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A Step-by-Step Guide to Crafting an Assignment on Auditing and Assurance

In the world of accounting and finance, auditing and assurance are essential elements that guarantee the veracity and accuracy of financial information. You might encounter various assignments as a finance student that require you to delve into the intricacies of assurance and auditing. These assignments help you develop your analytical and critical thinking abilities while also testing how well you understand the material. To help you submit a well-organized and insightful piece of work, we will walk you through the process of writing a thorough assignment to do auditing and assurance homework in this blog. You will learn how to review assignment guidelines, gather pertinent materials, take organized notes, and effectively structure your assignment by following the procedures described in this guide. We'll look at the theoretical underpinnings of auditing and assurance, talk about the various kinds of auditing and assurance homework, and give some insights into the auditing procedure. We'll also talk about the difficulties and moral dilemmas that auditing and assurance professionals face, emphasizing the value of professional ethics and the most recent developments in the industry. You will have the information and resources required to produce and complete your assignment on auditing and assurance by the blog's conclusion.

Understanding Auditing and Assurance

Let's establish a firm understanding of the concepts of assurance and auditing before we begin the assignment writing process. An organization's financial records, transactions, and internal controls are systematically examined and evaluated during an audit to make sure they are accurate, fair, and in compliance with all applicable laws. External auditors are frequently impartial experts who have been hired to conduct this assessment and offer a dispassionate opinion on the company's financial statements. On the other hand, assurance is a more comprehensive idea that goes beyond auditing and encompasses it. It includes a range of services, including attestation, reviews, and agreed-upon procedures, where an impartial expert assesses and offers assurance on various elements of financial data or operational procedures. As you begin writing your assignment, you must comprehend the differences between auditing and assurance. It enables you to comprehend the breadth and importance of each concept and successfully meet the requirements of the assignment. Having established this foundation, let's move on to the assignment writing process and investigate the essential steps to produce a properly organized and insightful piece of work.

Definition of Auditing

The goal of auditing is to verify the accuracy, fairness, and compliance with applicable laws of an organization's financial records, transactions, and internal controls. To evaluate the accuracy and integrity of financial information, a thorough analysis of financial statements, supporting materials, and accounting practices is required. Usually, external auditors, who are independent and impartial experts, are hired to conduct this assessment and offer an unbiased opinion on the company's financial statements. Organizations can be certain that their financial statements accurately reflect their financial position, performance, and cash flows by having them audited.

Definition of Assurance

Auditing is a subset of the larger concept of assurance, which goes beyond it. It includes a range of services like attestation, reviews, and established protocols. Independent experts evaluate and offer assurance on various facets of financial information or operational processes as part of assurance engagements. Assurance services go beyond the review of financial records, while auditing focuses on the verification of financial statements. They also consist of non-financial elements like risk assessment, process evaluation, performance measurement, and others. Engagements in assurance assure stakeholders that information beyond financial statements is trustworthy, credible, and transparent.

Key Differences Between Auditing and Assurance

Although auditing and assurance are similar, their scopes and objectives are different. Through an unbiased assessment of an organization's financial records, auditing primarily focuses on confirming the veracity of financial statements. It guarantees adherence to accounting rules, laws, and regulations. Contrarily, assurance covers a wider range of services beyond the simple verification of financial statements. It entails assessing risks, giving assurance regarding operational procedures, and judging the accuracy of non-financial data. Internal controls, sustainability reporting, regulatory compliance, and performance measurement are some examples of topics that can be covered by assurance engagements. Although assurance includes auditing as a subset, assurance services go beyond financial reporting to give confidence in a variety of organizational operations.

Preparing for the Assignment

Thorough planning is essential for a successful assignment on auditing and assurance. You can prepare for your assignment effectively by following the steps below. First and foremost, carefully read the instructions for the assignment that your teacher has provided. It's essential to comprehend the precise issues or subjects you must deal with as well as any format or citation requirements. Then, compile pertinent information by conducting in-depth research with the aid of scholarly journals, books, and reliable online sources. You will gain a thorough understanding of the subject matter as a result. Take detailed notes as you conduct your research to remember key ideas, quotations, and sources. The writing process will be streamlined as a result, and your assignment's structure will be simpler. Consider outlining as well to structure your ideas and guarantee a logical flow of ideas in your assignment. You will lay a strong foundation for writing an informed and coherent assignment on auditing and assurance by adhering to these pre-writing steps.

Review the Assignment Guidelines

It is crucial to carefully read the instructions provided by your instructor before beginning your assignment on auditing and assurance. Spend some time carefully reading and comprehending the directions, noting any particular questions or subjects you need to cover. Be mindful of the formatting specifications, including the need for margins, font size, and citation style. You can make sure that your assignment satisfies the requirements and addresses the particular areas of focus specified by your instructor by being aware of the rules upfront.

