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Purpose of audit – enhance the degree of confidence of intended users in the financial report. Expression of an opinion by the auditor on whether – the FR is prepared, in all material respects, in accordance with applicable financial reporting framework. Opinion – whether the FR is presented fairly, in all material aspects, give a true and fair view in accordance with the framework.
ASA require auditor to exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit to Identify and assess risk of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity’s internal control.
Obtain sufficient appropriate audit evidence about whether material misstatement exist, through designing and implementing appropriate responses to the assessed risks.
Understanding the business and determining risk
Assessment of the internal controls
Determining ‘significant risks’ for which special audit attention needs to be focused
Tests of controls
Substantive tests
Audit Risk- the risk of material misstatement of financial report Assertion level
Inherent Risk (IR) the susceptibility (感受性) of an assertion(主张) to material misstatement, assuming there are no related controls, IR factors are generally business risks (BR) affecting a specific account assertion.
Control Risk (CR) the risk of an assertion being materially misstated because controls will not prevent, or detect and correct errors on a timely basis. CR is the impact of the presence or absence of effective internal control designed to mitigate entity’s business risk
Detection Risk (DR) the risk that the auditor will not detect the material misstatement. Can be reduced by proper planning, assignment of staff, professional scepticism (疑问), supervision and review
ASA320 Materiality – no specific criteria for determining materiality, but rather considers it a matter of professional judgement. Determining materiality for planning- 2 stages
Finance Topics of Auditing and Assurance Notes. (2016, Apr 13). Retrieved from https://studymoose.com/finance-topics-of-auditing-and-assurance-notes-essay
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