International Auditing Standards
,Table of Contents
1. Lecture 1: Audit requirements, client acceptance, audit documentation and client communication ........ 3
1.1. International Standards on Auditing (ISA’s).......................................................................................... 3
1.2. ISA 200: overall responsibility .............................................................................................................. 4
1.3. ISA 210: Acceptance & Continuance .................................................................................................... 7
1.4. ISA 230: Audit documentation ............................................................................................................. 8
1.5. ISA 260: Communications with those charged with governance ......................................................... 9
2. Lecture 2: Audit strategy, risk identification & assessment, audit plan and using work of others ........... 11
2.1. ISA 300: Planning the Audit ................................................................................................................ 11
2.2. ISA 315R: Understanding the Entity and Risk Assessment ................................................................. 13
2.3. ISA 320: Audit materiality .................................................................................................................. 17
2.4. ISA 330: The Responsive Audit Plan ................................................................................................... 19
2.5. ISA 610: Using the Work of Internal Auditors .................................................................................... 20
2.6. ISA 620: Using the Work of an Expert ................................................................................................ 21
3. Lecture 3: Fraud and audit in Financial Services ..................................................................................... 23
3.1. ISA 240: Fraud .................................................................................................................................... 23
3.2. Introduction to auditing Financial Services entities (guest lecture) ................................................... 27
4. Lecture 4: Audit procedures ................................................................................................................... 31
4.1. ISA 500: Audit evidence ..................................................................................................................... 31
4.2. ISA 520: Analytical procedures ........................................................................................................... 33
4.3. ISA 530: Test of details ....................................................................................................................... 33
4.4. ISA 540R: Accounting estimates ......................................................................................................... 37
4.5. ISA 560: Subsequent events ............................................................................................................... 37
5. Lecture 5: Expanded audit report and Going Concern assessment ......................................................... 39
5.1. ISA 450: Evaluating a misstatement ................................................................................................... 39
5.2. ISA 700: Reporting on Financial Statements ...................................................................................... 40
5.3. ISA 701: Key Audit Matters................................................................................................................. 42
5.4. ISA 705, 706: Types of audit opinions ................................................................................................ 45
5.5. ISA 570: Going concern ...................................................................................................................... 48
6. Lecture 6: International standards on quality control............................................................................. 52
6.1. What is audit quality? ........................................................................................................................ 52
6.2. Safeguards to audit quality ................................................................................................................ 52
6.3. Quality control: ISQC1 – ISA 220R ...................................................................................................... 52
6.4. Audit firm transparency reports......................................................................................................... 59
6.5. Questions ........................................................................................................................................... 60
,1. Lecture 1: Audit requirements, client acceptance, audit
documentation and client communication
1.1. International Standards on Auditing (ISA’s)
1.1.1. Purpose of the standards
• Developed by International Auditing and Assurance Standards Board (IAASB)
= Independent standard setting body under International Federation of Accountants (IFAC)
• High quality of auditing and establishment of assurance
• Public confidence in the global auditing profession
• In Belgium: All statutory audits have to comply with the ISA’s.
1.1.2. Overview standards
• Audit and limited review of financial information
o ISA: International Standards on Auditing (200-800) → reasonable assurance1
= focus of this course
o ISRE: International Standards on Review Engagements → limited assurance2
• Assessment of non financial information
o ISAE: International Standards on Assurance Engagements → reasonable or limited
assurance
• Other Standards
o ISQC: International Standards on Quality Control → safeguard the quality of the audit
o ISRS: International Standards on Related services (such as compilation engagement
which is preparing the financial statements) → No assurance
1
Financial statement give a true and fair view: Positive confirmation (once a year)
2
Every quarter, for big companies, the auditor gives a review opinion that states no errors have been found that
would lead to untrue financial statements: Negative confirmation
3
, 1.1.3. Structure ISA’s
Starts with ISQC 1, the International standard on quality control
Then we have the ISA’s that go from 200 till 800
➢ 200: General principles and responsibilities
➢ 300 - 400: Risk assessment and response to assessed risks
➢ 500: Audit evidence
➢ 600: Using the work of others
➢ 700: Audit conclusions and reporting
➢ 800: Specialized areas
1.2. ISA 200: overall responsibility
1.2.1. Scope of ISA 200
• To explain an independent auditor’s overall responsibilities when conducting an audit, it is
twofold:
o Set out overall objectives: what does the auditor need to do
o Nature and scope of the audit
1.2.2. Objectives of the auditor
• Obtain reasonable assurance that the financial statements as a whole are free from material
misstatements
• Report on the financial statements and communicate as required
• In completing these objectives, the auditor must:
o comply with relevant ethical requirements (ISQ1 & ISA 220)
o plan and perform with professional scepticism
o exercise professional judgment
