Chapter 4 - Evidence and reporting Flashcards
(28 cards)
What does ISA 500 relate to?
Audit evidence
What is audit evidence?
Info used by the auditor in arriving at conclusions on which their opinion is based
What are tests of controls?
Audit procedures designed to evaluate the operating effectiveness of controls in preventing/detecting material misstatements
What are substantive procedures?
Audit procedures designed to detect material misstatements at assertion level
What do tests of controls assess?
Whether there is good operation of the control system
What do substantive procedures involve?
Testing specific items
What does ISA 500 require from auditors?
Obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions for the audit opinion
What is sufficiency?
Measure of the quantity of audit evidence
What is appropriateness?
Measure of the quality of audit evidence
What does the quantity of evidence required depend on?
Level of assurance being offered in the engagement
What is the quantity of evidence required affected by?
Risk level and quality of evidence
What does ISA 330 follow on from?
ISA 315
330 requires auditors to respond to risks encountered when applying 315
What substantive procedures should the auditor carry out?
- agreeing the financial statements to underlying accounting records
- examining material journal entries
What do analytical procedures tend to be appropriate to?
Large volumes of predictable transactions
E.g. wages
When are tests of detail appropriate?
- To gain info about accounting balances
- Verifying assertions of existence and valuation
What does the auditor’s opinion state?
- True and fair
- Prepared in accordance with IFRS and Companies Act 2006
What items of the audit report are only included by exception?
- Adequate accounting records kept
- Financial statements that agree with accounting records
What basic items are required on every audit report?
Title
Addressee
Opinion
Basis of opinion
What does ISA 701 give guidance on?
On determining which key audit matters to include in the report
What are key audit matters?
Matters of most significance to the audit
Not a substitute for disclosures
What is the expectations gap?
Difference between the apparent public perceptions of the responsibilities of auditors and the legal and professional reality
Does the auditor have to carry out substantive procedures on all material items?
Yes
What type of procedure is reviewing an invoice?
Test of control
What does a review of the financial statements using a Companies Act checklist ensure?
Classification