Gather Relevant Materials

Conducting thorough research is essential to producing a well-informed assignment. Make use of a range of resources, including scholarly journals, books, reliable websites, and trade publications. assemble trustworthy and pertinent resources that offer in-depth insights into the field of assurance and auditing. To ensure the accuracy of the information you use in your assignment, keep in mind to critically evaluate the credibility and dependability of each source.

Take Notes and Organize the Information

Organizing your notes will help you remember important ideas, quotations, and sources as you conduct your research. Whether you choose to use digital note-taking tools or conventional pen and paper, come up with a system that works for you. Make sure to meticulously note important details from your sources, such as author names, publication dates, and page numbers. By keeping your notes organized, you can structure your assignment more easily and avoid confusion or plagiarism concerns when citing sources.

Structuring Your Assignment

To present your ideas coherently and logically, it is essential to structure your assignment on auditing and assurance. You can create an assignment that is well-organized by using the following framework. Start by giving a brief overview of auditing and assurance, their importance, and the goal of your assignment in an interesting introduction. Discuss the theoretical underpinnings of auditing and assurance after the introduction, paying particular attention to important terms like materiality, independence, audit risk, and professional skepticism. Continue by describing the various auditing and assurance services, using appropriate examples, such as financial statement audits, operational audits, compliance audits, and review engagements. The auditing procedure should then be described in detail, including each step from planning and risk assessment to assembling evidence and arriving at a conclusion. Consider including a section on the difficulties and moral issues that arise in auditing and assurance, such as professional ethics, ongoing problems, and new trends. Finish your assignment by reiterating the most important ideas. By following this format, you will produce a well-organized assignment that thoroughly explores the subject of auditing and assurance.

Professional Ethics and Code of Conduct

Professional ethics are crucial for maintaining integrity, trust, and public confidence in the fields of auditing and assurance. Describe the role that professional ethics play in maintaining the veracity and accuracy of financial information. The International Ethics Standards Board for Accountants (IESBA) and the American Institute of Certified Public Accountants (AICPA) are two well-known professional organizations that have established high ethical standards. Investigate issues like impartiality, discretion, and professional competence. Emphasize the moral dilemmas that auditors might face and the ethical frameworks for making decisions. In the practice of auditing and assurance, emphasize the importance of adhering to a strict code of conduct and upholding high ethical standards.

Current Issues and Emerging Trends

Practises for auditing and assurance are constantly changing to address new issues and keep up with emerging trends. Highlight the most important current problems and new developments in the industry. Talk about how technology, including data analytics and artificial intelligence, has affected auditing procedures. Learn how technology is being used by auditors to improve efficiency, accuracy, and risk assessment. What role do auditors play in assessing and ensuring the accuracy of environmental, social, and governance (ESG) disclosures? Discuss the rising importance of sustainability reporting. Discuss how auditors are evolving in their ability to spot and stop fraud, financial irregularities, and cybersecurity risks. Your assignment will demonstrate a modern understanding of the dynamic auditing and assurance landscape by addressing these current issues and emerging trends.

Challenges and Ethical Considerations in Auditing and Assurance

Professionals in auditing and assurance face a variety of obstacles and moral quandaries in their work. These issues must be covered in your assignment. Talk about typical difficulties like auditing complicated financial instruments, handling client privacy issues, and preserving independence and objectivity. Describe any challenges auditors might encounter when determining the risk involved in complex financial transactions or juggling confidentiality issues when handling private client information. In addition, stress the value of maintaining ethical standards in assurance and auditing. Investigate subjects like business ethics, regulatory organizations' codes of conduct, and the value of professional skepticism. By addressing these issues and ethical concerns in your assignment, you will show that you have a thorough understanding of the complexities that exist in the auditing and assurance industry as well as your capacity for critical analysis and issue evaluation.

In conclusion, writing an assignment on auditing and assurance necessitates having a firm grasp of the material, meticulous planning, and adherence to ethical standards. You can create a well-organized and insightful assignment that demonstrates your knowledge and critical thinking abilities by following the instructions provided in this guide. Before beginning the writing process, don't forget to read the assignment instructions, gather pertinent materials, and organize your thoughts. Take into account the value of professional ethics as well as the changing auditing and assurance industry, including present problems and future trends. Your assignment will show that you are knowledgeable in the subject by addressing these important factors and will advance both your academic and professional careers. Therefore, approach this assignment with confidence and produce an outstanding piece of work on auditing and assurance.

