F F S

E W O S
E RV I O C E
OV I T P R
AU D PART 1
  Expl
ain th
 Expl e ph r
ase “
ai syste
indep n the over matic
proce
enden all ob
 Disc j ss”

es
t audit ective
uss th or of the

ectiv
finan e
cial s basic con
 Defi tatem
ent au
cepts
that u
ne M d it nderl
bj  Iden ateria
li ty and A
ie a
tif
statem y the majo udit R
ing o
en t au r pha isk
 Desc dit pr
o c
s es o f
finan
ribe t ess. cial
pre-e h e pro
ngag cedur
 Enum em es inv
Learn

ent ac olved
erate tivitie durin
an en the m s g
gagem atters
 Iden ent le
tte
to be
inclu
tify th r ded i
repor e diff n
ts. erent
kinds
of au
di t
INTR
ODU
CTIO
N
 n
uctio
d The definition of auditing includes the
Intro
phrase systematic process because an
audit involves a logical series of steps
that lead to the rendering of service.
 ts
emen
t A structured representation of the
al Sta
financial information.
 it can be a complete set or a single
financial statement.
ci
Finan
 statem ial
ents
inanc 1. Statement of Financial Position
2. Statement of Comprehensive income
t of f

3. Statement of changes in Equity

4. Statement of Cash Flows
se

5. Notes, comprising a summary of

plete

significant accounting policies and

other explanatory notes.
Com
 statem ial
ents
inanc 1. Statement of Financial Position
2. Statement of Comprehensive income
t of f

3. Statement oif changes in Equity

4. Statement of Cash Flows
se

5. Notes, comprising a summary of

plete

significant accounting policies and

other explanatory notes.
Com
O VE
R AL
L OB
THE JECT
INDE I VE O
PEND F
AUD NTE
ITOR
 e
jectiv
 The objective of an audit of financial
statements is to enable the auditor to
all ob
express an opinion whether the
financial statements are prepared, in all
material respects, in accordance with an
Over

applicable financial reporting

framework.
RESP
ONS
THE IBIL
MAN ITIES O
AGE F
MEN
T
 of FS
 An audit by an independent auditor
is premised on the fact that the
financial statements subject to audit are
ration
those of the entity, prepared and
presented by management of the entity
with oversight of those charged with
Prepa

governance, with the auditor engaged

for purposes of forming and expressing
an opinion on them.
 mana f the
nt
1. Preparation and presentation of FS in

geme
accordance with applicable framework.
ties o

2. The design, implementation, and

sibili

maintenance of internal control relevant

to the presentation and fair presentation
on

of financial statements that are free

from material misstatement, whether
Resp

due to fraud or error.

 mana f the
3. Provide complete information to the

nt
auditor:

geme
ties o
- all information such as record and
documentations
- any additional information that the
sibili

auditor may request from management

and, where appropriate, those charged
on

with governance.
Resp

- unrestricted access to this those

within the entity that is necessary to
obtain audit evidence.
 BAS
IC C O
FINA UND NCE
N C IA ERLYI TS P
L STA NG A
TEM
ENT
AUD
IT
 1. Audit Independence

ie a
dit:
2. Professional Skepticism
nderl
ent au 3. Conduct and scope of an audit in
Accordance with PSAs
epts u

4. Audit Evidence and Financial

tatem

Statement Assertions
5. Audit Materiality
Conc
cial s

6. Audit Risk
7. Professional judgment
finan

8. Inherent limitations of an audit

INDE AUDIT
PEND OR
ENC
E
 dence
 Refers to both state of mind of the
auditor and independence in
en appearance.
Indep

 Independence enhances the auditor’s

ability to act with integrity, to be
objective and maintain professional
scepticism.
PRO
FESS
I
SKEP ONAL
T IC I
SM
 ism
 The auditor shall plan and perform
eptic an audit with an attitude of professional
scepticism.
al Sk

 Professional skepticism is necessary

ssion

to the critical assessment of audit

evidence.
Profe
 ism
Includes:

eptic
1. Questioning contradictory audit
evidence and questioning the reliability
of documents and responses.
al Sk

2. Consideration of the sufficiency and

ssion

appropriateness of audit evidence

obtained in the light of the
circumstances.
Profe
 ism
In case of doubt about the reliability of

eptic
the documents presented and responses
received from the management and
those charged with governance, PSAs
al Sk

require that the auditor investage

further and determined what
ssion

modifications or additions to audit

procedures are necessary to resolve the
matter.
Profe
CON
DUCT
AND
OF A SCO
ACC N AU PE
ORD D
A N C IT IN
E WI
TH
PSAs
 it
f aud  The auditor shall comply with all
uct o
PSAs relevant to the audit. A PSA is
relevant to the audit when the PSA is in
Cond

effect and the circumstances addressed

by the PSA exists.
 it
f aud
 The auditor shall comply with each
requirement of PSA unless, in the
circumstances of the audit:
uct o

