedures to be followed when
using external confirmation procedures. Material relating to
external confirmations is currently in AGS-1006. The equivalent
material, internationally, is in ISA (NZ) 505. Therefore what was
guidance in AGS-1006 is now mandatory.
7. Group Audits
ISA (NZ) 600 replaces AS-602 which deals with using the work of
an other auditor. However, in addition to specifying requirements
when a group audit involves component auditors, it also specifies
requirements in relation to obtaining sufficient appropriate audit
evidence regarding the financial information of the components
and the consolidation process itself. These are essentially new
requirements.
13
Summaries of main differences between ISAs and ASs

Note that changes identified here represent significant differences between Auditing Standards (AS) and the ISAs (NZ). What is
significant to any individual user will depend on the particular circumstances. Users of this comparison should note that it may not
identify all the differences between the ASs and the ISAs (NZ) that are significant to a particular engagement. Therefore readers
should perform their own review of the entire ISAs (NZ) and other relevant materials to understand how adoption of the ISAs in New
Zealand will require changes to their current practices, policies or methodologies.
ISA (NZ) 200

Overall Objectives of the Independent Auditor
and the Conduct of an Audit in Accordance
with International Standards on Auditing
(New Zealand)
Auditing Standard Replaced
AS-100: Objective of and General Principles Governing an Audit
ISA (NZ) 200 also contains material currently in the Explanatory
Foreword to Engagement Standards relating to the authority
attaching to ISAs (NZ) and the obligations of auditors who follow
them along with more comprehensive explanations of relevant
auditing concepts than in AS-100.
Difference(s) in Scope
AS-100 applies to all audits. ISA (NZ) 200 applies only to audits
of financial statements (adapted as necessary for audits of other
historical financial information).
ISA (NZ) 200 also contains an extensive list of definitions that will
apply to all ISAs (NZ).
New Concepts
ISA (NZ) 200 introduces the concepts of applicable financial
reporting framework including fair presentation frameworks and
compliance frameworks. These concepts pervade the ISAs (NZ)
and affect, for example, the form and content of the audit report
(ISA (NZ) 700 and ISA (NZ) 800).
Applicable financial reporting framework the financial

reporting framework adopted in the preparation of the financial
statements that is acceptable in view of the nature of the entity
and the objective of the financial statements, or that is required by
law or regulation.
Fair presentation framework a financial reporting framework
that requires compliance with the requirements of the framework

and:
(i)

14
Acknowledges explicitly or implicitly that, to achieve fair

presentation of the financial statements, it may be
necessary to provide disclosures beyond those specifically
required by the framework.
(ii)

Acknowledges explicitly that it may be necessary to

depart from a requirement of the framework to
achieve a fair presentation of the financial statements.
Such departures are expected to be necessary only in
extremely rare circumstances.
Compliance framework a financial reporting framework that
requires compliance with the requirements of the framework, but

does not contain the acknowledgements in (i) or (ii) above.
Note: under the Financial Reporting Act, the framework for

reporting entities is a fair presentation framework while the
framework for exempt companies is a compliance framework.
ISA (NZ) 200 also introduces an explicit premise relating to the
responsibilities of those charged with governance, on which an
audit is conducted.
Changes to Requirements
ISA (NZ) 200 spells out the obligation for auditors to comply with
all ISAs (NZ) relevant to the audit, the importance of the objectives
in each ISA (NZ) and the need to comply with the relevant
requirements in each ISA (NZ). A departure from a relevant
requirement is allowed in exceptional circumstances but the
auditor still needs to perform alternative procedures to achieve the
aim of the requirement.
AS-100 has a mandatory paragraph which states that an auditor
must not accept an audit engagement when a known limitation
infringes on the auditors legal duties or ethical, or professional,
responsibilities. This is now largely picked up in ISA (NZ) 210
which states that the preconditions for an audit must be met if the
engagement is to be accepted or continued.
Other Differences/Points of Interest
ISA (NZ) 200 has some useful discussion on:
audit risk and materiality. Inherent risk, control risk and
detection risk are defined
the inherent limitations of an audit. The auditor is not expected
to, and cannot, reduce audit risk to zero
the meaning of professional scepticism.
ISA (NZ) 210

Agreeing the Terms of Audit Engagements
AS-202: Agreeing the Terms of an Audit Engagement
AS-202 applied to all audits. ISA (NZ) 210 applies only to audits
New Concepts
The preconditions for an audit are defined to be the use of an
acceptable financial reporting framework and the agreement of
those charged with governance of the premise on which an audit
is conducted.
Agreeing on Engagement Terms

ISA (NZ) 210 requires that the auditor and client agree on the
terms of the engagement and record it in an audit engagement
letter or other suitable form of written agreement. AS-210 only
requires the auditor to seek agreement, and then consider the
implications from non-acceptance. Further there are more specific
requirements over what the agreement should cover in ISA (NZ)
210 i.e.
the objective and scope of the audit
the responsibilities of the auditor
the responsibilities of those charged with governance
identification of the applicable financial reporting framework,
and
reference to the expected form and content of any reports to
be issued.
Preconditions for an Audit

The auditor is required to establish whether the preconditions for
an audit are present. In order to do so, the auditor is required to:
ISA (NZ) 220
(a) determine whether the financial reporting framework is

acceptable and
Quality Control for an Audit of Financial

Statements
(b) obtain an agreement of those charged with governance

that they acknowledge and understand their responsibility:
(i) for the preparation of the financial statements in

accordance with the applicable financial reporting

framework
(ii) for such internal control as is necessary to enable the

preparation of financial statements that are free from

material misstatement whether due to fraud or error
(iii) to provide the auditor with
a.

access to all information of which management is aware

that is relevant to the preparation of the financial
statements such as records, documentation and other
matters;
b. additional information that the auditor may request for the

purpose of the audit; and
c.

AS-220: Quality Control for Audits of Historical Financial

Statements.
The engagement team is defined to specifically exclude an
auditors external expert engaged by the network firm. Therefore,
the Standard does not cover the external expert. AS-220
specifically includes experts contracted by the firm in connection
with the particular audit engagement in the engagement team and
therefore AS-220 does cover external experts.
New Concepts
None
None
unrestricted access to persons within the entity from whom

the auditor determines it necessary to obtain
audit evidence.
If the preconditions for an audit are not present, the auditor is

required to discuss the matter with those charged with governance
and not accept the engagement if the financial reporting
framework is unacceptable or the agreement in (b) above is not
obtained.
15
ISA (NZ) 230
ISA (NZ) 240
Audit Documentation
The Auditors Responsibilities Relating to

Fraud in an Audit of Financial Statements

AS-204: Documentation
AS-206: The Auditors Responsibility to Consider Fraud in an

Audit of a Financial Report
New Concepts
New Concepts
None
None
ISA (NZ) 230 is much more prescriptive than AS-204. The auditor
is required to prepare audit documentation that is sufficient to
enable an experienced auditor, having no previous connection with
the audit, to understand:
Four previously grey-letter (should) paragraphs in AS-206 have

been elevated to requirements in ISA (NZ) 240:
the nature, timing and extent of the audit procedures performed

to comply with ISAs (NZ)
the results of the audit procedures performed and the audit
evidence obtained, and
significant matters arising during the audit, conclusions reached
and significant professional judgements made in reaching those
conclusions.
Other specific requirements are that documentation shall include:
who performed the audit work and the date it was completed and
who reviewed the work and the date and extent of the review
discussions of significant matters with management, those
charged with governance and others
how the auditor addressed any inconsistency between any
information inconsistent with the auditors final conclusions
regarding a significant matter
where the auditor has judged it necessary to depart from a
relevant requirement in an ISA (NZ), how the alternative audit
procedures performed achieve the aim of the omitted requirement
and the reasons for the departure.
matters arising after the date of the auditors report to be
documented.
There are also specific requirements relating to the completion of
the audit file. ISA (NZ) 230 requires assembly of the final audit file
on a timely basis after the date of the auditors report. This would
normally be no more than 60 days after the date of the report. After
the assembly of the final audit file has been completed, the auditor
shall not delete or discard audit documentation of any nature before
the end of its retention period (or clearly document the reasons for
making any modifications and when and by whom they were made
and reviewed).
16
None
Where conditions identified cause the auditor to believe that

a document may not be authentic or that terms in a document
have been modified but not disclosed to the auditor, the auditor
must investigate further.
Where responses to enquires of management or those charged
with governance are inconsistent, the auditor must investigate
the inconsistencies.
If the auditor has identified or suspects a fraud, the auditor
must determine whether there is a responsibility to report the
occurrence of suspicion to a party outside the entity.
The auditor shall make a presumption that there are risks of
fraud in revenue recognition. Where the auditor has determined
that the presumption is not applicable in the circumstances of
the engagement and, accordingly, has not identified revenue
recognition as a risk of material misstatement due to fraud, the
reasons must be included in the audit documentation.
The requirement to test the appropriateness of journal entries and
other adjustments and review accounting estimates for bias is
more detailed in ISA (NZ) 240 than in AS-206.
ISA (NZ) 250