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Audit Conclusion

• First Online: 24 April 2022

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This chapter continues with writing the audit report that identifies what was reviewed and what the auditors identify as exposures along with their impact. The chapter discusses the recommendations that are in the report, the fact that they are the auditors’ recommendations that need to be responded to. After the report is written, there is the final audit meeting and the presentation of the report to executive audit client management, asking for their sign-off before distribution of the report.

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Danter, E. (2022). Audit Conclusion. In: Audit Defense. Palgrave Studies in Accounting and Finance Practice. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-92466-9_5

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Auditing Assignment: the Audit Opinion Report (Assessment)

Auditor’s independence, auditor’s responsibility, the auditor’s opinion, reference list.

The audit opinion given by the auditors does not meet all the audit requirements in accordance to ASA 700 and ASA 701. The primary objective of ASA 700 is to ensure that the mandatory requirements when giving an unqualified audit opinion are met. These mandatory requirements are in relation to the audit format, it content in connection to the purpose of which the audit is being carried out, this is general purpose financial report (GPFR). Therefore the report should be reported in harmony with the laid out financial reporting guideline or frame work. When an audit follows this frame work, it should achieve fair presentation, auditors’ opinion, performance when carrying out the audit and his responsibilities in the audit. The main objectives of the ASA 701 Modifications to the Auditors report was to provide a frame work through which auditor would rely on in providing for opinions in relation to the financial opinion. These modifications were in relation to issuance of “other than unqualified” auditor’s report

The audit carried out has met some of the provisions of the ASA 700. Firstly, the audit began by identifying the financial entity on which the audit was carried out, this is, Highboury limited. In addition, the audit report has given its mandate whereby its states that the audit was carried out audit opinion whereby its states that the audit was carried out to provide reasonable assurance whether the audit was free from any material misstatements. In further states the procedures that were used in the preparation of the audit which includes, examination, on test basis of the financial records available and the evidence of all the transactions in the company. In addition the report stated the financial policies, accounting standards and other important estimates that were used in the process. At the end of the audit report the opinion of the auditors is given whereby they state that the audit was carried out with a view to give a fair presentation in accordance to the accounting standards and the statutory requirements in order to give an unqualified opinion which represents the financial records and position of the company’s operations and its cashflows ((CPA Australia, 2006).

Though the audit report identifies the company which it conducted the audit for in accordance with ASA 700, other audit frame work required to be used in the financial statements were not used. The audit report did not identify the each of the financial statements on which the audit was carried on but just gave a general opinion. According to ASA 700, the audit should have inspected all the financial statements of the company which included the balance sheets, income statements, and change in equity statements among others. After the audit on these statements, the report should have indicated the name of the financial statement and what was the opinion in the end separately before giving a general opinion at the end. After auditing the financial statements the auditors should then have given a summary of the various accounting and auditing policies used and other explanatory notes which explain in detail some of the financial issues in the statements, this should be done separately on all the financial statements separately and if possible the directors declaration. Though the audit report gave a date when the audit case carried out, it failed to give the financial period in which the audit covered which is a requirement of the ASA700. As an auditing requirement, ASA 700 should be used in conjunction with ASA 701 which provides guidelines and frame work for any upcoming modifications or changes to the audit report when the prevailing circumstances call for it.

The audit report should have indicated that the people who are in charge of governance of the reports shall also be accountable in ensuring that the audit gives a fair presentation. According to ASA 700 (2006), the responsibilities of those in charge of the governance of the report involves: “first, designing, implementing and maintaining the internal control systems which would be in harmony with the preparation and fair presentation of the financial reports which includes free from material errors and fraud, free from misstatement among others.” Secondly selecting and applying the appropriate accounting policies and finally creating accounting policies which are appropriate to the prevailing financial conditions. Hence the given audit report fails to show this framework.

According to the new requirements of ASA 701the report should have included a qualified, unqualified opinion, adverse or disclaimer, nevertheless it fails to provide for this. By failing to provide for the opinion, the auditors failed to fulfil the ethical duties as called for by the ASA 700 guidelines and frame work. In addition under the ASA 701 framework the audit report should have indicated that the audit was carried under the provisions of the regulatory requirements of the given country (CPA Australia, 2006).

Guy (2006) states that “An auditor’s report is a formal opinion, or disclaimer thereof, addressed by either an internal auditor or an external audit on evaluation performed on an organization or segment thereof.” The aim of the auditor’s report is allow the auditor to report his or her opinion as to whether the financial statements show a true and fair view of the firm’s financial position. The report is addressed to the shareholders for a statutory audit or to the individual or body that had requested the audit to be carried out for private audits. “An auditor’s report has three main components, which are auditor’s independence, responsibility and audit opinion” (Guy, 2006).

