What is meant by Subject Matter in assurance engagements in auditing?
For an engagement to be an assurance engagement five elements needs to be present which are as follows: Existence of three party relationship i.e. practitioner, responsible party and the intended users Subject matter Criteria Collecting sufficient appropriate audit evidence Expression of an opinion Subject matter is in simple words means the following: Financial position of […]
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 […]
What is meant by Anomalous misstatement?
Lingual meaning (general meanings in English language) of the word anomaly or anomalous is of something that is irregular i.e. something that is not expected to happen frequently or does not follow a certain expected pattern or simply it is not what was expected! In auditing the terms anomaly and anomalous has the almost the same […]
Can auditor agree to change the terms of audit engagement after initial acceptance during engagement?
Normally the change is neither requested nor required by the client in the terms of audit engagement once they have been agreed at the start. The reason is that terms are agreed upon after detailed discussion and giving proper thought both by the auditor and client. But circumstances may arise in which client may think […]
What is meant by Significant Matters in auditing?
Significant matters are such matters that give risk to special audit consideration, treatment, conclusion or opinion. What is significant matter is not clearly defined in International Standards on Auditing (ISAs) and therefore what amounts to significant matter while conducting audit engagement is left over the auditor to decide by exercising his professional judgement. While deciding […]
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 Sale or Return?
Buying and selling arrangements between sellers and buyers may take different forms and sales contracts can have some unusual terms agreed between the parties. However, one of the common arrangements between supplier and customer is ‘sale or return‘ also known as ‘sale and return‘. This term is also commonly used as an alternative term to mean consignment […]
What is meant by Audit evidence?
Auditors objective or in simple words responsibility with respect to audit engagement is only to the extent of expression his opinion on financial statements whether they have been prepared in accordance with applicable financial reporting framework and giving true and fair view of entity’s business. Although expression of opinion might look like not much of […]