Consideration of Laws and Regulations in an
Audit of Financial Statements
AS-208: Consideration of Laws and Regulations in an Audit
None
New Concepts
None
Categories of Laws and Regulations

AS-208 identifies three categories of laws and regulations and
specifies the auditors responsibility in relation to each, whereas
ISA (NZ) 250 only specifically refers to two categories. Further, the
auditors responsibilities are different in relation to these categories.
(a) Those relating directly to the financial report.
AS-208
ISA (NZ) 250

Description
Those generally recognised to have a direct effect on the
determination of material amounts and disclosures in the
financial statements, e.g. tax and pension laws and regulations.
Those that directly affect the form or content of an entitys

financial report or have requirements with which the governing
body must comply in the preparation of the financial report, for
example, the Financial Reporting Act 1993.
Requirements
The auditor shall obtain sufficient appropriate audit evidence
regarding compliance with the provisions of these laws and
regulations.
The auditor must perform procedures to help identify instances of

non-compliance specifically:
enquiring as to whether the entity is in compliance; and
inspecting correspondence with the relevant licensing or
regulatory authority.
17
(b) Those fundamental to operations.
ISA (NZ) 250
AS-208
Description
Laws and regulations - compliance with which may be

fundamental to the operating aspects of the business, to an
entitys ability to continue its business, or to avoid material
penalties, for example an operating licence, regulatory solvency
requirements, environmental regulations.
Laws and regulations that may be expected to have a

fundamental effect on the operations of an entity and thus could
have financial consequences that are material to the financial
report e.g. a law or licence, or a similar entitlement to carry on a
trade or practice which forms a major part of an entitys activities,
environmental protection for an entity involved in the production
of chemicals. The consequences of non-compliance would result
in material liabilities or would jeopardize the viability of that
major part of the entity, or would affect the ability of the entity to
continue to operate as a going concern.
Requirements
The auditor shall perform procedures to help identify instances of
non-compliance, specifically:
enquiring as to whether the entity is in compliance; and
inspecting correspondence with the relevant licensing or
regulatory authority.
Remain alert
ISA (NZ) 250 has a requirement for the auditor to remain alert
to the possibility that other audit procedures applied may bring
instances of possible non-compliance to the auditors attention.
This is grey-letter (should) in AS-208.
AS-208 identifies a third category of laws and regulations other
which includes such things as occupational health and safety, equal
opportunity employment, environmental protection. In relation to
this category, the Standard states that in the absence of a specific
requirement of the audit mandate, it is not practical to consider
all such legislation when planning and assessing audit risk, and
the auditor is not expected to have a detailed knowledge of them
beyond that expected of a reasonable person.
AS-208 has a paragraph which states that when non-compliance is
detected, regardless of materiality, the auditor should consider the
implications of relying on the integrity of management. This does
not appear in ISA (NZ) 250.
18
The auditor must obtain sufficient appropriate audit evidence

about compliance with these laws and regulations. The
auditor must have a sufficient understanding of those laws
and regulations in order to consider them when auditing the
assertions related to the determination of the amounts to be
recorded and the disclosures to be made.
ISA (NZ) 260
ISA (NZ) 265
Communication with Those Charged with

Governance
Communicating Deficiencies in Internal Control to Those Charged with Governance and

Management

AS-710: Communication with the Entity on Matters Arising from
the Audit

None. AS-402 has a requirement to make management aware as
soon as practical of material weaknesses in the design or operation
of the accounting and internal control systems, which have come to
the auditors attention.
Not applicable
New Concepts
Qualitative aspects of accounting practices includes such
New Concepts
matters as appropriateness of accounting policies to the

circumstances of the entity, accounting estimates and financial
statement disclosures.
A significant deficiency in internal control is defined to be a

deficiency or combination of deficiencies in internal control that, in
the auditors professional judgement, is of sufficient importance to
merit the attention of those charged with governance.
Matters to be Communicated
ISA (NZ) 260 specifies certain matters that now must be
communicated:
the responsibilities of the auditor
Additional Requirements
Significant deficiencies identified must be communicated in writing to
those charged with governance and management, on a timely basis.
The following must be included in this communication:
an overview of the planned scope and timing of the audit
a description of the deficiencies and an explanation of their

potential effects
the auditors views about significant qualitative aspects of the

entitys accounting practices, including accounting policies,
accounting estimates and financial statement disclosures
sufficient information to enable those charged with

governance and management to understand the context of the
communication. In particular, the auditor shall explain that
significant difficulties, if any, encountered during the audit
the purpose of the audit was for the auditor to express an

opinion on the financial statements
significant issues communicated to management including the

written representations the auditor is requesting
other matters that are significant to the oversight of the financial
reporting process, and
in the case of issuers, a statement that the engagement team
and others in the firm, and network firms have complied with
all ethical requirements regarding independence (including total
fees charged for audit and non-audit services during the period
covered by the financial statements) and related safeguards that
have been applied to deal with identified threats to independence.
Most of these were grey-letter only in AS-710.
Oral Communication
AS-710 requires all significant matters communicated orally to be
documented and a copy provided to the appropriate person within
the entity to ensure that it appropriately reflects the conversation.
ISA (NZ) 260 is not quite as prescriptive it requires the auditor to
include them in the audit documentation along with when and to
whom they were communicated.
the audit included consideration of internal control relevant to

the preparation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness
of internal control, and
the matters being reported are limited to those deficiencies that
the auditor has identified during the audit and that the auditor
has concluded are of sufficient importance to merit being
reported to those charged with governance.
Other deficiencies in internal control identified during the audit
must be communicated to management where they are of
sufficient importance to merit managements attention (may be in
writing or orally).
19
ISA (NZ) 300

Planning an Audit of Financial Statements
financial statement and assertion levels. These must include

enquiries of management and relevant others within the entity,
analytical procedures and observation and inspection.
AS-300: Planning
New (or more detailed) Requirements in ISA (NZ) 315:
Team Discussion
None
There is now a requirement for a discussion to take place between

the engagement partner and other key engagement team members
at which the risk of material misstatement must be covered. In
addition, the engagement partner must determine which matters
are to be communicated to all other engagement team members.
This is designed to ensure that all personnel on the audit are aware
of relevant risk factors.
New Concepts
None
There is now a specific requirement stating that the engagement
partner and other key members of the engagement team shall be
involved in planning the audit, including planning and participating
in the discussion among engagement team members.
There are also more detailed requirements for establishing the
overall audit strategy and covering what shall be included in the
audit plan. All of this detail is grey letter in AS-300.
ISA (NZ) 315

