ISA-200 Overall Objectives of Independent Auditor and Conduct of Audit in Accordance with ISAs:

Auditor is responsible for obtaining reasonable assurance that Financial Statements taken as a
whole are free from material misstatements whether due to fraud or error.
Objective of auditor is to express an opinion as to whether financial statements are prepared in all
material respects, in accordance with an applicable financial reporting framework.
-Audit Risk (Detection Risk, Risk of Material Misstatement- Inherent Risk, Control Risk), Professional
Scepticism

ISA-210 Agreeing the Terms of Audit Engagement

Before accepting or continuing with audit engagement, auditor must establish whether
preconditions for audit are present and there is common understanding between auditor and
management and where appropriate TCWG.
Preconditions: Preconditions are that management acknowledges and understands its
responsibility for:
i) Preparation of F/S in accordance with applicable financial reporting framework.
ii) Internal Control necessary for F/S to give true and fair view.
iii) Providing the auditor with access to all relevant information and explanations.
If client imposes limitation on scope of auditor’s work to extent that ultimately disclaimer of
opinion would be issued, then auditor shall not accept the engagement unless required to do so by
law.
Auditor will agree the terms of audit engagement with management or TCWG and engagement
letter should include:
-Objective and Scope of audit of F/S
-Responsibilities of auditor
-Responsibilities of management
-Identification of applicable financial reporting framework for preparation of F/S
-Reference for expected forms and content of any reports to be issued
It also requires the auditor to consider whether there is need to remind entity of existing terms.
Reasons for change in engagement letter include:
-Changes in statutory duties due to new legislation
-Changes to professional duties
-Recent changes in senior management
-Significant change in Ownership

ISA-220 Quality Management for Audit of F/S:

Firms must:
-Conduct engagement in accordance with professional standards and applicable legal and
regulatory requirements.
-Issue reports that are appropriate in circumstances
Leadership Responsibilities: Engagement partner takes overall responsibility for quality of audit.
Requires clear commitment emphasizing:
-That all team members are responsible for contributing to quality.
-Importance of professional ethics, values and attitudes.
-Importance of open and robust communication within team and ability of team to raise concerns
without fear of reprisal
-Importance of each team member exercising professional scepticism throughout the engagement

Relevant Ethical Requirements: Firm must ensure compliance with requirements of Code of Ethics
and Conduct. Engagement partner must:
-Identify, evaluate and address ethical threats
-Remain alert throughout audit for breaches of ethical requirements
-Take appropriate action when where ethical requirements have not been fulfilled
-Prior to dating the auditor’s report, take responsibility for determining whether ethical
requirements have been fulfilled

Acceptance and Continuance:

Consider following when determining whether to accept or continue with client relationship:
-Integrity and Ethical Values
-Whether sufficient and appropriate evidence will be available
-Whether management and TCWG have acknowledged their responsibilities in relation to
engagement
-Whether engagement team has competence and capabilities
-Whether significant matters that have arisen during current or previous engagement have
implications for continuing the engagement

Engagement Resources:
Engagement Partner must ensure sufficient and appropriate resources are assigned or made
available to engagement team.
Human resource- Competence and Capabilities
Technological resources- careful not to place too much reliance
Intellectual Resources- audit methodologies, implementation tools, auditing guides, templates and
checklists
(Direction, Supervision and Review)

ISQM-1
Monitoring and Remediation:
Process must be established to provide relevant, reliable and timely information about design,
implementation and operation of system of quality management and take appropriate actions to
respond to identified deficiencies so they are remediated on timely basis.
To do so, firm must:
- Establish quality objectives
- Identify and assess quality risks
- Design and implement responses to address quality risks
- Monitor system as whole by inspecting completed engagements selected according to risk
and consideration of other monitoring activities performed by firm
- Evaluate the severity of deficiencies and investigate root cause of deficiencies, evaluating
effect on quality management system
- Appropriately, remediate deficiencies responsive to root cause
Annual evaluation is required to be undertaken

ISA-220…
Taking overall responsibility for managing and achieving quality:
Prior to dating auditor’s report, engagement partner must ensure their involvement has been
sufficient and appropriate throughout the audit engagement such that they have basis for
determining that significant judgements made and conclusions reached are appropriate. Indicators
include lack of timely review and lack of evidence.

Documentation:
ISA-220 requires auditor to document:
-Conclusions reached with respect to fulfilment of responsibilities relating to ethical requirements,
and acceptance and continuance.
-Nature, scope and conclusions resulting from consultations undertaken during course of audit.
-If audit engagement is subject to an EQR, that EQR has been completed on or before date of
auditor’s report.