Auditor’s independence also referred to as the cornerstone of audit, is the most fundamental part of an audit process in determining the objectivity of the audit opinion. It is basically a state of mind shown by integrity and objectivity to the audit procedure. It is the independence of an internal or external auditor to perform his responsibilities in a free and objective way. In coming up with an auditor’s opinion, the auditor should be free from any biasness or coercion and do his or her work with due diligence. Taking into consideration that the aim of an audit is to enhance the reliability of the financial statement by showing a dependable assurance from an independent source that they show a true and fair view according to the auditing standards; however, this function cannot be achieved if the users of the audit report know that the audit process was not carried out in a credible manner and the auditor independence may have been undermined by other factors, such as the conflict of interest or coercion by other stakeholders of the business.

However, auditor’s independence and objective of the audit can be compromised in the following grounds: self interest, where an auditor’s has personal interest in the entity; self review threat arises when the auditor had undertaken an audit-related service to the entity earlier and the auditor reviews his or her work; advocacy threat, arises where the auditor promoted the client’s position irrationally; in as case where the auditor is involved in disagreement with the client or management; familiarity threat, which arises due to over contact of the auditor with the client for a long period may undermine the independence of the audit; and intimidation threat of the auditor by the client.

Reporting independence guarantees the auditor’s responsibility to disclose to the users of financial statement any information they deem ought to be revealed. If an organization’s management has been misleading stakeholders by manipulating financial information, they will try all means to ensure that the auditor does not report their acts. It is in these of cases where the auditor’s independence is likely to be undermined. Auditor’s independence can be enhanced by putting in place the five pillars of auditing, which are, competence, objectivity, professional competence, confidentiality and professional behaviour.

An independent auditor is able to detect misconduct by the management in an entity which would otherwise not have been detected, removing directors’ biasness in presentation of accounting statements about the firm’s financial position, hence they play a big role in boosting good corporate governance.

Auditing processes should be undertaken with professional scepticism, and in accordance with the accepted regulations of practice within the auditing profession. To attain this level of performance, an auditor should take responsibility for the completion of the stated responsibilities in a professional way. Thus, the auditor’s responsibility in an audit report include: disclosing any compromise or objectiveness of the audit that arise; undertaking allocated duties in an independent and self-driven way; planning and carrying out the actual audit exercise and preparing the auditor’s report on time and as per stated.

ASA 700.37 states that “The auditor’s report shall state that the responsibility of the auditor is to express an opinion on the financial report based on the audit.” ASA 700 requires the auditors to acquire the necessary information of the risks involved in an organization’s regulatory framework and the business environment standards and essentials. In addition, ASAs requires the auditor to assess the internal controls of the entity to measure the extent of the credibility of the financial reporting; the auditor should measure the relevant controls if they are effective and efficient in operations of the firm; and check if the controls in place are compliant with the standards and regulations (Tomasic, 1992).

Users of the auditor’s report should also understand the auditor’s responsibility towards the report so as to avoid any interference of opinions, that is, to bridge the expectation gap between the users of the auditor’s report and the auditor. It occurs mostly that the users believe that it is the duty of the auditors to prevent fraud and errors whereas it is the duty of the management; this creates a conflict of perception.

“The purpose of auditing financial statements is to allow the auditor to show an opinion whether the financial statements are prepared, in all material respects, according to the Generally Accepted Accounting Principles and UIG Consensus views.” An audit undertaken according to the SASs is aimed at providing a reasonable assurance that the accounting statement taken wholly or partly does not have any material misstatements and the SAS expects after the audit process, the auditor to give an opinion on the financial statements in the auditor’s report.

Therefore, an auditor’s opinion is a qualification that accompanies accounting statements provided by the independent auditor after carrying out an auditing process. The auditor’s opinion shows the scope of the audit, the auditor’s opinion on the adherence of generally accepted accounting principles and information used in the audit, and the auditor’s opinion on whether the accounting statements reflect a true and fair position of the entity’s situation.

The auditor’s opinion on the accounting statements is based on the principle of acquiring reasonable assurance; thus, in an auditing process, the auditor does not assure that a material misstatement, arising from fraud or error, will be discovered. Hence, the consequent detection of material misstatements in accounting financial statements does not show: failure to obtain reasonable assurance; inadequacy in planning, performance or judgment; the lack of professional competence and due care; or failure to comply with SAS.