Identifying and Assessing the Risks of Material
Misstatement through Understanding the
Entity and its Environment
Auditing Standards Replaced
The auditor is specifically required to obtain an understanding

of the entitys risk assessment process, in particular the entitys
process for identifying and addressing relevant business risks. If
the entity does not have such a process, the auditor is required
to discuss with management and those charged with governance
whether business risks relevant to financial reporting objectives
have been identified and how they have been addressed. The
absence of a documented risk process may represent a material
weakness in the entitys internal control.
The auditor is now required to specifically obtain an understanding
of how the entity has responded to IT risks.
The auditor is required to specifically consider how the entity
monitors internal control over financial reporting.
AS-302: Knowledge of the Audit Environment
Significant Risks
AS-402: Risk Assessment and Internal Control
There are requirements in relation to significant risks.
Other
In respect of some risks, the auditor may judge that it is not

possible or practicable to obtain sufficient appropriate audit
evidence from substantive procedures. In such cases, the entitys
controls over such risks are relevant to the audit and the auditor
shall obtain an understanding of them.
New Concepts
Audit risk is a function of the risk of material misstatement and
detection risk. Inherent and control risk are the two components
of the risk of material misstatement, but these terms are not used
in this Standard.
A significant risk is an identified and assessed risk of material
misstatement that, in the auditors judgement, requires special
audit consideration.
Risk assessment procedures are audit procedures performed

to obtain an understanding of the entity and its environment,
including internal control, to identify and assess the risks of
material misstatement, whether due to fraud or error, at the
20
Risk Assessment
There is a specific requirement for the auditor to revise risk

assessment if new information is obtained and to modify the
planned audit procedures accordingly.
ISA (NZ) 320 and ISA (NZ) 450

Materiality in Planning and Performing an
Audit
Evaluation of Misstatements Identified During
the Audit
AS-320: Audit Materiality
None
New Concepts
Performance materiality is the amount or amounts set by the
auditor at less than materiality for the financial statements as

a whole to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole. If
applicable, it also refers to the amount or amounts set by the
auditor at less than the materiality level or levels for particular
classes of transactions, account balances or disclosures.
The Requirements in the ISAs (NZ) are more detailed.
Identified Misstatements
ISA (NZ) 450 contains communication requirements relating
to misstatements accumulated during the audit; uncorrected
misstatements and the effect that they may have on the audit
opinion; and the effect of uncorrected misstatements related to
prior periods. In particular, the Standard requires the auditor to
request that all misstatements accumulated during the audit be
corrected. If those charged with governance refuse to correct some
or all of the misstatements, then the auditor is required to obtain
an understanding of the reasons for not making the corrections
and take that understanding into account when evaluating
whether the financial statements as a whole are free from material
misstatement.
Prior to evaluating the effect of uncorrected misstatements, ISA
(NZ) 450 requires the auditor to reassess materiality determined
in accordance with ISA (NZ) 320 to confirm whether it remains
appropriate in the context of the entitys actual financial results.
ISA (NZ) 450 requires the auditor to request a written
representation from those charged with governance whether they
believe the effects of uncorrected misstatements are immaterial,
individually and in aggregate, to the financial statements as a
whole.
Planning
The auditor is now required to determine materiality for the
purpose of assessing the risks of material misstatement as well
as determining the nature, timing and extent of further audit
procedures. AS-304 requires the auditor to consider audit materiality
alongside risk. Materiality is required to be determined for the
financial statements as a whole and, if necessary, for one or more
particular classes of transactions, account balances or disclosures
for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to
influence the economic decisions of users.
Documentation
Both ISAs (NZ) have detailed requirements for what amounts and
factors need to be documented.
21
ISA (NZ) 330

The Auditors Responses to Assessed Risks
AS-402: Risks Assessments and Internal Control
the assertion level. This may occur when an entity conducts

its business using IT and no documentation of transactions is
produced or maintained, other than through the IT system. In such
cases the auditor is required to perform tests of relevant controls.
None
New Concepts
None
ISA (NZ) 402

Audit Considerations Relating to an Entity Using a Service Organisation
Testing Controls
ISA (NZ) 330 requires the auditor to obtain more persuasive

evidence about the operating effectiveness of controls the greater
the reliance the auditor places on the control.
AS-404: Audit Considerations Relating to Entities Using Service

Organisations
ISA (NZ) 330 requires the auditor to consider whether the controls
being tested are dependent on other controls (indirect controls). If
so, the auditor must determine whether it is necessary to obtain
audit evidence supporting the effective operation of the indirect
controls.
None
ISA (NZ) 330 allows the auditor to rely on evidence from a

previous audit about the operating effectiveness of specific controls
(not being controls over a significant risk) in certain limited
circumstances and provided certain procedures are carried out.
However, the auditor must test the controls at least once in every
third audit and test some controls each audit.
ISA (NZ) 330 requires the auditor to take into account
misstatements detected by substantive procedures when evaluating
the operating effectiveness of relevant controls.
New Concepts
A type 1 report, issued by the service organisation, comprises a
description, prepared by the service organisation, of the service
organisations system, control objectives and related controls
together with a report by the auditor of the service organisation
(the service auditor) expressing an opinion on the description and
suitability of the design of the controls to achieve the specified
control objectives.
A type 2 report compromises the elements of the type 1 report
plus, in some cases, the operating effectiveness of the controls
throughout a specified period may be included in the description.
The auditors report includes a description of the service auditors
tests of the controls and the results thereof.
Mandatory Procedures
There are now two specific procedures that must be carried out
on each audit agree or reconcile the financial statements with
the underlying accounting records and examining material journal
entries and other adjustments made during the course of preparing
the financial statements.
Further, there is now a requirement to perform audit procedures
to evaluate whether the presentation of the financial statements,
including the related disclosures, is in accordance with the
applicable financial reporting framework.
Documentation
The documentation requirements are more detailed.
ISA (NZ) 330 suggests that, in some cases, the auditor may find
it impossible to design effective substantive procedures that
by themselves provide sufficient appropriate audit evidence at
22
ISA (NZ) 402 has more detailed requirements when the auditor of
the entity using the service organisation (the use auditor) seeks
to rely on a type 1 or type 2 report. For example, the user auditor
shall be satisfied as to the professional competence of the service
auditor and their independence from the service organisation.
The user auditor is required to enquire of management of the
user entity whether the service organisation has reported to the
user entity, or whether the user entity is otherwise aware of, any
fraud, non-compliance with laws and regulations or uncorrected
misstatements affecting the financial statements of the user entity.
The user auditor must then evaluate how such matters affect
the nature, timing and extent of the user auditors further audit
procedures, including the effect on the user auditors conclusions
and user auditors report.
ISA (NZ) 500

Audit Evidence
AS-500: Audit Evidence
ISA (NZ) 500 covers audit evidence prepared using the work of an
expert employed or engaged by the entity (a management expert).
those relating to classes of transactions and events for the

period under audit: occurrence, completeness, accuracy, cut-off
and classifications.
those relating to account balances at period end: existence,
rights and obligations, completeness and, valuation and
allocation.
those relating to presentation and disclosure: occurrence
and rights and obligations, completeness, classification and
understandability, and accuracy and valuation.
New Concepts
None
ISA (NZ) 500 specifically requires the auditor to consider the
relevance and reliability of the information to be used as audit
evidence.
ISA (NZ) 500 now has a requirement that, when designing tests of
controls and tests of details, the auditor must determine means of
selecting items for testing that are effective in meeting the purpose
of the audit procedure. The means available for selecting items
are identified as selecting all items (100% examination), selecting
specific items and audit sampling. The first two means are covered
in the application guidance to ISA (NZ) 500. Audit sampling is
covered in ISA (NZ) 530.
ISA (NZ) 500 has a specific requirement covering inconsistency
in, or doubts over reliability of, audit evidence. If these exist, the
auditor is required to determine what modifications or additions to
audit procedures are necessary to resolve the matter and consider
the effect, if any, on other matters of the audit.
AS-500 lists the seven assertions embodied in the financial report
as: existence, rights and obligations, occurrence, completeness,
valuation, measurement, and presentation and disclosure.
The assertions are now discussed in the application section of ISA
(NZ) 315 and have been grouped into 3 categories:
23
ISA (NZ) 501

