Can auditor provide absolute assurance if ideal situation is given?
We must be clear that auditor is neither expected nor required by the International Standards on Auditing to provide absolute assurance i.e. auditor is not expected even to put an effort to be able to provide absolute assurance. Auditor is unable to provide absolute assurance because of inherent limitations of audit therefore, auditor is at […]
What is Business risk?
Doing day to day business involves carrying out numerous activities of different nature. It involves all kinds and sorts of business transactions. Some of these activities gets accounted for and some are simply dealt out of books. However, everything business do has inherent benefits and inherent problems. And it is the job and responsibility of […]
What is Credit note and when is it used?
A credit note is a source document providing evidence that a credit entry has been made in the financial records for specific reason which is explained on the face of this business document. Credit note is also known as credit memo or credit memorandum as it only notifies about the entry made in the financial […]
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 the difference and relation between Business risk Inherent risk Control risk Detection risk and Audit risk?
In risk based audit engagements understanding different kinds of risk become extremely important. Proper understand will not only differentiate between different kinds of risks but also help you in recognizing the duties of management and auditor in a given context and the nature of their responsibilities. Another reason of having a clear understanding of these […]
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 […]
