Practical auditing under clarified ISAs

What should be the approach to the performance of an audit under clarified ISAs?

Adopting a risk-based approach that requires the use of professional judgement and maintenance of professional scepticism throughout the audit to design and perform appropriate responses to assessed risks

Streamlining the work by disregarding the particular circumstances of the engagement to meet the objectives of the audit and express an audit opinion

Completing rapidly more extensive checklists

Performing substantive procedures on all classes of transactions, account balances and disclosures in the financial statements

The structure of each clarified ISA includes the following items:

Each standard has a different structure

Introduction, definitions, audit procedures and audit conclusions

Introduction, major requirements in bold text and effective date

Specific objectives, requirements and application and explanatory material

What would constitute performance materiality in accordance with ISA 320?

An amount below the overall materiality level set at random by the auditor

An amount or amounts higher than the overall materiality level

An amount set at 50% of the overall and particular assertions materiality level

An amount that is less than the overall materiality level set by taking into account the general risk of material misstatement associated with the audit and specific risks, like past uncorrected errors and the probability that undetected errors exist

What does ISA 540 require as a response to significant risks arising from estimates with high levels of uncertainty?

Do not consider events occurring up to the date of the auditor`s report

Ask management not to include the estimates in the financial statements

Obtain confirmations from management that the estimates are free from error

Evaluating if and how management has considered alternative assumptions and outcomes and addressed estimation uncertainty

What does ISA 580 require the auditor to do if there is sufficient doubt about management`s representations on the fulfilment of its responsibility for the preparation of the accounts, the completeness of the information provided and its reliability?

Issue an unmodified opinion on the financial statements

Include an emphasis of matter paragraph in the auditor`s report

Resign from the engagement

Disclaim an opinion on the financial statements

ISA 402 requires the auditor to obtain an understanding of the services provided by external organisations and used by the reporting entity in respect of:

Services that are part of the entity`s information system relevant to financial reporting

Any services received

IT services only

Services provided to third parties

Identify specific objectives, requirements and separate application and explanatory material that guide the auditor in identifying and assessing risks of material misstatement, in obtaining sufficient appropriate audit evidence by designing appropriate responses to the assessed risks, and in forming an opinion on the basis of the evidence obtained

Identify specific objectives, requirements and separate application and explanatory material that guide the business in identifying and assessing

Design appropriate responses for the auditor to discuss with the directors

Identify specific objectives, requirements and separate application and explanatory material that guide the auditor in identifying how the business should be developed

Its risk of material misstatement, by obtaining sufficient appropriate internal evidence and by the assessment of risks

What does ISA 315 require in order to identify and assess the risks of material misstatement?

To perform analytical procedures on the material items in the financial statements

To identify risks throughout the process of obtaining an understanding of the entity and its environment and to assess the potential impact of such risks on the accounts as a whole and on specific assertions

Ask the management of the entity to identify the risks relating to the financial statements that they have prepare

To carefully read the financial statements

What are the new standards introduced as part of the clarified ISAs?

ISA 265, Communicating Deficiencies in Internal Control and ISA 450, Evaluation of Misstatements identified during the audit

ISA 540, Auditing Accounting Estimates and ISA 550, Related Parties

ISA 300, Planning and ISA 330, The Auditor`s Responses to Assessed Risks

All of these

The clarified ISAs in the UK apply from:

Periods starting on or after 15 December 2010

Periods starting on or after 15 December 2009

Periods ending after 15 December 2010

31 December 2009

Practical auditing under clarified ISAs

What should be the approach to the performance of an audit under clarified ISAs?

The structure of each clarified ISA includes the following items:

What would constitute performance materiality in accordance with ISA 320?

What does ISA 540 require as a response to significant risks arising from estimates with high levels of uncertainty?

What does ISA 580 require the auditor to do if there is sufficient doubt about management`s representations on the fulfilment of its responsibility for the preparation of the accounts, the completeness of the information provided and its reliability?

ISA 402 requires the auditor to obtain an understanding of the services provided by external organisations and used by the reporting entity in respect of:

What does ISA 315 require in order to identify and assess the risks of material misstatement?

What are the new standards introduced as part of the clarified ISAs?

The clarified ISAs in the UK apply from:

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