Audit Evidence Specific Consideration for
Selected Items
AS-512: Enquiry Regarding Litigation and Claims
ISA (NZ) 501 also replaces AGS-1004: Audit Evidence Existence
and Valuation of Inventory.
The three areas covered by ISA (NZ) 501 are existence and condition
of inventory, completeness of litigation and claims involving the
entity, and presentation and disclosure of segment information in
accordance with the applicable financial reporting framework.
As noted above, material relating to the existence and condition
of inventory is currently covered in AGS-1004 (but guidance only)
and material relating to the completeness of litigation and claims is
currently covered in AS-512. The ASs and AGSs do not contain any
requirements or guidance on the audit of segment information.
New Concepts
None
Inventory
ISA (NZ) 501 contains 5 paragraphs containing requirements
relating to obtaining sufficient appropriate audit evidence
regarding the existence and condition of inventory. These are all
new requirements as AGS-1004 is a guidance statement. Under
the ISA (NZ), the auditor is required to:
attend the physical inventory count when inventory is material
to the financial statements unless this is impracticable. At
the physical count the auditor is to evaluate managements
instructions and procedures for recording and controlling the
results of the entitys physical inventory counting, observe
the performance of managements count procedures, inspect
the inventory and perform test counts. If attendance is
impracticable, the auditor is required to perform alternative
audit procedures to obtain sufficient appropriate audit evidence
regarding the existence and condition of inventory
24
where inventory under the custody and control of a third party

is material to the financial statements, the auditor is required to
obtain evidence regarding the existence and condition of that
inventory by performing one or both of: requesting confirmation
from the third party as to the quantities and condition of
inventory held on behalf of the entity; performing inspection or
other audit procedures appropriate in the circumstances
if physical inventory counting is conducted at a date other than
the date of the financial statements, the auditor is required to
also perform audit procedures to obtain audit evidence about
whether changes in inventory between the count date and the
date of the financial statements are properly recorded.
Litigation and Claims
In relation to litigation and claims, AS-512 requires the auditor
to request written representations from all solicitors with whom
the entity has consulted on material legal matters. Under ISA (NZ)
501, the auditor is only required to seek direct communication with
the entitys external legal counsel if the auditor assesses a risk of
material misstatement regarding litigation or claims that have been
identified, or when audit procedures performed indicate that other
material litigation may exist.
Segment Reporting
The one requirement paragraph relating to obtaining audit

evidence regarding presentation and disclosure of segment
information is new. This requires the auditor to obtain an
understanding of the methods used in determining segment
information by obtaining an understanding of, evaluating and,
where appropriate, testing the application of the methods used
in determining segment information as well as performing
analytical procedures or other audit procedures appropriate in the
circumstances.
As noted above, AGS-1004 also included material relating to the
valuation of inventory and listed audit procedures relating to this.
These are not included in the ISAs (NZ).
AS-512 is much more extensive than ISA (NZ) 501 and the black
letter paragraphs are more onerous.
ISA (NZ) 505
ISA (NZ) 510
External Confirmations
Initial Audit Engagements Opening Balances
None. External confirmations are covered in AGS-1006: Audit

Evidence - External Confirmations
AS-502: Initial Engagements Opening Balances

None
AGS-1006 applies to all audits (but was guidance only). ISA (NZ)
505 applies only to audits of financial statements (adapted as
necessary for audits of other historical financial information).
New Concepts
New Concepts
None
ISA (NZ) 510 is more specific as to how to ensure that the opening
balances are not misstated. The auditor is required to:
All Requirements are new. The Standard deals with the auditors
use of external confirmation procedures to obtain audit evidence.
It does not require the use of external confirmations, but contains
requirements when the auditor has made the decision to use
external confirmation procedures. Requirements cover:
the need to maintain control over external confirmation requests
the situation where management refuses to allow the auditor to
send a confirmation request
the reliability of responses to confirmation requests
non-responses to positive confirmation requests
exceptions
negative confirmations
evaluating the evidence obtained.
None
read the most recent financial statements and the predecessor

auditors report for information relevant to opening balances.
where the prior year financial statements were audited, review
the predecessor auditors working papers to obtain evidence
regarding the opening balances and/or
evaluate whether audit procedures performed in the current
period provide evidence relevant to the opening balances and/or
performing specific audit procedures to obtain evidence
regarding the opening balances.
AS-502 imposes requirements on the predecessor auditor. They
require the predecessor auditor to co-operate with the current
auditor to the extent necessary to allow the current auditor to
discharge their professional obligations and, specifically, to provide
the current auditor with, at a minimum, working papers analysing
the opening balance, schedules of any differences or errors and any
unresolved issues, when requested by the current auditor. These
requirements will no longer apply when
ISA (NZ) 510 becomes effective.
25
ISA (NZ) 520
ISA (NZ) 540
Analytical Procedures
Auditing Accounting Estimates, Including

Fair Value Accounting Estimates, and Related
Disclosures

AS-504: Analytical Procedures

AS-508: Audit of Accounting Estimates
AS-545: Auditing Fair Value Measurements and

Disclosures
AS-504 states that analytical procedures must be applied at the

planning stage of an audit to assist in understanding the audit
environment and in identifying areas of potential risk. Material on
the use of analytical procedures as risk assessment procedures is
now included in ISA (NZ) 315.
New Concepts
None
ISA (NZ) 520 requires that when analytical procedures identify
fluctuations or relationships that are inconsistent with other
relevant information or that differ from expected values by a
significant amount, the auditor shall enquire of management
and obtain audit evidence relevant to managements responses.
AS-504 does not specifically require that the auditor enquire of
management, although this is included in the guidance paragraphs.
None
New Concepts
Estimation uncertainty is the susceptibility of an accounting
estimate and related disclosures to an inherent lack of precision in
its measurement.
Management bias is the lack of neutrality by management and/or
those charged with governance in the preparation of information.

Review of previous estimates
ISA (NZ) 540 requires the auditor to review the outcome of
accounting estimates made in the prior period financial statements.
This is consistent with AS-508 but it is not a requirement in AS-508.
Estimation uncertainty and significant risks
ISA (NZ) 530

Audit Sampling
AS-506: Audit Sampling
AS-506 applies to all audits
New Concepts
None
The auditor is required to evaluate the degree of estimation

uncertainty associated with an accounting estimate when
assessing the risks of material misstatement. In particular, the
auditor shall determine whether any of those accounting estimates
that have been identified as having high estimation uncertainty
give rise to significant risks.
For accounting estimates that give rise to significant risks, the
auditor is required to specifically evaluate:
how alternative assumptions or outcomes have been considered
and why they have been rejected or how estimation uncertainty
has been otherwise addressed in making the accounting
estimate
whether the significant assumptions used are reasonable.
None
where relevant, the intent of those charged with governance to

carry out specific courses of action and their ability to do so
If the effects of estimation uncertainty have not been adequately
addressed, the auditor is required to, if considered necessary,
develop a range with which to evaluate the reasonableness of the
accounting estimate.
For estimates that give rise to significant risks, the auditor is
required to obtain evidence about whether the decision to
26
ISA (NZ) 550

recognise, or not recognise, the accounting estimates in the
financial statements and the selected measurement basis for the
accounting estimates are in accordance with the requirements of
the applicable financial reporting framework.
Related Parties
Management bias
The auditor is required to identify whether there are indicators of

possible management bias in the judgements and decisions made
in the making of accounting estimates.
None
Documentation
The auditor is required to document the basis for the auditors
conclusions about the reasonableness of accounting estimates and
their disclosure that give rise to significant risks and indicators of
possible management bias, if any.
Generally, ISA (NZ) 540 is much more detailed than the existing
ASs. It has much more discussion on identifying, assessing and
responding to the risks of material misstatement and introduces
greater rigour and scepticism in reviewing accounting estimates.

