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, […]
What is the difference between unmodified opinion and unqualified opinion?
To me there is no difference between the two terms as they concludes one and the same thing. Auditing Standards use both terms to mean one and the same thing. But it has been observed that the term Unmodified opinion is used more often in standards instead of Unqualified opinion. Some authors try to differentiate […]
Does Modified report always have Modified opinion?
No. Modified reports does not necessarily means modified opinion also. Lets explain it further. Modified opinion means either of the following: Qualified opinion Adverse opinion Disclaimer Therefore, whenever we refer to modified opinion we mean either of these three. And if the modification is necessary in the opinion then report also requires necessary modifications which […]
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 the difference between Internal Control Questionnaires (ICQ) and Internal Control Evaluation Questionnaires (ICEQ)?
Internal controls questionnaires (ICQ) and Internal controls evaluation questionnaires (ICEQ) are basically two modes of documenting entity’s internal control system while auditor applies risk assessment procedures and tests of controls. Both serve different purposes and thus are distinct from each other. However, which one to use depends on auditor’s understanding of the entity, the risk […]
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 tolerable misstatement and tolerable rate of deviation and the difference betweem them?
Auditor most of the time, due to number of factors, is unable to apply audit procedures on each and every piece of information available to him. Therefore, he applies different audit procedures on less then 100% items in a given population. This is called sampling. Among these audit procedures there are two types of procedures […]
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 […]
