What is Source document?
In the business world buyers and sellers interact to exchange goods and services and other transactions like payment. A diligent accountant keeps the record of all such important transactions about which users must be informed. However, to have the information reliable the recording of such transaction is controlled by source documents. Source document is basically […]
What are the five components of internal control system?
Internal control system is implemented by the management or those charged with governance to assure that entity’s objectives regarding reporting, compliance with applicable laws and effectiveness and efficiency of operations is achieved. However, this becomes possible because internal control system serve this purpose through its different components or subsystems working collectively like a clockwork and […]
What is Cost classification and in how many ways can we classify cost?
Cost classification is a simple process in which we group or categorize costs on the basis of common characteristics. Grouping costs on the basis of their nature, form, source or any other attribution makes it really easy to understand their effects and ultimately to take decisions about costs and beyond any shadow of doubt classifying […]
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 […]