AS-510: Related Parties
New Concepts
None
ISA (NZ) 550 is more prescriptive than AS-510, which contains
minimal mandatory paragraphs. However, the intent behind the
two standards is similar, that is, that the auditor obtains sufficient
appropriate audit evidence relating to the identification of
related parties and accounting for and disclosure of related party
relationships and transactions. New requirements to achieve these
objectives include:
Understanding related party relationships and transactions
ISA (NZ) 550 contains a Requirement to discuss with the
engagement team specific consideration of the susceptibility of
the financial statements to material misstatement that could result
from the entitys related party relationships and transactions,
and share relevant information obtained about related party
relationships with the engagement team.
The auditor is required to obtain an understanding of the controls,
if any, that have been established: to identify, account for, and
disclose related party relationships and transactions; authorise and
approve significant transactions and arrangements with related
parties including those outside the normal course of business.
Maintaining alertness for related party information
The auditor is required to inspect bank and legal confirmations
obtained as part of the auditors procedures, minutes of meetings
of shareholders and of those charged with governance and such
other records or documents as the auditor considers necessary in
the circumstances of the entity, for indications of the existence of
related party relationships or transactions not previously identified
or disclosed to the auditor.
If significant transactions outside the entitys normal course of
business are identified, the auditor is required to enquire about the
nature of the transactions and whether related parties could be
involved.
Risk identification and assessment
Significant related party transactions outside the entitys normal course
of business are to be regarded as giving rise to significant risks.
The auditor is required to consider any identified fraud risk factors
27
ISA (NZ) 560

(including circumstances relating to the existence of a related party
with dominant influence) in relation to related parties in assessing
the risk of material misstatement due to fraud.
If the auditor identifies related parties or significant related party
transactions that have not been previously identified or disclosed
to the auditor, the auditor is required to:

AS-522: Subsequent Events
None
promptly communicate the relevant information to the other

members of the engagement team
New Concepts
request management to identify all transactions with the newly

identified related parties for the auditors further evaluation
enquire as to why the entitys controls failed to enable the

identification or disclosure of the related party relationships or
transactions
perform appropriate substantive audit procedures relating to
the newly identified related parties or significant related party
transactions
reconsider the risk that other related parties or significant
related party transactions may exist, and perform additional
audit procedures as necessary, and
evaluate the implications for the audit if the non-disclosure
appears intentional (and therefore indicative of a risk of material
misstatement due to fraud).
For identified significant related party transactions outside the
entitys normal course of business the auditor is required to obtain
evidence that the transactions have been appropriately authorised
and approved and inspect underlying contracts or agreements
to evaluate whether: the business rationale suggests that they
may have been entered into to engage in fraudulent financial
reporting or to conceal misappropriation of assets; the terms of the
transactions are consistent with explanations of management or
those charged with governance; and the transactions have been
appropriately accounted for and disclosed.
Other
Significant matters in connection with the entitys related parties
are required to be communicated with those charged with
governance.
The names of the identified related parties and the nature of the
relationship are to be documented.
28
Subsequent Events
None
Some of the grey-letter paragraphs in AS-522 have been elevated

to Requirements.
The auditor is required to obtain an understanding of the
procedures established by the entity to ensure that subsequent
events are identified
The auditor is required to specifically enquire of the entity as
to whether any subsequent events have occurred that might
affect the financial statements. This is required to be followed
by a request for a written representation from those charged
with governance that all such events have been appropriately
reflected in the financial statements
The auditor must now read minutes of all relevant meetings
after balance date, and
The auditor must now read the entitys latest subsequent interim
financial statements, if any.
The auditors subsequent event review is required to extend from
the date of the financial statements to the date of the auditors
report. As will be seen, the requirements around the date of the
audit report have changed. One of the implications of this change
will be that the subsequent event review period may be shorter
than under existing standards.
ISA (NZ) 570

Going Concern
AS-520: Going Concern

The period to be covered in the auditors review of the use of the
going concern assumption is different. The period in AS-520 is
one year from the date the financial report is approved by the
governing body. ISA (NZ) 570 specifies the period of interest as
extending to one year from balance date.
None
New Concepts
ISA (NZ) 580
None
Written Representations
AS-520 has some mandatory paragraphs that do not appear in ISA

(NZ) 570.
AS-514: Management Representations
AS-520 has a requirement to obtain a written statement from

management confirming managements view on whether or not
the adoption of the going concern assumption is appropriate.
The Standard then goes further and requires the auditor to
request an explanation of any matters that may indicate that the
adoption of the going concern assumption is inappropriate and
to give the reasons why management has continued to adopt
the going concern assumption. If the written statement is not
forthcoming, this may constitute a scope limitation.
AS-520 is very clear in requiring the auditor to plan and perform
procedures which are specifically designed to identify material
matters that could indicate concern about the adoption of the
going concern assumption. ISA (NZ) 570 is not as direct as
this in that it requires the auditor to evaluate managements
assessment of the entitys ability to continue as a going concern,
to consider whether there are events or conditions that may cast
significant doubt on the entitys ability to continue as a going
concern and generally to remain alert throughout the audit for
evidence of events or conditions that may cast significant doubt
on the entitys ability to continue as a going concern.
In the rare situation that the financial report is prepared on a
basis other than that of a going concern, AS-520 requires the
audit report to include an explanatory paragraph (now emphasis
of matter) which describes the basis of preparation and refers
to relevant notes in the financial report. ISA (NZ) 570 does not
make the inclusion of an emphasis of matter mandatory but
states that it may be appropriate.
Other
If there is significant delay in the approval of the financial statements
by those charged with governance, ISA (NZ) 570 requires the auditor
to enquire as to the reasons for the delay. If the auditor believes that
the delay could be related to events or conditions relating to the going
concern assessment, the auditor is required to perform additional audit
procedures as well as consider the effect on the auditors conclusion
regarding the existence of a material uncertainty.
AS-514 applies to all attest audits. ISA (NZ) 580 applies only to
audits of financial statements (adapted as necessary for audits of
other historical financial information).
New Concepts
None
ISA (NZ) 580 is more prescriptive that AS-514. ISA (NZ) 580
specifically requires the auditor to:
request written representation from those charged with
governance that they have fulfilled their responsibility for the
preparation of the financial statements, as set out in the terms
of the audit engagement and that they have provided the
auditor with all relevant information and access as agreed in
the terms of the engagement.
request written representation from those charged with
governance that all transactions have been recorded and are
reflected in the financial statements.
These representations are required to be in the form of a
representation letter addressed to the auditor and shall be dated as
near as practicable to, but not after, the date of the auditors report.
Further, if the auditor has concerns about the competence, integrity,
ethical values or diligence of those charged with governance or
about their commitment to or enforcement of these, the auditor
shall determine the effect that such concerns may have on the
reliability of representations and audit evidence in general. In
particular, if written representations are inconsistent with other audit
evidence the auditor is required to attempt to resolve the matter.
If the auditor concludes that the written representations are not
reliable, ISA (NZ) 580 is required to take appropriate actions which
may include modifying the opinion in the auditors report.
29
ISA (NZ) 600