ISA-230 Audit Documentation:

Requires:
-Auditor to prepare documentation that is sufficient to enable an experienced auditor, having no
previous connection with audit to understand the audit work performed, the results and audit
evidence obtained, and the significant matters identified and conclusions reached thereon.
-Timely preparation of audit documentation necessary to provide sufficient and appropriate record
of basis for auditor’s report and evidence that audit was carried out in accordance with ISAs and
applicable legal and regulatory requirements.
-Audit file should be completed within 60 days of date of auditor’s report and no changes except
general administration should be made.
(Significant professional judgements are documented)

ISA-240 Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements

Management Responsibilities: Primary responsibility for prevention and detection rests with both
management and TCWG.
-Place strong emphasis on fraud prevention and error reduction
-Reduce opportunities for fraud to take place.
-Ensure likelihood of detection and punishment for fraud is sufficient to act as deterrent.
-Ensure controls are in place to provide reasonable assurance that errors will be identified.
-Foster, communicate and demonstrate culture of honesty and ethical behaviour.
-Consider potential for override of controls or manipulation of Financial reporting.
-Implement and operate adequate accounting and internal control systems.
Auditor Responsibilities:
-Obtain reasonable assurance that F/S are free from material misstatements whether due to fraud
or error.
-Apply professional scepticism and remain alert to possibility that fraud could take place.
-Consider potential for management override of controls and recognise that audit procedures that
are effective for detecting error may not be effective for detecting fraud.
Procedures:
- Discuss susceptibility of client’s F/S to material misstatement due to fraud with engagement
team.
- Enquire of management regarding their assessment of fraud risk, procedures they conduct and
whether they are aware of any actual or suspected instances of fraud.
- Enquire of IA Function to establish whether they are aware of any actual or suspected instances of
fraud.
- Enquire of TCWG with regard to how they exercise oversight of management processes for
identifying and responding to risks of fraud and controls established by management to mitigate
these risks.
- Consideration of relationships identified during analytical procedures.
Responding to assessed Risk of Fraud:
- Assign responsibility to personnel with appropriate knowledge and skill.
- Evaluate whether accounting policies of entity indicate fraudulent financial reporting.
- Use unpredictable procedures to obtain evidence.
Procedures:
- Review journal entries made to identify manipulation of figures recorded or unauthorised
journal adjustments.
- Review management estimates for evidence of bias.
- Review transactions outside normal course of business or transactions which appear unusual
and assess whether they are indicative of fraudulent Financial reporting.
- Obtain written representation from management and TCWG regarding Internal Controls,
Fraud risk assessment, known or suspected frauds, disclosure to auditor regarding frauds
affecting F/S.
Reporting:
- If the auditor identifies fraud they must communicate matter on timely basis to appropriate
level of Management.
- If suspected fraud involves management, auditor must communicate the matter to TCWG.
 - If auditor has doubts about the integrity of TCWG they should seek legal advice regarding an
appropriate course of action.
- Auditor must also consider whether they have responsibility to report occurrence of suspicion
to party outside the entity. Advisable to seek legal advice.
- If fraud has material impact on F/S the audit opinion will be modified. When opinion is
modified, auditor will explain why the opinion has been modified.
Engagement Withdrawal:
If fraud is being committed by management or TCWG and therefore casts doubts over integrity of
client and reliability of representations from management.
Auditor should seek legal advice first as it may also require it to report to shareholders, regulators
or others.

ISA-250 Consideration of Laws and Regulations in an Audit of Financial Statements:

Responsibilities of Management: It is responsibility of management with oversight of TCWG to
ensure that entity’s operations are conducted in accordance with relevant laws and regulations
including those that determine reported amounts and disclosures in Financial Statements.
Responsibilities of Auditor: Auditor must obtain sufficient and appropriate evidence regarding
compliance with:
-Laws and Regulations generally recognised to have direct effect on determination of material
amounts and disclosures in F/S
-Other laws and regulations that may have material impact on F/S
Audit Procedures to identify Non Compliance:
-Obtain general understanding
-Enquiring management and TCWG
-Inspecting Correspondence
-Remaining Alert
-Obtain written representation
Investigation of Possible Non Compliance:
-Understand the nature of act and circumstances in which it has occurred
-Obtain further information to evaluate possible effect on F/S
Audit Procedures when non-compliance is identified:
-Enquiring management regarding penalties
-Inspect correspondence with regulatory authority
-Inspect board minutes
-Enquire of company’s legal department
Communicating and Reporting Non Compliance:
-Communicate to management and TCWG unless prohibited by law.
-If auditor believes non-compliance is intentional and material, communicate to TCWG.
-If auditor suspects both, communicate to audit committee or supervisory board.
-If non-compliance has material effect on F/S, issue Qualified or Adverse Opinion.
-Auditor should also consider whether it has ethical, legal or regulatory responsibility to report non-
compliance with third parties.
Engagement Withdrawal:
-If management or TCWG do not take remedial action that auditor considers appropriate.
-Non-compliance raises doubt over integrity of management or TCWG

