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 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 […]
What is meant by ‘lowering detection risk’ in auditing?
A practitioner (or simply auditor) performing audit engagement is required to reduce audit risk to such level that is suitable to provide reasonable assurance to the intended users. By audit risk we mean that probability that auditor express an inappropriate audit opinion when the financial statements are materially misstated i.e. auditor stated that financial statements […]
What is meant by ‘net of’ in accounting or tax and other business related subjects?
The expression ‘net of’ represents the exclusion of something from a particular sum. For example net of tax means the resultant amount which is exclusive of tax or in other words the amount we get after deducting tax is net of tax amount. We can see its uses in wide variety of ways in accounting […]
How a liability paid in kind or by issuing shares is disclosed in statement of cash flows?
Most of the time entities pay out their liabilities, whether short term or long term, in cash. And by cash it means either in hard cash or by issuing cheque or using cash equivalents. Sometime company does not have a ready cash in which case it will sell an asset, get the cash and pay […]
Is audit an attestation engagement or direct reporting engagement?
Audit engagement is an attest or attestation engagement rather than direct reporting engagement. As the purpose of audit engagement is to enhance the degree of users of financial statements which is achieved by the expression of opinion by the auditor. This opinion given by the auditor is merely about the fairness of the financial statements […]
What is meant by Assertions in audit or auditing?
Assertions or management assertions in audit or auditing simply means what management claims. For example, if a management states that internal controls are effective then it is a claim or assertion made by management. Similarly, it is primarily the responsibility of the management of the entity to prepare financial statements in which all the assets, […]
What is assurance engagement?
Assurance engagement is an engagement performed by a practitioner to enable himself to express an opinion about the measurement of subject matter against a criteria. Practitioner’s expression of opinion raise the confidence of the users over the measurement as to whether measurement of subject matter is a fair statement keeping the criteria applicable under consideration. Replacing the formal […]