Special Considerations Audits of Group
Financial Statements (Including the Work of
Component Auditors)
AS-602: Using the Work of An Other Auditor
ISA (NZ) 600 applies to the audits of group financial statements
and, in addition to specifying requirements when a group audit
involves component auditors, specifies requirements in relation
to obtaining sufficient appropriate audit evidence regarding the
financial information of the components and the consolidation
process.
AS-602 applies when an auditor intends to rely on the work of
another auditor and applies to both the principal auditor and the
other auditor. It is not confined to a group audit situation.
ISA (NZ) 600 does state that an auditor may find the Standard
useful, adapted as necessary, when the auditor involves other
auditors in the audit of financial statements that are not group
financial statements.
New Concepts
Establishing the materiality level for the group financial

statements as a whole, materiality levels to be applied to
particular classes of transactions, account balances and
disclosures; and component materiality for those component
auditors where component auditors will perform an audit or
review for purposes of the group audit.
The consolidation process.
The need to perform procedures designed to identify events
at components that occur between the dates of the financial
information of the components and the date of the auditors
report on the group financial statements, and that may require
adjustment to or disclosure in the group financial statements.
The need for the group engagement team to communicate
relevant matters with group management and those charged
with governance of the group.
In addition to the application material the Standard contains
appendices giving examples of:
A component auditor is an auditor, who, at the request of the

group engagement team, performs work on financial information
related to a component for the group audit. A component is
an entity or business activity for which group or component
management prepares financial information that should be
included in the group financial statements.
an audit report containing a qualified opinion where the group

engagement team is not able to obtain sufficient appropriate
audit evidence on which to base the group audit opinion
The group engagement partner is the person in the firm

responsible for the group audit engagement and its performance.
The group engagement team includes partners, including the
group engagement partner, and staff who establish the overall
group strategy, communicate with component auditors, perform
work on the consolidation process, and evaluate the conclusions
drawn from the audit evidence as the basis for forming an opinion
on the group financial statements.
conditions or events that may indicate risks of material

misstatement of the group financial statements
As noted above, this is essentially a new Standard. As such most
of the Requirements are new. They cover, in addition to component
auditors the following areas:
30
Establishing an overall group audit strategy and audit plan

which is required to be reviewed by the group engagement
partner.
matters about which the group engagement team should obtain

understanding
examples of a component auditors confirmations

matters to be included in the group engagement teams letter of
instruction to component auditors.
ISA (NZ) 610
ISA (NZ) 620
Using the Work of Internal Auditors
Using the Work of an Auditors Expert
AS-604: Considering the Work of Internal Audit
AS-606: Using the Work of an Expert
AS-604 applies to all audits of entities that have an internal audit

function where the activities of the internal audit function are
relevant to the audit subject matter. ISA (NZ) 604 applies only to
audits of financial statements (adapted as necessary for audits of
other historical financial information).
New Concepts
None
To determine the adequacy of specific work performed by the
internal auditors for the external auditors purposes, ISA (NZ) 610
requires the external auditor to evaluate whether:
the work was performed by internal auditors having adequate
technical training and proficiency
the work was properly supervised, reviewed and documented
adequate audit evidence has been obtained to enable the
internal auditors to draw reasonable conclusions
conclusions reached are appropriate in the circumstances and
any reports prepared by the internal auditors are consistent with
the results of the work performed
any exceptions or unusual matters disclosed by the internal
auditors are properly resolved.
This is grey-letter material in AS-604
In addition, if the external auditor uses specific work of the internal
auditors, the external auditor is now required to include in the audit
documentation the conclusions reached regarding the evaluation
of the adequacy of the work of the internal auditors, and the audit
procedures performed by the external auditor on that work.
AS-606 deals with both the use of the work of auditors experts
and the auditors use of work performed by managements
experts (specialists whose work in a field other than accounting
or auditing is used by the entity to assist in preparing the
financial statements). AS-606 does not deal with the work of an
expert employed by the auditor. In the latter case, the expert is
considered to be part of the audit engagement team.
ISA (NZ) 620 deals only with the use of the auditors expert, but
this includes an internal expert.
ISA (NZ) 620 defines an auditors expert as someone possessing
expertise in a field other than accounting or auditing. AS-606
defines an expert to be someone with special skill, knowledge
and experience in a particular field other than auditing (i.e. could
include an accounting specialist).
New Concepts
None
ISA (NZ) 620 specifically requires the auditor to determine whether
to use the work of an auditors expert if expertise in a field other
than accounting or auditing is necessary to obtain sufficient
appropriate audit evidence.
ISA (NZ) 620 requires the auditor to obtain a sufficient
understanding of the field of expertise of the auditors expert to
enable the auditor to determine the nature, scope and objectives
of that experts work for the auditors purposes and to evaluate the
adequacy of that work for the auditors purposes.
The auditor is required to agree certain matters in writing with
the auditors expert. AS-606 stated that the terms of reference are
often set out in written instructions to the expert.
Where the auditor makes reference to the work of an auditors
expert in the auditors report because such reference is relevant
to the understanding of a modification to the auditors opinion,
the auditor is required to indicate in the auditors report that such
reference does not reduce the auditors responsibility for that
opinion. This is consistent with the principle behind AS-606.
31
ISA (NZ) 700

Forming an Opinion and Reporting on Financial Statements
AS-702: The Audit Report on an Attest Audit. ISA (NZ) 700
applies only to audits of financial statements (adapted as necessary
for audits of other historical financial information).
AS-702 applies to all attest audits. ISA (NZ) 700 is written in the
context of a complete set of general purpose financial statements.
AS-702 contains material relating to modifications to the auditors
opinion and the inclusion of explanatory paragraphs within the
audit report. ISA (NZ) 700 does not deal with how the form and
content of the auditors report are affected when the auditor
expresses a modified opinion or includes an Emphasis of Matter
paragraph or an Other Matter paragraph in the auditors report.
Changed Concepts
Audit opinions are, under ISA (NZ) 700 modified or
unmodified (qualified or unqualified in AS-702). There are
three types of modification: - a qualified (except-for in AS-702)
opinion, an adverse opinion or a disclaimer of opinion.
Forming an opinion
ISA (NZ) 700 explicitly states requirements relating to forming the
auditors opinion on a set of financial statements which are not
stated in AS-702 due to its wider scope.
The auditor shall form an opinion on whether the financial
statements are prepared, in all material respects, in accordance
with the applicable financial reporting framework, including
consideration of the qualitative aspects of the entitys
accounting practices: indicators of possible management
bias; appropriateness of accounting policies; disclosure of
significant accounting policies; disclosure generally; whether
the information presented is relevant, reliable, comparable
and understandable; whether the accounting estimates are
reasonable and whether the terminology used is appropriate.
In order to form that opinion, the auditor is required to conclude
as to whether reasonable assurance has been obtained about
whether the financial statements are free from material
misstatement, taking into account whether sufficient appropriate
audit evidence has been obtained and whether any uncorrected
misstatements are material.
When the financial statements are prepared in accordance with
a fair presentation framework the evaluation will also cover
whether the financial statements, including the related notes,
represent the underlying transactions and events in a manner
32
that achieves presentation and consideration of the overall

presentation, structure and content of the financial statements.
The auditor is also expressly required to evaluate whether
the financial statements adequately refer to or describe the
applicable financial reporting framework.
Introductory paragraph
ISA (NZ) 700 requires the introductory paragraph in the auditors
report to identify the title of each statement that comprises the
financial statements and refer to the summary of significant
accounting policies and other explanatory information.
Responsibility of those charged with governance
ISA (NZ) 700 requires the auditors report to include under the
heading Directors (or other appropriate term for those charged
with governance) Responsibility for the Financial Statements that
those charged with governance are responsible for the preparation
of the financial statements in accordance with the applicable
financial reporting framework and for such internal control as
they determine necessary to enable the preparation of financial
statements that are free from material misstatement whether due
to fraud or error. AS-702 merely requires the auditors report to
include a statement that the written assertion is the responsibility
of the appropriate person or body within the entity.
Responsibility of the auditor
The wording of the section on Auditors Responsibility is also
different under ISA (NZ) 700. This section will now include much
of the information included under Basis of Opinion in AS-702 and
the wording of much of this information is different.
The description of an audit within this section is also mandated
under ISA (NZ) 700. It must state that:
an audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements;
the procedures selected depend on the auditors judgement,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entitys preparation of the financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control.
an audit also includes evaluating the appropriateness of the
accounting policies used and the reasonableness of accounting
estimates, as well as the overall presentation of the financial
statements.
where the financial statements are prepared in accordance with
a fair presentation framework, the description of the audit in
the auditors report shall refer to the entitys preparation and
fair presentation of the financial statements or the entitys
preparation of financial statements that give a true and fair

view, as appropriate.
The auditors report is now required to state whether the auditor
believes that the audit evidence the auditor has obtained is
sufficient and appropriate to provide a basis for the auditors
opinion.
Opinion
ISA (NZ) 700 specifies the wording of the auditors opinion. Unless
otherwise required by law or regulation, the opinion when the
reporting framework is a fair presentation framework must use one
of the following phrases, which are regarded as being equivalent:
The financial statements present fairly, in all material respects,
in accordance with the [applicable financial reporting
framework]; or
ISA (NZ) 705