ISA-260 Communication with Those Charged with Governance:

Reasons for communicating:
-To communicate responsibilities of auditor and an overview of scope and timing of audit.
-To obtain information relevant to audit.
-To report matters from audit on timely basis.
-To promote effective two-way communication.
Matters to be communicated:
-Auditor’s responsibilities in relation to F/S audit.
-Planned scope and timing of audit.
-Significant findings from audit (Views about accounting policies and practices, significant
difficulties encountered during audit, Significant matters during audit that were discussed with
management, Request of written representations, Circumstances affecting the form and content of
auditor’s report, Other matters significant to reporting process)
-Matters of auditor independence (Compliance with ethical requirements, Professional fees,
Safeguards applied)

ISA-265 Communicating Deficiencies in Internal Control to Those Charged with Governance and
Management:
Requires auditor to communicate identified deficiencies in internal control that in auditor’s
judgement are of sufficient importance to merit attention by entity.
Deficiencies occur when:
i) Control is unable to prevent, detect and correct misstatement on timely basis.
ii) Control is missing.
It should include:
- Description of deficiencies and their potential effects
- Explanation of purpose of auditor
- Explanation of why consideration of internal controls is relevant to audit
- Explanation that matters being reported are only those identified during audit and considered
to be significant enough to report

ISA-300 Planning an Audit of Financial Statements:

a) Audit Strategy:
 i) Significant Factors, Preliminary Engagement Activities and knowledge gained on other
engagements:
Materiality, assessed ROMM, need for Professional Scepticism, Internal Controls,
Significant developments affecting entity, Changes in Laws and Regulations, Changes to
accounting standards.
ii) Characteristics of Engagement:
FR Framework, Industry Reporting, Knowledge of Business, IA Function, Service
Organisations, CATs, Timing of Audit Work, Availability of Client Staff
iii) Nature Timing and Extent of Resources:
Selection of Audit Team, Budget
iv) Reporting Objectives, Timing and Communication:
Timetable for Reporting, Communication with client, Communication among Team,
Communication with 3rd parties.

b) Audit Plan:
-Nature, timing and extent of planned direction and supervision of engagement team members and
review of their work.
-Nature, timing and extent of Risk Assessment Procedures.
-Nature, timing and extent of Further Audit Procedures.
-Any other procedures necessary to conform to ISAs.

Planning Procedures for Initial Engagements:

- Arrangements should be made with predecessor auditor to review their working papers.
- Matters which were discussed with management in connection with appointment should be
considered.
- Audit procedures necessary to obtain sufficient appropriate evidence regarding opening
balances should be planned in accordance with ISAs.
- Quality management responses may require another partner or individual with appropriate
authority to review the overall audit strategy prior to commencing significant audit
procedures or to review reports prior to issuance.
- Additional time and resource may be necessary in first year of an audit for new client in order
to obtain required knowledge of client.
- It may be difficult to place reliance on analytical procedures as source of substantive audit
evidence.
- Consideration should be given using an experienced audit team to reduce Detection Risk

ISA-315 Identifying and Assessing the Risk of Material Misstatement:

Requires auditors to perform following Risk Assessment Procedures:
- Enquiries of management, IA Function
- Analytical Procedures
- Observation
- Inspection
Auditor is required to obtain an understanding of:
 - Aspects of entity and its environment: Complexity of Organisational structure, Ownership
and Governance, Business model (Use of IT), Industry regulatory and other external factors,
Measures to assess financial performance.
- Applicable FR Framework
- Components of entity’s system of Internal Controls and Deficiencies.
Components of Internal Controls:
- Control Environment (How management has responded to findings and recommendations of
IA Function regarding Internal Control Deficiencies)
- Entity’s Risk Assessment Process (Identifying business risks relevant to FR, assessing
significance of risks, addressing those risks)
- Entity’s process to monitor controls (Evaluating effectiveness of controls and taking remedial
actions)
- Information System and Communication (Activities and policies relevant to FR)
- Control Activities
General IT Controls and Information Processing Controls
Assessing whether a risk is significant:
- Transactions for which there are multiple acceptable accounting treatments involving
subjectivity.
- Accounting estimates involving high uncertainty or complexity.
- Complexity in data collection and processing.
- A/C balances or disclosures involving complex calculations.
- A/C principles subject to different interpretation.
- Changes in entity’s business that involve changes in accounting.