An auditor can give either of the four types of audit opinions: first, an unqualified opinion, this makes no reservations about the accounting statements and holds that they give a true and fair view in accordance with the relevant accounting reporting standards; second a qualified opinion, expressed when the auditor is not able to ascertain the possible cause of the materials misstatements may be due to limitation in scope of his or her work, disagreement with the management, or there are significant uncertainties affecting the financial statements; third a disclaimer of opinion, this is expressed when the auditor is unable to form an opinion due to insufficient audit evidence; and fourth an adverse opinion, issued when the effects of disagreements are so material and pervasive to the financial statements that the auditor concludes that the financial statements do not show a true and fair view.

An independent auditor’s opinions can be helpful to users of financial statements in ascertaining the reliability and credibility of financial statements. This helps stakeholders of an entity to make informed decision on the firm concerning its going concern assumption, firm’s management and the overall operation of the entity. Auditor’s opinion helps in identifying the weakness in an entity’s control system and opinions on what needs to be done to provide a more secure operating system (CPA Australia, 2006).

CPA Australia (2006). ASA 700 The Auditor’s Report on a General Purpose Financial Report. Melbourne: CPA Australia.

Guy, D. (2006). Auditors’ reports . Menomonee Falls, WI: Tax Management Inc.

Tomasic, R. (1992). Auditors and the reporting of illegality and financial fraud, Australian Business Law Review , 20, 150-198.

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IvyPanda. (2022, March 15). Auditing Assignment: the Audit Opinion. https://ivypanda.com/essays/auditing-assignment-the-audit-opinion/

"Auditing Assignment: the Audit Opinion." IvyPanda , 15 Mar. 2022, ivypanda.com/essays/auditing-assignment-the-audit-opinion/.

IvyPanda . (2022) 'Auditing Assignment: the Audit Opinion'. 15 March.

IvyPanda . 2022. "Auditing Assignment: the Audit Opinion." March 15, 2022. https://ivypanda.com/essays/auditing-assignment-the-audit-opinion/.

1. IvyPanda . "Auditing Assignment: the Audit Opinion." March 15, 2022. https://ivypanda.com/essays/auditing-assignment-the-audit-opinion/.

Bibliography

IvyPanda . "Auditing Assignment: the Audit Opinion." March 15, 2022. https://ivypanda.com/essays/auditing-assignment-the-audit-opinion/.

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• Internal audit
• Learn about internal audit
• Back to Learn about internal audit
• A brief guide to internal auditing
• A brief guide to assignment planning
• A brief guide to assessing risks and controls

A brief guide to assignment quality

• A brief guide to assignment reporting
• A brief guide to follow up
• A brief guide to relationship management
• A brief guide to audit governance
• A brief guide to standards and responsibility
• A brief guide to strategic audit planning and resourcing
• A brief guide to working with other providers
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• Guidance for Heads of Internal Audit
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• Introduction
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• Benefits of coordination
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Quality control processes are important to ensure that all audit work is suitably undertaken, evidenced and supports the audit findings.

In accordance with professional standards you should ensure that the internal audit team has a suitable quality assurance and improvement programme in place; this should include elements such as:

• standards and methodology
• training, development and supervision
• assignment planning and resourcing (see sample opening meeting template in related downloads box to the right)
• communication and reporting
• review and improvement

All team members should be trained on the in-house working practice, working paper formats, reporting and approvals processes.

Working practices should facilitate review by management throughout fieldwork. All grades of staff should be suitably monitored with work signed off by their line manager. All assignments should be signed off in accordance with the team’s approval process, typically by the chief audit executive (CAE), prior to circulation as ultimately they are responsible for reports to management and audit committee.

The reviewer should follow the golden thread of evidence collected in the audit file to see if they arrive at the same conclusion and opinion as the individual undertaking the work.

Any review points should be formally recorded, actioned by the auditor and confirmed as completed in a timely manner to ensure that all audit products are delivered to a consistently high standard.

In some sectors, it is good practice and a requirement to periodically subject the internal audit department to an independent review process, known as an external quality assessment (EQA). An EQA is performed with specific focus on resources, competency and delivery. The EQA should be undertaken at least every 5 years.

Often departments will also be subject to peer review or other quality assurance arrangements (eg ISO audit) to ensure best practice is being consistently observed and applied. Out-sourced providers may be subject to further monitoring by their professional bodies.

IIA IPPF Standard 1300 – quality assurance and improvement

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Complete Audit Assignment - Step by Step

Today we will look at the steps that external auditors need to take to complete an audit. Once the external auditors have completed their substantive testing, there are still many procedures that they need to complete before the audit report is provided to client. Here are the key steps in completing an audit engagement, with reference to respective ISA.

Step 1 - Final review of the audit file to ensure quality control is in place

Before the audit report is drafted, the audit engagement manager and partner will review the audit file to ensure proper procedures have been applied based on which the engagement partner can form an opinion. Reviewing the audit file is also necessary to ensure the quality of the audit.