Modifications to the Opinion in the Independent Auditors Report
AS-702: The Audit Report on an Attest Audit (as it applies to
qualifications (modifications) to the auditors opinion.
ISA (NZ) 705 deals only with the form and content of the auditors
report when, in forming an opinion the auditor concludes that a
modification to the auditors opinion is necessary.
The financial statements give a true and fair view of in

accordance with [the applicable financial reporting framework].
Changed Concepts
Or, in the case of a compliance framework:
The financial statements are prepared, in all material respects, in

accordance with [the applicable financial reporting framework].
Other reporting responsibilities
If the auditor has other reporting responsibilities, for example,
whether the proper accounting records have been kept, these
are required to be addressed in a separate section in the
auditors report sub-titled Report on Other Legal and Regulatory
Requirements under ISA (NZ) 700.
Date
AS-702 requires the audit report to be dated as of the date the
auditor signs the audit report (but no earlier than the date on
which the written assertion is approved by management). ISA
(NZ) 700 does not specify the date for the audit report, but states
that it shall be dated no earlier than the date on which the auditor
has obtained sufficient appropriate audit evidence on which to
base the opinion, including evidence that all the statements that
comprise the financial statements, including the related notes,
have been prepared and those with the recognised authority have
asserted that they have taken responsibility for those financial
statements.
None
Scope limitation imposed after acceptance of the

engagement
ISA (NZ) 705 has specific requirements dealing with the situation
where management or those charged with governance impose a
scope limitation after the auditor has accepted the engagement.
Modifications
ISA (NZ) 705 requires that when the auditor modifies the opinion,
the auditor must include a paragraph immediately before the
opinion paragraph, headed Basis for Qualified/Adverse/Disclaimer
of Opinion that provides the description of the matter giving rise
to the modification.
ISA (NZ) 705 requires the auditor to disclaim an opinion when,
in extremely rare circumstances the auditor concludes that,
notwithstanding having obtained sufficient appropriate audit
evidence regarding each of the individual uncertainties, it is not
possible to form an opinion on the financial statements due to
the potential interaction of the uncertainties and their possible
cumulative effect on the financial statements. AS-702 requires
an unqualified opinion in this situation with a fundamental
uncertainty paragraph.
Quantification
AS-702 generally requires quantification of the effect of a
disagreement on the subject matter unless it related solely from
the failure to disclose a matter. For example, if an entity refuses to
separately disclose its turnover, yet the turnover is correctly taken
in to account in determining the results for the year it would be
inappropriate for the auditor to disclose the value of the turnover
in the audit report. ISA (NZ) 705 does not have this exception to
the requirement for quantification of a material misstatement. The
33
only exception to the requirement to quantify the financial effect is

if it is impracticable to do so.
Effect of modifications on other sections of the
auditors report
When the auditor expresses a qualified or adverse opinion,
ISA (NZ) 705 requires an amendment to the description of the
auditors responsibility so that it states that the auditor believes
that the audit evidence the auditor has obtained is sufficient and
appropriate to provide a basis for the auditors modified opinion.
Where the auditor disclaims an opinion due to an inability to
obtain sufficient appropriate audit evidence, ISA (NZ) 705 requires
the introductory paragraph to be amended to state that the auditor
was engaged to audit the financial statements. The description of
the auditors responsibility and the description of the scope of the
audit is also significantly amended.
Communication with those charged with
governance
When the auditor expects to modify the opinion, ISA (NZ)
705 requires the auditor to communicate with those charged
with governance the circumstances that led to the expected
modification and the proposed wording of the modification. This is
not expressly required in AS-702.
ISA (NZ) 706

Emphasis of Matter Paragraphs and Other
Matter Paragraphs in the Independent Auditors Report
AS-702: The Audit Report on an Attest Audit (as it applies to
explanatory paragraphs in the auditors report).
ISA (NZ) 705 deals only with the form and content of the auditors
report when the auditor considers it necessary to:
draw users attention to a matter or matters presented or
disclosed in the financial statements that are of such importance
that they are fundamental to users understanding of the
financial statements; or
draw users attention to any matter or matters other than
those presented or disclosed in the financial statements that
are relevant to users understanding of the audit, the auditors
responsibilities or the auditors report.
New Concepts
An emphasis of matter paragraph is a paragraph included in the
auditors report that refers to a matter appropriately presented
or disclosed in the financial statements that, in the auditors
judgement, is of such importance that it is fundamental to users
understanding of the financial statements.
An other matter paragraph is a paragraph included in the
auditors report that refers to a matter other than those presented
or disclosed in the financial statements that, in the auditors
judgement, is relevant to users understanding of the audit, the
auditors responsibilities or the auditors report.
ISA (NZ) 706 specifies the placement of and headings for these
two types of paragraphs.
Again, when the auditor expects to include one of these
paragraphs in the auditors report the auditor is required to
communicate with those charged with governance regarding this
expectation and the proposed wording of this paragraph.
34
ISA (NZ) 710

Comparative Information Corresponding
Figures and Comparative Financial Statements
AS-516: Comparatives
ISA (NZ) 710 specifically refers to and recognises that there
are two different approaches to comparative information
corresponding figures and comparative financial statements.
AS-516 only applies to comparatives the equivalent of the new
corresponding figures.
New Concepts
None
ISA (NZ) 710 specifically requires written representations to cover
all periods referred to in the auditors opinion, that is, all periods
for which full financial statements are presented and on which the
audit opinion is expressed.
Corresponding figures
ISA (NZ) 710 has different audit reporting requirements in relation
to corresponding figures.
Where the financial statements were audited by a predecessor
auditor the auditor may include an Other Matter paragraph in
the auditors report which states that the financial statements
were audited by the predecessor auditor and notes the type
of opinion expressed and the date of the report. There is no
suggestion in AS-516 that there could be any reference to a
predecessor auditor in the audit report.
statements differs from the opinion the auditor previously

expressed, the substantive reasons for the different opinion must
be disclosed in an Other Matter paragraph.
Where comparative financial statements are presented, and
the financial statements of the prior period were audited by a
predecessor auditor, the auditor is required to state in an Other
Matter paragraph that the financial statements of the prior
period were audited by a predecessor auditor, the type of opinion
expressed by the predecessor auditor and, if the opinion was
modified, the reasons for the modification and the date of the
report, unless the predecessor auditors report is reissued with the
If the auditor concludes that a material misstatement exists in
the prior period financial statements that received an unmodified
opinion, the auditor is required to communicate the misstatement
with the entity and request that the predecessor auditor be
informed. If the prior period financial statements are amended
and the predecessor auditor agrees to issue a new auditors report
on the amended statements, the auditor shall report only on the
current period.
If the prior period financial statements were not audited, the
auditor is required to state in an Other Matter paragraph that
the comparative financial statements are unaudited (but is still
required to obtain sufficient appropriate audit evidence on opening
balances).
Where the prior period financial statements were not audited,

AS-516 requires the auditor to attempt to obtain evidence
that the comparatives are fairly stated. If the auditor is unable
to obtain this evidence, the auditor must express a qualified
audit opinion on the basis that the comparatives are unaudited
and that no opinion on them is expressed. However, ISA (NZ)
710 states that if the financial statements of the prior period
were not audited, the auditor shall state in an Other Matter
paragraph in the auditors report that the corresponding figures
are unaudited (but no modification to the opinion).
Comparative financial statements not covered in
AS-516
When comparative financial statements are presented, the
auditors opinion is required to refer to each period for which
financial statements are presented and on which an audit
opinion is expressed. If the opinion on the prior period financial
35
ISA (NZ) 720
ISA (NZ) 805
The Auditors Responsibilities Relating to

