Guide to Using International Standards on Auditing in - IFAC
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Guide to Using International Standards on Auditing in - IFAC

Guide to Using International Standards on Auditing in - IFAC Guide to Using International Standards on Auditing in - IFAC

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17.03.2014 Views

26 ong>Guideong> ong>toong> ong>Usingong> ong>Internationalong> ong>Standardsong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Summary of the Audit Risk Components Exhibit 3.2-3 Note: The length of the bars in the exhibit would vary based on the particular circumstances and risk profile of the entity. Exhibit 3.2-4 Note: The length of the bars in the exhibit would vary based on the particular circumstances and risk profile of the entity, and the nature of the audiong>toong>r’s response.

27 ong>Guideong> ong>toong> ong>Usingong> ong>Internationalong> ong>Standardsong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts 3.3 How ong>toong> Perform a Risk-Based Audit Paragraph # Relevant Extracts from ISAs 200.15 The audiong>toong>r shall plan and perform an audit with professional skepticism recognizing that circumstances may exist that cause the financial statements ong>toong> be materially misstated. (Ref: Para. A18-A22) 200.16 The audiong>toong>r shall exercise professional judgment in planning and performing an audit of financial statements. (Ref: Para. A23-A27) 200.17 To obtain reasonable assurance, the audiong>toong>r shall obtain sufficient appropriate audit evidence ong>toong> reduce audit risk ong>toong> an acceptably low level and thereby enable the audiong>toong>r ong>toong> draw reasonable conclusions on which ong>toong> base the audiong>toong>r’s opinion. (Ref: Para. A28-A52) 200.21 To achieve the overall objectives of the audiong>toong>r, the audiong>toong>r shall use the objectives stated in relevant ISAs in planning and performing the audit, having regard ong>toong> the interrelationships among the ISAs, ong>toong>: (Ref: Para. A67-A69) (a) Determine whether any audit procedures in addition ong>toong> those required by the ISAs are necessary in pursuance of the objectives stated in the ISAs; and (Ref: Para. A70) (b) Evaluate whether sufficient appropriate audit evidence has been obtained. (Ref: Para. A71) A risk-based audit has three key steps, as illustrated below. Exhibit 3.3-1 Steps (Phases) Risk Assessment Risk Response Reporting Description Performing risk assessment procedures ong>toong> identify and assess the risks of material misstatement in the financial statements. Designing and performing further audit procedures that respond ong>toong> identified and assessed risks of material misstatement, at both the financial statement and assertion levels. This involves: • Forming an opinion based on the audit evidence obtained; and • Preparing and issuing a report that is appropriate ong>toong> the conclusions reached. A simple way of describing the three elements is illustrated below. Exhibit 3.3-2 Risk Assessment What events* could occur that would cause a material misstatement in the financial statements? Risk Response Did the events* identified occur and result in a material misstatement in the financial statements? Reporting What audit opinion, based on the evidence obtained, is appropriate on the financial statements? * An “event” is simply a business or fraud risk facong>toong>r (see descriptions in Exhibit 3.2-2) that, if it actually occurred, would adversely affect the entity’s ability ong>toong> achieve its objective of preparing financial statements that do not contain material misstatements resulting from error and fraud. This would also include risks resulting from the absence of internal control ong>toong> mitigate the potential for material misstatements in the financial statements.

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<str<strong>on</strong>g>Guide</str<strong>on</strong>g> <str<strong>on</strong>g>to</str<strong>on</strong>g> <str<strong>on</strong>g>Us<strong>in</strong>g</str<strong>on</strong>g> <str<strong>on</strong>g>Internati<strong>on</strong>al</str<strong>on</strong>g> <str<strong>on</strong>g>Standards</str<strong>on</strong>g> <strong>on</strong> <strong>Audit<strong>in</strong>g</strong> <strong>in</strong> the Audits of Small- and Medium-Sized Entities Volume 1—Core C<strong>on</strong>cepts<br />

Summary of the Audit Risk Comp<strong>on</strong>ents<br />

Exhibit 3.2-3<br />

Note:<br />

The length of the bars <strong>in</strong> the exhibit would vary based <strong>on</strong> the particular circumstances and risk profile of the entity.<br />

Exhibit 3.2-4<br />

Note:<br />

The length of the bars <strong>in</strong> the exhibit would vary based <strong>on</strong> the particular circumstances and risk profile of the<br />

entity, and the nature of the audi<str<strong>on</strong>g>to</str<strong>on</strong>g>r’s resp<strong>on</strong>se.

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