ISA 220 Quality Control for an Audit of Financial Statements

Concerning quality control of audit documentation with regards to completion of an audit, ' ISA 220 - Quality Control for an Audit of Financial Statements ’ states that:

The engagement partner shall take responsibility for reviews being performed in accordance with the firm’s review policies and procedures.

On or before the date of the auditor’s report, the engagement partner shall, through a review of the audit documentation and discussion with the engagement team, be satisfied that sufficient appropriate audit evidence has been obtained to support the conclusions reached and for the auditor’s report to be issued.

The standard requires the engagement partner to review the work performed by the members of the audit assignment team before completing an audit.

The audit engagement partner will generally review critical areas of judgement, areas of significant risk and other areas that they deem important to ensure compliance with the standard in regards to the quality of the audit.

The standard does not require the audit engagement partner to review all documentation related to the assignment but they may choose to do so if they deem necessary.

ISA 520 Analytical Procedures

ISA 520 – Analytical Procedures deals with the auditor's use of analytical procedures as substantive procedures in response to assessed risks, and as procedures that assist in arriving at the auditor's overall conclusion in an audit of financial statements.

Under the paragraph “Analytical Procedures that Assist When Forming an Overall Conclusion” states that:

The auditor shall design and perform analytical procedures, near the end of the audit, that assist the auditor when forming an overall conclusion as to whether the financial statements are consistent with the auditor’s understanding of the entity.

Before forming an overall conclusion regarding the financial statements of the audit, the auditor should perform analytical procedures to verify their opinion formed during the audit of individual components or elements of the financial statements.

Analytical procedures may include different methods such as ratio analysis, trend analysis or comparisons with prior period financial statements. This can help the auditor identify any unusual transactions or balances that may indicate a risk of misstatement.

Through the use of analytical procedures, the auditor probably comes across any previously unknown information, then, it is required to revise the risk of material misstatement assessed before.

This may also require the auditor to perform further audit procedures according to the newly identified information. The auditor may also need to carefully consider the disclosures in the notes to the financial statements and any other information that is issued with the financial statements to ensure they are consistent with the financial statements.

Step 2 - Evaluation of misstatements

Next step to complete an audit assignment is to evaluate the misstatements identified during the audit. This is done under ' ISA 450 - Evaluation of Misstatements Identified During the Audit '. Regarding the steps taken before the completion of an audit, ISA 450 states that:

The auditor shall determine whether uncorrected misstatements are material, individually or in aggregate. In making this determination, the auditor shall consider:

(a) The size and nature of the misstatements, both in relation to particular classes of transactions, account balances or disclosures and the financial statements as a whole, and the particular circumstances of their occurrence; and

(b) The effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole.

The standard requires the auditor, before giving a report, to evaluate the effect of any uncorrected misstatements and if necessary, reassess the materiality per ISA 320.

The auditor must determine whether the uncorrected misstatements are material, individually or in aggregate. The auditor must also determine the effect of any uncorrected misstatements from prior accounting periods that may affect the current financial statements.

These misstatements are generally discussed with the client in the audit clearance meeting before providing the client with an audit report. If the misstatements remain uncorrected, the auditor will have to modify their report accordingly.

Step 3 - Review of subsequent events

During the process of completion of an audit, the auditor must also determine the effect of any subsequent events relevant to client’s financial statements.

This is done per ' ISA 560 – Subsequent Events ' which requires the auditor to perform audit procedures to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the auditor’s report that require adjustment of, or disclosure in, the financial statements have been identified.

In regards to the completion of an audit, the standard states that:

[if] the auditor identifies events that require adjustment of, or disclosure in, the financial statements, the auditor shall determine whether each such event is appropriately reflected in those financial statements in accordance with the applicable financial reporting framework.

The standard requires the auditor to perform procedures to ensure that the events that occur between the date of the financial statement and the date of the auditor’s report, the require an adjustment or a disclosure within the financial statements are reflected in the financial statements.

The auditor can achieve this by reviewing the subsequent accounting records of the business or analyzing minutes of the management meetings after the year-end. These checks need to be carried out as close to the audit report date as possible to ensure all subsequent events are identified and adjusted.

Step 4 - Review of going concern

The auditor must also review the going concern status of the client business before providing an audit report. This is done following ISA 570 – Going Concern .

The standard states that the auditor shall remain alert throughout the audit for audit evidence of events or conditions that may cast doubt on the entity’s ability to continue as a going concern. Furthermore, it states that:

The auditor shall evaluate whether sufficient appropriate audit evidence has been obtained regarding, and shall conclude on, the appropriateness of management’s use of the going concern basis of accounting in the preparation of the financial statements.