Other Information in Documents Containing
Auditing Financial Statements
Special Considerations Audits of Single

Financial Statements and Specific Elements,
Accounts of Items of a Financial Statement
AS-518: Other Information in a Document Containing an Audited

Financial Report
None specifically, although many of the ASs applied to these types

of audit.
None
Not applicable
New Concepts
Changed Concepts
None
None
ISA (NZ) 720 includes as a Requirement, the need to make

appropriate arrangements to obtain the other information prior to
the date of the auditors report. This is a commentary paragraph in
AS-518.
If the opinion in the auditors report on an entitys complete set

of financial statements is modified, or if that report includes an
Emphasis of Matter paragraph or an Other Matter paragraph, ISA
(NZ) 805 requires the auditor to determine the effect that this may
have on the auditors report on a single financial statement or on a
specific element of the financial statements.
ISA (NZ) 800

Special Considerations Audits of Financial
Statements Prepared in Accordance with
Special Purpose Frameworks
None specifically, although all the ASs applied equally to financial
statements prepared in accordance with general purpose or special
purpose frameworks.
Not applicable
Changed Concepts
None
ISA (NZ) 800 requires the auditors report on special purpose
financial statements to include an Emphasis of Matter paragraph
alerting users of the auditors report that the financial statements
are prepared in accordance with a special purpose framework and
that, as a result, the financial statements may not be suitable for
another purpose.
36
If the auditor expresses an adverse opinion or disclaims an opinion

on the entitys complete set of financial statements as a whole,
the auditor can only express an unmodified opinion on a specific
element included in those financial statements if:
the opinion is expressed in an auditors report that is not
published together with the auditors report containing the
adverse opinion or disclaimer of opinion; and
the specific element does not constitute a major portion of the
entitys complete set of financial statements.
ISA (NZ) 805 does not allow an auditor to express an unmodified
opinion on a single financial statement or a complete set of
financial statements if the auditor has expressed an adverse
opinion or disclaimed an opinion on the complete set of financial
statements as a whole. This is the case even if the auditors report
on the single financial statement is not published together with
the auditors report containing the adverse opinion or disclaimer of
opinion. This is because a single financial statement is deemed to
constitute a major portion of those financial statements.
ISA (NZ) 810

Engagements to Report on Summary Financial
Statements
AS-702, paragraphs 66 70.
AS-702 only deals with the audit reports accompanying summary
financial reports.
ISA (NZ) 810 deals with the auditors responsibilities relating to an
engagement to report on summary financial statements derived
from financial statements audited in accordance with ISAs (NZ) by
that same auditor.
In relation to the opinion on the summary statements, ISA (NZ)

810 states that when the auditors report on the audited financial
statements contains an adverse opinion or a disclaimer of opinion,
the auditors report on the summary financial statements shall
state that, as a result of the adverse opinion or disclaimer of
opinion, it is inappropriate to express an opinion on the financial
statements. AS-702, on the other hand states that the auditors
opinion on the summary financial statement must include the
audit report on the full financial report and an explanation of the
effect of the matter on the summary financial report. However, it
is still possible to express an unqualified opinion on the summary
financial statement, i.e. that the summary financial statements are
consistent with the full set of financial statements from which they
derive and that they comply with FRS-39 or FRS-43, as applicable.
Changed Concepts
None
ISA (NZ) 810 specifies the procedures necessary in such an
engagement.
Evaluate whether the summary financial statements adequately
disclose their summarised nature and identify the audited
When the summary statements are not accompanied by the
annual financial statements they must describe clearly from
whom or where the audited financial statements are available.
Evaluate whether the summary financial statements adequately
disclose the applied criteria.
Compare the summary financial statements with the related
information in the audited financial statements to determine
whether the summary financial statements agree with or can be
recalculated from the related information in the audited financial
statements.
Evaluate whether the summary statements are prepared in
accordance with the applied criteria.
Evaluate whether the audited financial statements are available
to the intended users of the summary statements without undue
difficulty.
37
NEW ZEALAND INSTITUTE OF CHARTERED ACCOUNTANTS

Tower Building | 50 Customhouse Quay | PO Box 11342 | Wellington 6142
Email: customers@nzica.com | Website: www.nzica.com

ISA Implementation May2010

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

ISA Implementation May2010

Загружено:

Авторское право:

Доступные форматы

INTERNATIONAL

2010 Copyright New Zealand Institute of Chartered Accountants

Enquiries should be addressed to the publisher.

Published in May 2010 by

Why were the ISAs adopted?

Implications for auditors

Financial Reporting Framework

Preconditions for an Audit/Premise on which an Audit is Conducted

Comparison of Audit Reports under AS-702 and ISA (NZ) 700

Procedures Regarding Litigation and Claims

Consideration of Laws and Regulations in an Audit of Financial Statements

Attendance at Physical Inventory Counting

Using the Work of Experts

Summaries of main differences between ISAs and ASs

ISA (NZ) 210: Agreeing the Terms of Audit Engagements

ISA (NZ) 220: Quality Control for an Audit of Financial Statements

ISA (NZ) 230: Audit Documentation

ISA (NZ) 260: Communication with Those Charged with Governance

ISA (NZ) 300: Planning an Audit of Financial Statements

ISA (NZ) 330: The Auditors Responses to Assessed Risks

ISA (NZ) 500: Audit Evidence

ISA (NZ) 505: External Confirmations

ISA (NZ) 510: Initial Audit Engagements - Opening Balances

ISA (NZ) 520: Analytical Procedures

ISA (NZ) 530: Audit Sampling

ISA (NZ) 550: Related Parties

ISA (NZ) 560: Subsequent Events

ISA (NZ) 570: Going Concern

ISA (NZ) 580: Written Representations

ISA (NZ) 610: Using the Work of Internal Auditors

ISA (NZ) 620: Using the Work of an Expert

ISA (NZ) 700: Forming an Opinion and Reporting on Financial Statements

ISA (NZ) 810: Engagements to Report on Summary Financil Statements

Consequently, the ISAs (NZ) have exactly the same structure,

What are the implications for auditors?

the standards will be amended to make them applicable in New

National legal and regulatory requirements

Deletions and other amendments will be limited to:

The elimination of options provided for in the international standard

Mapping from Existing Auditing Standards to New International

AS-100 Objective of and General Principles

ISA (NZ) 200 Overall Objectives of the Independent Auditor and

AS-202 Agreeing the Terms of an Audit

ISA (NZ) 210 Agreeing the Terms of Audit Engagements

ISA (NZ) 230 Audit Documentation

AS-206 The Auditors Responsibility to Consider

ISA (NZ) 240 The Auditors Responsibilities Relating to Fraud in an

AS-208 Consideration of Laws and Regulations

ISA (NZ) 250 Consideration of Laws and Regulations in an Audit of

AS-210 Auditing in a Computer Information

AS-710 Communication with the Entity on

ISA (NZ) 260 Communication with Those Charged with Governance

IAS (NZ) 265 Communicating Deficiencies in Internal Control to

AS-220 Quality Control for Audits of Historical

ISA (NZ) 220 Quality Control for an Audit of Financial Statements

ISA (NZ) 300 Planning of an Audit of Financial Statements

AS-302 Knowledge of the Audit Environment

ISA (NZ) 315 Identifying and Assessing the Risks of Material

AS-402 Risk Assessment and Internal Control

ISA (NZ) 330 The Auditors Reponses to Assessed Risks

AS-304 Audit Materiality

ISA (NZ) 320 Materiality in Planning and Performing an Audit

AS-404 Audit Considerations Relating to Entities

ISA (NZ) 402 Audit Considerations Relating to an Entity Using a