Unit 2 Summary.docx - Unit 2 Summary Auditing standards and...

Unit 2 Summary, Auditing standards and quality control
Audit process
 Prior to the audit
o Assessing ethical requirements of client and engagement including integrity of the
client and agreeing to the terms of any engagement
 Planning the audit
o Gaining understanding of the client and its environment, assessing risks and
determining materiality, this helps develop the overall audit plan
 Responding to assessed risks – undertaking the audit
o Performing the audit field work or evidence gathering process
o Gathering enough evidence to form auditor’s opinion
o May include controls testing, and will include performing substantive tests, such as
verifying dollar amounts
o Evidence gathered then evaluated to determine sufficiency and appropriateness of
the basis of going concern, e.g. this event can lead to a going concern issue
 Finalising the audit
o Formulation of the auditor’s opinion and reporting activities
Continuous audit activities and related Standards
Activity Related Standards and requirements
Consider engagement
independence and
ethical considerations
ISQC 1
1 Requires an audit firm to establish policies and
procedures that will help ensure it only undertakes or
continues engagements and relationships in which
the firm and its personnel comply with relevant
ethical requirements (ISQC 1 para. 20). Complying
with ethical requirements is a continual obligation
throughout the engagement
ISA 220
1 Requires the engagement partner to ‘remain alert’
throughout the engagement ‘for evidence of non-
compliance with relevant ethical requirements by
members of the engagement team’ (ISA 220 para. 9)
Direction and supervision
of the audit
ISQC 1
1 Requires appropriate quality control policies and
procedures to help ensure engagements are
performed in accordance with IAASB Standards,
ethical requirements and applicable legal and
regulatory requirements (ISQC 1 para. 11)
ISA 220
1 Requires the engagement partner to take
responsibility for the ‘direction, supervision and
performance’ of the audit (ISA 220 para. 15(a))
Assess continuing
relationship with client
ISA 220
1 Requires the engagement partner to reconsider the
client relationship if the firm obtains any information
that would have caused it to decline the engagement
had that information been available earlier (ISA 220
para. 13)

Communicate with
management and those
charged with governance
Consult with appropriate
persons on difficult or
contentious matters
Document work
performed, findings and
conclusions in
appropriate work papers
ISA 260 Communication with Those Charged with
Governance (ISA 260).
Requires the auditor to communicate specific matters to
those charged with governance (ISA 260 para. 3). Additional
matters to be communicated which complement these
requirements are identified in other Auditing Standards, such
as:
ISA 265 Communicating Deficiencies in Internal Control to
Those Charged with Governance and Management (ISA 265)
1 Requires the auditor to ‘communicate in writing