Based on the audit evidence obtained, the auditor shall conclude whether, in the auditor’s judgment, a material uncertainty exists related to events or conditions that, individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern. A material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence is such that, in the auditor’s judgment, appropriate disclosure of the nature and implications of the uncertainty is necessary for:

(a) In the case of a fair presentation financial reporting framework, the fair presentation of the financial statements, or

(b) In the case of a compliance framework, the financial statements not to be misleading.

This means that before providing the audit report to the client, the auditor must verify the going concern assumption of the management. The auditor must also ensure that sufficient appropriate audit evidence has been gathered to verify the going concern assumption. Based on this evidence, the auditor can conclude whether any material uncertainty exists related to events or conditions that may challenge the going concern ability of the business.

Step 5 - Obtaining written representations

The audit cannot be completed without obtaining written representations under ISA 580 Written Representations .

Written representations are written statements provided by the management of the business to the auditor to confirm certain matters or to support audit evidence. Before the completion of the audit, the auditor must obtain different written representations from the client business.

The objectives of auditors, per ISA 580 are:

To obtain written representations from management and, where appropriate, those charged with governance that they believe that they have fulfilled their responsibility for the preparation of the financial statements and for the completeness of the information provided to the auditor;

To support other audit evidence relevant to the financial statements or specific assertions in the financial statements by means of written representations if determined necessary by the auditor or required by other ISAs; and

To respond appropriately to written representations provided by management and, where appropriate, those charged with governance, or if management or, where appropriate, those charged with governance do not provide the written representations requested by the auditor.

This means the auditors must obtain written representations from the management and, if necessary, from those charged with governance that regarding their duties when it comes to the preparation of financial statements and providing auditors with complete information.

Furthermore, the auditor is required to obtain written representations for matters relating to the financial statements, if the auditor deems necessary.

ISA 580 also requires the auditors to respond appropriately when a written representation is obtained or when the management or those charged with governance of the client business refuse to provide written representations.

Written representations are dealt with at the end of the audit competition cycle because the standard requires the date of these representations to be close to the date of the audit reports.

Step 6 - Audit clearance meeting

Last but not the least, audit clearance meeting is the final step in an audit completion process. An audit clearance meeting is not required by the International Standards on Accounting. However, these meetings can be used as a final communication channel between the auditors, and the management and those charged with governance of the business.

In addition, this meeting is used as a means to ensure there are no misunderstandings between the two parties regarding the financial statements, the auditor’s report and any other matters.

Matters discussed in a typical audit clearance meeting will include, but are not limited to:

The process of preparation of financial statements.

The adequacy of the internal controls of the business.

Proposed adjustments to the financial statements.

Difficulties encountered by the auditors during the assignment.

Confirmation of the matters to be included in the written representations to be provided by the management.

Confirmation regarding the client’s accounting policies appropriateness.

Details of ethical matters that may need to be clarified with the client.

Final words

When it comes to the completion of an audit, the auditor must plan the completion stage carefully. This is because the completion stage of the audit requires compliance with many different ISAs. The auditor may risk giving an inappropriate opinion if the completion stage is not carried out properly.

If you find this article is helpful and you want to help others too, just share it in any social media (such as Facebook, LindedIn).

#auditcompletion #ISA220 #ISA520 #ISA450 #ISA560 #ISA570 #ISA580 #analyticalprocedures #evaluationofmistatements #subsequentevents #goingconcern #writtenrepresentations #ACCAAAA #ACCAauditandassurance

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Auditing Essay Examples

Type of paper: Essay

Topic: Education , Audit , Politics , Finance , Control , Organization , Risk , Internal Control