4
,Table of Contents
1. Lecture 1: Audit requirements, client acceptance, audit documentation and client communication ........ 3
1.1. International Standards on Auditing (ISA’s).......................................................................................... 3
1.2. ISA 200: overall responsibility .............................................................................................................. 4
1.3. ISA 210: Acceptance & Continuance .................................................................................................... 7
1.4. ISA 230: Audit documentation ............................................................................................................. 8
1.5. ISA 260: Communications with those charged with governance ......................................................... 9
2. Lecture 2: Audit strategy, risk identification & assessment, audit plan and using work of others ........... 11
2.1. ISA 300: Planning the Audit ................................................................................................................ 11
2.2. ISA 315R: Understanding the Entity and Risk Assessment ................................................................. 13
2.3. ISA 320: Audit materiality .................................................................................................................. 17
2.4. ISA 330: The Responsive Audit Plan ................................................................................................... 19
2.5. ISA 610: Using the Work of Internal Auditors .................................................................................... 20
2.6. ISA 620: Using the Work of an Expert ................................................................................................ 21
3. Lecture 3: Fraud and audit in Financial Services ..................................................................................... 23
3.1. ISA 240: Fraud .................................................................................................................................... 23
3.2. Introduction to auditing Financial Services entities (guest lecture) ................................................... 27
4. Lecture 4: Audit procedures ................................................................................................................... 31
4.1. ISA 500: Audit evidence ..................................................................................................................... 31
4.2. ISA 520: Analytical procedures ........................................................................................................... 33
4.3. ISA 530: Test of details ....................................................................................................................... 33
4.4. ISA 540R: Accounting estimates ......................................................................................................... 37
4.5. ISA 560: Subsequent events ............................................................................................................... 37
5. Lecture 5: Expanded audit report and Going Concern assessment ......................................................... 39
5.1. ISA 450: Evaluating a misstatement ................................................................................................... 39
5.2. ISA 700: Reporting on Financial Statements ...................................................................................... 40
5.3. ISA 701: Key Audit Matters................................................................................................................. 42
5.4. ISA 705, 706: Types of audit opinions ................................................................................................ 45
5.5. ISA 570: Going concern ...................................................................................................................... 48
6. Lecture 6: International standards on quality control............................................................................. 52
6.1. What is audit quality? ........................................................................................................................ 52
6.2. Safeguards to audit quality ................................................................................................................ 52
6.3. Quality control: ISQC1 – ISA 220R ...................................................................................................... 52
6.4. Audit firm transparency reports......................................................................................................... 59
6.5. Questions ........................................................................................................................................... 60
,1. Lecture 1: Audit requirements, client acceptance, audit
documentation and client communication
1.1. International Standards on Auditing (ISA’s)
1.1.1. Purpose of the standards
• Developed by International Auditing and Assurance Standards Board (IAASB)
= Independent standard setting body under International Federation of Accountants (IFAC)
• High quality of auditing and establishment of assurance
• Public confidence in the global auditing profession
• In Belgium: All statutory audits have to comply with the ISA’s.
1.1.2. Overview standards
• Audit and limited review of financial information
o ISA: International Standards on Auditing (200-800) → reasonable assurance1
= focus of this course
o ISRE: International Standards on Review Engagements → limited assurance2
• Assessment of non financial information
o ISAE: International Standards on Assurance Engagements → reasonable or limited
assurance
• Other Standards
o ISQC: International Standards on Quality Control → safeguard the quality of the audit
o ISRS: International Standards on Related services (such as compilation engagement
which is preparing the financial statements) → No assurance
1
Financial statement give a true and fair view: Positive confirmation (once a year)
2
Every quarter, for big companies, the auditor gives a review opinion that states no errors have been found that
would lead to untrue financial statements: Negative confirmation
3
, 1.1.3. Structure ISA’s
Starts with ISQC 1, the International standard on quality control
Then we have the ISA’s that go from 200 till 800
➢ 200: General principles and responsibilities
➢ 300 - 400: Risk assessment and response to assessed risks
➢ 500: Audit evidence
➢ 600: Using the work of others
➢ 700: Audit conclusions and reporting
➢ 800: Specialized areas
1.2. ISA 200: overall responsibility
1.2.1. Scope of ISA 200
• To explain an independent auditor’s overall responsibilities when conducting an audit, it is
twofold:
o Set out overall objectives: what does the auditor need to do
o Nature and scope of the audit
1.2.2. Objectives of the auditor
• Obtain reasonable assurance that the financial statements as a whole are free from material
misstatements
• Report on the financial statements and communicate as required
• In completing these objectives, the auditor must:
o comply with relevant ethical requirements (ISQ1 & ISA 220)
o plan and perform with professional scepticism
o exercise professional judgment
4
