Why auditor cannot provide Absolute level of assurance in audit engagement?
According to International Standards on Auditing ISAs, auditor is required to obtain reasonable assurance whether financial statements give true and fair view or in others words he must be reasonably sure that financial statements are free from material misstatements. Again, I must emphasize he needs to be reasonably sure and NOT absolutely sure. There is […]
What is meant by ‘lowering detection risk’ in auditing?
A practitioner (or simply auditor) performing audit engagement is required to reduce audit risk to such level that is suitable to provide reasonable assurance to the intended users. By audit risk we mean that probability that auditor express an inappropriate audit opinion when the financial statements are materially misstated i.e. auditor stated that financial statements […]
What is meant by Assertions in audit or auditing?
Assertions or management assertions in audit or auditing simply means what management claims. For example, if a management states that internal controls are effective then it is a claim or assertion made by management. Similarly, it is primarily the responsibility of the management of the entity to prepare financial statements in which all the assets, […]
What is assurance engagement?
Assurance engagement is an engagement performed by a practitioner to enable himself to express an opinion about the measurement of subject matter against a criteria. Practitioner’s expression of opinion raise the confidence of the users over the measurement as to whether measurement of subject matter is a fair statement keeping the criteria applicable under consideration. Replacing the formal […]
How Professional judgement and Professional skepticism are different in application?
Professional Skepticism and Professional Judgment both are required to conduct the assurance engagements properly. But both are two separate requirements and are not one and the same and are different in their meaning and also in their application. But surely both complement each other in auditor’s work. Professional Skepticism The auditor is required to maintain […]
What is Audit programme or Audit program?
First things first audit programme or audit program refers to one and the same thing. Audit programme is used in British English whereas Audit program is used in American english. However, audit program can also mean some auditing software but here I will be discussing this term in relation to auditing and what is its […]
What is Audit risk?
In IAASB auditing standards the term Audit risk has been defined as: The risk that auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of risk of material misstatement and detection risk. In simple words a risk that auditor expresses an opinion that financial statements are […]
What is Performance materiality?
Since the the concept of materiality at application level has been defined in the standards, it has been posing problems for students. Many think that this is a new concept, but it is fairly old and was there but it was certainly not defined before. Main reason to my mind why students find it hard […]
What is the difference between Inherent Risk and Business Risk and implications of these two in auditing?
Understanding the difference between these two terms and other risk related terminologies is vital if students want to acquire the conceptual understanding of the Risk-based Audit approach. According to the glossary accompanying the IAASB pronouncements on assurance engagement and related Services business risk has been defined as follows: A risk resulting from significant conditions, events, […]
