Global objectives of the independent auditor and performance of the audit in accordance with international auditing standards. ISA 200.
1. This ISA 200 deals with the general responsibilities of the independent auditor when conducting an audit of financial statements in accordance with International Standards on Auditing (ISA). Specifically, it establishes the general objectives of the independent auditor and explains the nature and scope of an audit designed to enable the independent auditor to meet those objectives. It also explains the scope, authority and structure of the ISAs and includes the general responsibilities of the independent auditor, applicable in all audits, including the obligation to comply with the ISAs.
3. The objective of an audit is to increase the degree of confidence that users place in the financial statements. This is accomplished through the expression of an auditor's opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. In general terms, the ISAs refer to the opinion on whether the financial statements are presented fairly, in all material respects or express an opinion on the truthfulness and reasonableness in accordance with the applicable financial reporting framework. An audit conducted in accordance with the ISAs and ethical requirements enables the auditor to form that opinion.
7. The ISAs contain objectives, requirements, application guidance and other explanatory material designed to assist the auditor in obtaining reasonable assurance. The ISAs require the auditor to exercise professional judgment and maintain professional skepticism during the planning and performance of the audit, and further:
- Identify and assess the risks of material error, due to fraud or unintentional human mistakes, based on an understanding of the entity and its environment, including the entity's internal control Obtain sufficient appropriate audit evidence as to whether errors exist materials, through the design and implementation of adequate responses to the assessed risks. An opinion is formed on the financial statements, based on conclusions based on the audit evidence obtained.
11. In conducting an audit of financial statements, the overall objectives of the auditor are:
a) Obtain reasonable assurance about whether the financial statements taken as a whole are free from material errors, due to fraud or unintentional human mistakes, allowing the auditor to express an opinion on whether the financial statements are prepared, in all respects significant, in accordance with an applicable financial reporting framework; and
b) Issue a report on the financial statements and communicate, as required by the ISAs, the audit findings.
(b) Audit evidence. Information used by the auditor to reach the conclusions on which the audit opinion is based. The audit evidence includes both the information contained in the accounting records with which the financial statements are prepared, and some other information. For the purpose of the ISAs:
(i) Sufficient audit evidence. It is the measure of the amount of audit evidence. This amount of evidence depends on the assessment of the risk of material error made by the auditor, as well as on its quality.
(ii) Appropriate audit evidence. It is the measure of the quality of the audit evidence; that is, the relevance and reliability of the evidence to support the conclusions on which the auditor's opinion is based.
(c) Audit risk. It is the risk that the auditor expresses an inappropriate audit opinion when the financial statements contain material errors. The audit risk is a function of the risk of material error and the risk of detection.
(d) Auditor. The term "auditor" refers to the person or persons conducting the audit, generally the engagement partner, other members of the engagement team, or the firm, as applicable. When an ISA expressly states that a requirement or responsibility be met by the engagement partner, the term "engagement partner" is used. "Partner in charge of the work" and "firm" should be understood with their equivalents in the public sector.
(e) Detection risk. It is the risk that the procedures performed by the auditor to reduce the audit risk to an acceptably low level, do not detect the errors that exist and that could be material, either individually or in the aggregate with other errors.
(i) Incorrect. A difference between the amount, classification, presentation or disclosure of an item reported in a financial statement and the amount, classification, presentation or disclosure that is required for said item to be in accordance with the applicable financial reporting framework. Errors can be caused by unintentional human mistakes or fraud.
(k) Professional judgment. The application of relevant training, knowledge and experience, within the context of auditing, accounting and ethical standards, for making decisions about the course of action of the audit work, appropriate in the circumstances.
(l) Professional skepticism. It refers to an attitude that includes an inquiring mind and alert to conditions that may indicate errors, due to fraud or unintentional human mistakes, and a critical evaluation of audit evidence.
(m) Reasonable security. In the context of an audit of financial statements, it refers to a high level of assurance, but not absolute.
(n) Risk of material error. It refers to the risk that the financial statements contain material errors before the audit. It consists of two components at the assertion level:
(i) Inherent risk. Susceptibility that an assertion about a class of transaction, balance or disclosure is erroneous and that it may be material, individually or in the aggregate, with other errors and before the consideration of any related control.
