What is Financial Statement Risk?
The term or concept with the name Financial Statement Risk has NOT been defined, at least, in International Standards on Auditing and not even in any other pronouncements issued by IAASB related to assurance engagements and related services. So it is possible that this term is from such pronouncements issued by other auditing boards. Most […]
Where can I find the glossary of auditing terms?
Auditing is one of the technical and practical subject so defining each term can be different from one perspective to other. For example, term defined in one definition might have completely different meanings in another standard. Also there are many different auditing boards around the world ranging from global to country wide organizations responsible for […]
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 the difference between Negative assurance, Positive assurance, Negative opinion and Negative report?
Difference between Negative assurance and Positive assurance Many students get confuse in these things and mostly it is because books usually use such terminologies which prevail in the business world which are most of the time shortened up and thus sometimes lose their meanings. Lets start with Positive and Negative assurance. Many students think that […]
What is Substantive audit approach / Vouching approach?
There are many different auditing methodologies or in other words auditing approaches which can be used by the auditor to conduct an audit engagement. Which audit approach is better or should be used to much extent was (and to some extent still is) dependent on the audit firm. One of the approaches is vouching approach, […]
What is the objective of an assurance engagement?
Well objective of every assurance engagement can be understood if we understand the elements of an assurance engagement. So let’s first of all understand the connection between three parties and what each do. Stakeholders like owner, employees, creditors, lenders and many other need financial information regarding financial performance and financial position of the business for […]
What is Inherent risk?
Inherent risk has been defined in the standards as follows: The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Simply put, management make assertions in financial statements which might […]
What are the FIVE Elements of an assurance engagement?
According to International Framework on Assurance Engagements, there are five elements of any assurance engagement which are as follows: A three party relationship involving practitioner (auditor), a responsible part (client) and intended users (users of financial statements) Subject matter; against which assurance is required by the intended users Criteria; which will be used by the […]
What is the difference between Internal Audit Function and Internal Control System?
Let’s refresh some important areas before we get to the answer to this question so that no room is left for confusions. I will be having a quick go through each topic that is relevant. Users require financial statements to fulfill their information needs and in order to reach good decisions they must have accurate […]
What is Audit Evidence?
IAASB auditing standards use professional code of ethics issued by International Ethical Standards Board of Accountants (IESBA) to describe the ethical requirements for conducting an audit. However, accountancy bodies all over the world have their own ethical standards for their members working as accounting and auditors. One common requirement in every ethical standard is that […]