1. The entire PSA is not relevant; or

Cond

2. The requirement is not relevant

because it is conditional and the
condition does not exist.
 it
f aud
If an objective in a relevent PSA
uct o cannot be achieve, the auditor shall
evaluate whether this prevents the
auditor from achieving the overall
objectives of the auditor and thereby
Cond

requires the auditor to modify the

opinion or withdraw from the
engagement.
 uditnA  Scope of an audit refers to the audit
procedures that, the auditor’s
e of a
judgement and based on the PSAs, are
deemed appropriate in the
circumstances to achieve the objective
Scop

of the audit.
 AUD
I
FINA T EVIDE
NC I A N CE
L STA AN D
TEM
ASSE ENT
RTIO
NS
 ence
t Evid  Audit evidence is all the information
used by the auditor in arriving at the
conclusions on which the audit opinion
is based, and includes the information
Audi

contained in the accounting records

underlying the financial statements and
other information.
  Auditors gather audit evidence
regarding the assertions

ns
(representations) of management. In

sertio
representing that the financial
statements are presented fairly, in all
material respect, in accordance with the
nt As
applicable financial reporting
framework, management implicitly or
explicitly makes assertions regarding
geme

the recognition, measurement,

presentation, classification and
Mana

disclosure of the various elements of

financial statements and related
disclosures.
MAT A UD
ERIA IT
LITY
  Information is material if its
omission or misstatement could

ity
influence the economic decisions of
users taken on the basis of financial

rial
Mate statement. Materiality depends on the
size of the item or error judges in the
particular circumstances of its omission
or misstatement.

 Materiality provides a threshold or

cutoff point rather than being a primary
qualitative characteristic which
information must have if it is to be
useful.
AUD
IT RISK
 Riskof  Risk, from the context of financial
ition
statement audit, refers to the possibility
or likelihood that the financial
statements contain material
Defin

misstatement.
 t Risk
 Audit risk is a function of the risks of
Audi material misstatement (inherent risk
and control risk) and detection risk.

 It is the risk that an auditor express

an inappropriate audit opinion when the
financial statement are materially
misstated.
  Audit risk does not include :

t Risk
1. The risk that the auditor might
express an opinion that the financial
statements are materially misstated
Audi
when they are not (this risk id
originally insignificant).

2. The auditor’s business risks such as

loss from litigation, adverse publicity,
or other events arising in connection
with the audit.
 misst terial
ent
atem
 Exists in two levels:
of ma
1. Overall financial statement level.
Risk

2. Assertion level for classes of

transactions, account balances, and
disclosures.
 al
statem nancial
vel
emen f materi

ent le  Risk of misstatement at the overall

t at fi

financial statement level refers to risk

o

of material misstatement that relate

Risk

pervasively to the financial statements

as a whole and potentially affect many
assertions.
at
misst
 terial
tion
level
asser
of ma

 Risk of material misstatement at the

ent at

assertion level are assessed in order to

Risk

determine the nature, timing, and extent

of necessary further audit procedures.
atem
misst
 terial
ent
atem
of ma

 The risk of material misstatement

misst

consist of two components – inherent

Risk

risk and control risk

 sk i
ent R
INHERENT RISK
-is the susceptibility of an assertion (i.e.
Inher
accounts and amounts) to a
misstatement that could be material,
individually or when aggregate with
other misstatements assuming that there
were no related internal controls.
 isk
CONTROL RISK
rol R - is the likelihood that a misstatement
that could occur in an assertion and that
Cont
could be material, individually or when
aggregated with other misstatements,
will not be prevented or detected and
corrected on a timely basis by the
entity's internal control.
 isk
DETECTION RISK
is the likelihood that the auditor
tion R will not detect a misstatement that
exists in an assertion that could be
material, either individually or when
Detec

aggregated with other misstatements.

 it is a function of the effectiveness

of an audit procedure and of its
application by the auditor.
 isk
tion R  Detection risk cannot be reduced to
zero because the auditor usually does
not examine all of a class of
Detec

transactions, account balance, or

disclosure and because of the other
factors.
 isk
tion R  Detection risk related to the nature,
timing, and extent of the auditor’s
Detec

procedures that are determined by the

auditor to reduce audit risk to an
acceptable low level.
PRO
FESS
I
JUDG ONAL
EME
NT
 Judgm al
ent
ssion  Professional Judgement in auditing
may be described as the application of
relevant knowledge and experience,
Profe

within the context provided by

auditing, accounting and ethical
standards, in reaching decisions about
the courses of action that are
appropriate in the circumstances of
audit engagement.
 Judgm al
ent
ssion  Professional Judgement is therefore
essential to the proper conduct of an
audit. The distinguishing feature of the
Profe

professional judgement expected of an

auditor is that it is exercised by the
auditor whose training, knowledge and
experience have assisted in developing
the necessary competence to achieve
reasonable judgements.