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 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 […]
What is Inherent risk?
Inherent risk has been defined in the standards as follows: The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Simply put, management make assertions in financial statements which might […]
What are the FIVE Elements of an assurance engagement?
According to International Framework on Assurance Engagements, there are five elements of any assurance engagement which are as follows: A three party relationship involving practitioner (auditor), a responsible part (client) and intended users (users of financial statements) Subject matter; against which assurance is required by the intended users Criteria; which will be used by the […]
How sequentially numbered vouchers help auditors?
First of all let’s clear our confusions about the term Voucher itself. Voucher is any document on which an information about the business activity is recorded and the same is approved/authenticated/authorized by the relevant person in the management. Thus voucher is any document that proves that a particular transaction did happened and the person responsible […]
What is Sampling risk in auditing?
In order to express an opinion, auditor needs sufficient appropriate audit evidence. To obtain audit evidence, auditor applies range of audit procedures. But due to limited time and resources and also to conduct audit efficiently, auditor does not apply audit procedures to the whole population in consideration. Instead, he carefully selects reasonably small proportion, which […]
What is Non-sampling Risk?
Before we look at the definition of non-sampling risk, let’s understand the background why we are even discussing this question i.e. why we even have something with the name “non-sampling risk” In order to express an opinion, auditor needs sufficient appropriate audit evidence. To obtain audit evidence, auditor applies range of audit procedures. But due […]