(ii) Control risk. It is the risk that an error may occur in an assertion about a class of transaction, balance or disclosure and that it could be material, individually or in the aggregate with other errors, and is not prevented, detected or corrected in a timely manner by the entity's internal control.
Ethical requirements related to EF auditing, including independence.
(a) Integrity, (b) Objectivity, (c) Professional competence and diligence, (d) Confidentiality, and
(e) Professional performance.
- Professional skepticism Professional judgment Conducting an audit in accordance with ISAs The auditor should comply with all ISAs relevant to the audit The auditor should obtain an understanding of the entire text of an ISA, including application guidance and other material explanatory, to understand the objectives and apply the established requirements appropriately, the auditor should not refer to compliance with the ISAs in the audit report, unless the requirements of this and all the ISAs relevant to the audit have been met.
Integrity
110.1 The principle of integrity imposes an obligation on all certified public accountants to be loyal, truthful and honest in all professional and business relationships. Integrity also implies objective, fair and truthful attitudes.
Objectivity
120.1 The principle of objectivity imposes an obligation on all Chartered Accountants not to compromise their professional or business judgment due to prejudice, conflicts of interest, or undue influence from third parties.
Diligence and professional competence
130.1 The principle of diligence and professional competence imposes the following obligations on Public Accountants:
a) Act diligently in accordance with the applicable professional techniques and standards when rendering professional services; and
b) Maintain professional knowledge and skills at the required level to ensure that clients or entities for which they work receive a competent professional service.
Confidentiality
140.1 The principle of confidentiality imposes an obligation on all Public Accountants to refrain from:
a) Reveal outside the firm or organization that employs him the confidential information obtained as a result of professional and business relationships, without the appropriate and specific authorization, unless there is a legal or professional right or obligation to disclose it; and
b) Use confidential information obtained as a result of professional or business relationships, for your benefit or that of third parties.
Professional behavior
150.1 The principle of professional behavior imposes an obligation on all Chartered Accountants to comply with relevant laws and regulations, and to avoid any action that the Chartered Accountant knows or should be aware of, that may discredit the profession. This includes actions that a reasonable and well-informed third party, weighing all the specific facts and circumstances known to the CPA at the time, concludes that they adversely affect the good reputation of the profession.
Independence
290.4 In the case of audit engagements, it is a requirement that members of the audit teams, firms, and network firms be independent of the audit client.
290.6 Independence includes:
a) Mental independence: the state of mind that allows the expression of a conclusion without being affected by influences that compromise professional judgment, thus allowing an individual to act with integrity and exercise objectivity and professional skepticism.
b) Independence in appearance: avoiding facts and circumstances that are so important that when weighing all the specific facts and circumstances, they would lead a reasonable and well-informed third party to conclude that the integrity, objectivity or professional skepticism of a firm has been compromised, or a member of the audit team.
18. The auditor should comply with all ISAs relevant to the audit. The ISAs are relevant:
- When the ISA is in force When the circumstances to which the ISA relates exist
22. The auditor may not meet the objectives of the ISAs only in the following cases:
- When the ISA is not relevant to the case When in exceptional circumstances alternative procedures are applied to seek to meet the objective of the ISA - this is when the ISA procedures would not be effective.
24. If an objective of an ISA cannot be achieved, the auditor should evaluate its impact on the opinion or possible withdrawal from the engagement.
A64. Considerations specific to small entities
SMEs
The small entities that are included in the ISAs have been developed taking into account those entities that are not publicly traded.
- Uncomplicated transactions Simple records Few internal controls Few levels of management Few staff
A63. Considerations specific to small entities
- The ISAs are the same for large and small companies. Procedures vary according to the entity to be audited. The ISAs focus on the matters to be addressed by the auditor, they do not detail the procedures to be applied. The audit approach to design and The performance of the procedures depends on the risk assessment. Professional judgment is essential in deciding on the nature, scope, and timing of the procedures. But judgment does not preclude compliance with all the requirements of the ISAs.
Considerations specific to small entities
How do the ISAs help in audits of small entities?
- They propose alternative procedures to assess risk. They indicate optional requirements when there is no difference between corporate governance and administration. The control environment can be evaluated by the attitudes, knowledge and actions of the administration when there is no supporting documentation.
