Guide to Using International Standards on Auditing in - IFAC

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4 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Contents Volume 2 Primary ISA Reference Page Number Preface 5 Request for Comments 6 1. How <strong>to</strong> Use the <strong>Guide</strong> 8 2. Introduction <strong>to</strong> the Case Studies 13 PHASE 1: Risk Assessment 24 3. Risk Assessment—Overview 24 Preliminary Activities 27 4. Engagement Acceptance and Continuance ISQC 1, 210, 220, 300 27 Planning the Audit 43 5. Overall Audit Strategy 300 43 6. Determining and <strong>Using</strong> Materiality 320, 450 54 7. Audit-Team Discussions 240, 300, 315 70 Performing Risk Assessment Procedures 79 8. Inherent Risks—Identification 240, 315 79 9. Inherent Risks—Assessment 240, 315 107 10. Significant Risks 240, 315, 300 117 11. Understanding Internal Control 240, 315 127 12. Evaluating Internal Control 315 141 13. Communicating Deficiencies in Internal Control 265 170 14. Concluding the Risk Assessment Phase 315 183 PHASE II: Risk Response 193 15. Risk Response—An Overview – 193 16. The Responsive Audit Plan 260, 300, 330, 500 196 17. Determining the Extent of Testing 330, 500, 530 219 18. Documenting Work Performed 230, 500 248 19. Written Representations 580 252 PHASE III: Reporting 264 20. Reporting—Overview – 264 21. Evaluating Audit Evidence 220, 330, 450, 520, 540 267 22. Communicating with Those Charged with Governance 260, 450 284 23. Modifications <strong>to</strong> the Audi<strong>to</strong>r’s Report 705 295 24. Emphasis of Matter and Other Matter Paragraphs 706 308 25. Comparative Information 710 314
5 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Preface The second edition of this <strong>Guide</strong> was commissioned by the IFAC Small and Medium Practices (SMP) Committee <strong>to</strong> assist practitioners on the audit of small- and medium-sized entities (SMEs), and <strong>to</strong> promote consistent application of the <strong>International</strong> <strong>Standards</strong> on Auditing (ISAs). While developed by the Canadian Institute of Chartered Accountants (the CICA), the <strong>Guide</strong> is the full responsibility of the IFAC SMP Committee. The <strong>International</strong> Auditing and Assurance <strong>Standards</strong> Board (IAASB) staff and a global advisory panel, with members drawn from a broad cross-section of IFAC member bodies, have assisted in reviewing the <strong>Guide</strong>. The <strong>Guide</strong> provides non-authoritative guidance on applying ISAs. It is not <strong>to</strong> be used as a substitute for reading the ISAs, but rather as a supplement intended <strong>to</strong> help practitioners understand and consistently implement these standards on SME audits. The <strong>Guide</strong> does not address all aspects of ISAs, and should not be used for the purposes of determining or demonstrating compliance with the ISAs. The <strong>Guide</strong> is intended <strong>to</strong> explain and illustrate so as <strong>to</strong> develop a deeper understanding of an audit conducted in compliance with ISAs. It offers a practical “how-<strong>to</strong>” audit approach that practitioners may use when undertaking a risk-based audit of an SME. Ultimately it should help practitioners conduct high quality, cost-effective SME audits, and in so doing help them <strong>to</strong> better serve the public interest. It is anticipated that the <strong>Guide</strong> will be used by member bodies, audit firms, and others as a basis for educating and training professional accountants and students. IFAC member bodies and firms may use the <strong>Guide</strong>, either as it is or tailored <strong>to</strong> suit their own needs and jurisdiction. It provides a basis from which member bodies and others can develop derivative products such as training materials, audit software, checklists, and forms. The IFAC SMP Committee welcomes readers <strong>to</strong> visit its <strong>International</strong> Center for Small and Medium Practices (www.ifac.org/smp), which hosts a collection of other free publications and resources. Sylvie Voghel Chair, IFAC SMP Committee Oc<strong>to</strong>ber 2010
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