Why auditors may fail to detect fraud?
Primary responsibility to prevent and detect fraud is upon management or those who are charged with an authority of management oversight (also known as those charged with governance). To achieve this objective it is their responsibility to have an effective internal control system in place which not detect fraudulent activities but also prevent them from […]
What is meant by sufficient appropriate audit evidence and how is it obtained?
It is the responsibility of the auditor to obtain reasonable assurance by conducting audit engagement and expressing his opinion in the audit report. This expression of opinion results in reasonable assurance which is conveyed to users of financial statements via audit report. However, to form audit opinion, auditor is required to stay objective and he […]
What is meant by inherent limitations of audit and what are these?
Inherent limitations are such features of audit that constrains the auditor to obtain absolute assurance. It is because of these inherent limitations of audit the practitioner cannot assure the users of financial statements that financial statements are absolutely free of (material) misstatements. As a result of these limitations auditor is expected provide reasonable assurance which […]
How can auditor overcome inherent limitations of an audit engagement?
Auditors or practitioners conduct audit and other assurance engagements under certain limitations which are commonly known as Inherent limitations of an audit (assurance) engagement. It is these limitations that restricts the auditor to gain absolute assurance i.e. financial statements are absolutely free of misstatements. International Standards on Auditing ISAs because of these limitations recognize that […]
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 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 Control risk?
Control risk has been defined under International Standards of Auditing (ISAs) as following: The risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on […]
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 […]