Words: 1300

Published: 01/27/2020

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Auditing is important in all organizations in the world since it enables the preparers of financial statements to provide a true and fair view of these documents. In addition, auditing enhances transparency in reporting. It also ensures that there is little or no manipulation of accounts in the organization (Arens 2). One of the important aspects in auditing is the audit risk model. This model explains the various risks that are associated with auditing. The model describes risk as the probability that there will be inappropriate use of auditor’s independence in the provision of opinions regarding financial statements. One of the risks associated with auditing is the inherent risk. This is the probability that the accounting system contains transactions that have been misstated. In addition, the misstatements in these accounts are material. The probability that there is weak internal control system in the organization is called control risk. This means that this system is not able to detect misstatements that have a high materiality level. The probability that there will be no evidence of misstatements of high materiality level produced by audit procedures is called detection risk (Arens 4). When substantive procedures are not effective in detecting misstatements that may affect financial reporting, the situation may also be referred to as detection risk. One of the tests that are needed in risk management is the test of controls. This ensures that the internal control system is working effectively. This test prevents control risk. Substantive tests involve the in-depth testing of transitions to ensure that they have no misstatements. These tests also prevent control risk. Balance sheet test is also an important test that is used to mitigate audit risks. This type of test involves tracing transactions from the accounts to the balance sheet in order to test their validity. Analytical procedures are also important in reducing and mitigating audit risk. These procedures involve the comparison of current transactions with previous period transactions in order to test divergences. The fifth type of test meant to mitigate audit risk is the use of risk assessment procedures (Arens 7). These procedures involve investigating items that increase the level of audit risk in the organization. In the audit risk model, inherent risk and control risk form the risk material misstatement. The Coso internal control framework explains how internal control should be undertaken in an organization in order to achieve major objectives. According to this framework, one of the advantages of internal control is that it enables an organization to maintain effectiveness in the operation of its activities (Arens 7). This means that there will be less time spent in correcting plenty of errors in the accounting systems. This framework also argues that effective internal controls enable the management to prepare financial statements that reflect true opinion of the auditors. This ensures that the financial reports prepared are reliable. The Coso framework also induces organizations to conduct its activities in accordance to the laws that are applicable to them. There are four concepts that are fundamental in explaining the aspects of the Coso report. One of the fundamental concepts is that internal control enables an organization to get into the process of achieving its objectives. This is done through the effective control of activities undertaken in the company. The other concept argues that in the establishment of objectives, the management should also be involved in the implementation of effective controls. The management should be capable of operating these controls. The third concept argues that internal controls are an assurance that the targets of a company will be attained. According to this framework, this kind of assurance is reasonable and not absolute. The fourth fundamental framework indicates that installing a strong internal control system will enable the company to achieve its short term and long term goals (Arens 10). Materiality is a concept that indicates the value of misstatements that have not been corrected in the financial statements. This concept may also be important in evaluating these misstatements in the published accounts. Materiality has two important levels; high and low. High materiality level indicates that there are many misstatements in the financial statements (Arens 11). This level of materiality may affect the decision of the users of financial statements. For instance, if the profit of an organization is largely misstated, the public may have a wrong perception that this is the perfect company to invest. If there is low materiality level, there would be little or no effect in the final statements presented to the public users. Every auditor should choose an effective materiality level. Auditors should ensure that the number of misstatements should not fall below this level. If the materiality level exceeds the set level, the auditor should undertake the necessary procedures to ensure that the associated misstatements are corrected. The setting of materiality level involves personal judgment. The judging criteria may be categorized according to the size of the materiality or depending on the type of the items being tested. Tolerable misstatement is one that is associated with low materiality level. This misstatement can be ignored by the auditor since it does not have significant impact in the financial statements. The auditor uses personal judgment to establish the tolerable misstatements in the financial accounts. In setting the materiality level, the auditor should also consider the cumulative effects of the materiality and the circumstances surrounding the occurrence of the misstatements. There are two types of approaches used in measuring materiality; top down and bottom down approaches. Internal control system ensures that there is effective maintenance and supervision in the accounting system of a company. The operation of internal control system involves performing certain procedures. If the internal system of the client is computerized, it is important to conduct control procedures to the sale processes. Firstly, the auditor should ensure that he understands the nature of the client’s system. This enables the auditor to collect important information that may be required in the process of auditing. This will also enable the auditor to know the timing of sales transactions and the audit tests to be conducted (Arens 12). The auditor should test the validity of the sale transactions in order to test whether the management was right in approving the sale transactions or not. In addition, the auditor should test whether all the approved transactions regarding sales have been documented in the computerized system. This will ensure effective testing of the completeness of the transactions. The auditor should also test the computer systems to confirm whether the sale transactions have been authorized (Arens 14). If he finds transactions that are not authorized, then the management should be advised that there may be a manipulation of account by the relevant staff. The computer system should be checked in order to test the accuracy of the approved sales. In addition, the auditor should check whether the sale transactions are entered in the correct accounts. He should also check whether the transactions for each financial period are properly recorded. If these tests are not satisfactory, they may affect the audit evidence in sales. The major effect is that they may not guarantee sufficient audit evidence to make prompt advice to the management. In addition, the evidence may not be adequate to give a true view of the financial statements. In conclusion, the work of the auditors is important in all organizations since it helps the company to provide financial statements that are reliable. The preparation of reliable accounts enables external users of financial statements to make prompt decisions regarding investment and provision of supplies. Auditing also ensures that an organization conforms to its overall plan. This enables the management to work effectively towards the achievement of its goals.

Arens, E. (2012) Auditing and Assurance Services: An Integrated Approach. Prentice. Prentice Hall.

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