Professional Documents
Culture Documents
AA - Sessi
AA - Sessi
AA - Sessi
SESSION 6
ISA 210 – Agreeing the Terms of Engagement
Audit Engagement Letter
ISA 220 – Quality Control
ISQC 1 – Firm Level Quality Control
Professional Skepticism
SESSION 7
ISA 240 – Fraud & Error
ISA 250 – Laws & Regulations
ISA 260 – Communication with TCWG
SESSION 8
ISA 300 – planning
Planning Process
Interim and Final Audit
Impact of Interim Audit work on the Final Audit
ISA 230 – Audit Documentation
Types of Audit Documentation
Standardized Working Papers
Automated Working Papers
Modification of Documents
Security of Working Papers
IT based Systems
Retention of Working Papers
SESSION 9
Risk of Material Mistatement
ISA 320 - Materiality
Performance Materiality
Revision of Materiality
AUDIT RISK
Inherent Risk
This is 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.
For Example,
Fast moving Industry
Detection Risk
This is the risk that the procedures performed by the auditor to reduce
audit risk to an acceptably low level will not detect a misstatement that
exists and that could be material, either individually or when aggregated
with other misstatements.
Detection risk includes sampling as well as non-sampling risk
Sampling risk
Non-sampling risks
MATERIALITY LEVELS
The materiality level is determined by the auditors on the basis of
professional judgements. The auditors consider the following –
Does the misstatement affect the economic decision of the users?
What is the size and nature of the misstatement?
Information needs of the users
Value %
Revenue ½–1
Total assets 1–2
Profit before tax 5–10
PERFORMANCE MATERIALITY
REVISION OF MATERIALITY
Internal control
RATIOS CALCULATION
Profitability Ratios
Liquidity Ratios
Gearing Ratios
The ISA states that ‘The auditor shall design and perform audit
procedures whose nature, timing and extent are based on and are
responsive to the assessed risks of material misstatement.’
ROMM
Responses- Audit
procedures
Sufficient appropriate
audit evidence
AUDIT PROCEDURES
TYPES OF MISSTATEMENTS