ISA-320 Materiality in Planning and Performing the Audit:

- Pre-tax Profit (5-10%)
- Revenue (0.5-1%)
- Total Assets (1-2%)
Deciding benchmark, consider:
- Elements of F/S
- Whether particular items tend to be focus of users.
- Nature of entity, its life cycle and environment.
- Ownership and Financing Structure.
- Relative volatility of benchmark.
Material by Nature
Performance Materiality

ISA-330 The Auditor’s Response to Assessed Risks:

Objective of auditor is to obtain sufficient appropriate audit evidence regarding the assessed risk of
material misstatement through designing and implementing appropriate responses to those risks.
Reduce audit risk by reducing detection risk by:
- Emphasizing the need for professional scepticism.
- Assigning more experienced staff to complex or risky areas of engagement.
 - Changing the nature, timing and extent of direction and supervision of members of
engagement team and review of work performed.
- Incorporating additional elements of unpredictability in selection of further audit procedures.
- Changing overall audit strategy.

ISA-402 Audit Considerations Relating to an Entity Using a Service Organisation

Planning the Audit:
- Obtain an understanding of service organisation sufficient to identify and assess the ROMM.
- Design and perform the audit procedures responsive to those risks.
Obtain understanding of service provided: (Nature of services and effect on Internal Controls,
Nature and materiality of transactions to entity, Level of Interaction, Nature of relationship
including contractual terms)
Consider: (Reputation, External Supervision, Extent of Controls, Errors and Omissions, Degree of
monitoring by user)
Source of Information about service organisation:
Obtain Type I and Type II report from service organisation’s auditor. They provide reasonable
assurance that:
- Service organisation’s description of its systems fairly present system as designed and
implemented
- Controls were suitably designed
- Controls operated effectively throughout specific period
- Report on above matters
Type I: Description of designs of controls at service organisation prepared by management of
service organisation. It includes report by service auditor providing an opinion on description of
system and suitability of controls
Type II: In addition to above also report on operating effectiveness of controls. Service auditor
also provide an opinion on effectiveness of controls and description of test of controls
performed by auditor

- Consider: (Competence and Independence of Service Org Auditor, Standards under which the
report was issued)
- Contact service organisation through client.
- Visiting service organisation and performing procedures.
- Using another auditor to perform procedures that will provide necessary information about
controls at service organisation.
Responding to Assessed Risk:
Auditor should determine whether sufficient appropriate evidence is available from client and if
not perform further audit procedures or use another auditor to perform procedures on their
behalf.
If controls are expected to operate effectively:
- Obtain Type II Report. (Date covered is appropriate, any complimentary controls in place,
time elapsed since TOCs performed, TOCs relevant to F/S assertions)
- Perform TOCs at Service Organisation.
- Use another auditor to perform TOCs.
Auditor should enquire of client whether service organisation has reported any frauds to them or
whether they are aware of any frauds, non-compliance or uncorrected misstatements affecting F/S
of entity.
Impact on Auditor’s Report:
If sufficient appropriate evidence has not been obtained, Qualified or Disclaimer of Opinion will be
issued.

ISA-450 Evaluation of Misstatements identified during Audit

Auditor must:
- Accumulate record of all identified misstatements, unless they are clearly trivial.
- Consider if the existence of such misstatements indicate that others may exist, which when
aggregated with other misstatements could be considered material.
- If so, consider if the audit strategy and plan needs to be revised.
- Communicate all misstatements identified during course of audit to an appropriate level of
management on timely basis and request that all misstatements are corrected.
- If management refuses to correct some or all of misstatements auditor should consider their
reasons for refusal and take these into account when considering if F/S are free from material
misstatements.
Evaluation of uncorrected misstatements:
If management has failed to correct all of misstatements, auditor should:
- Revisit their assessment of materiality to determine whether it is still appropriate in
circumstances.
- Determine whether uncorrected misstatements either individually or in aggregate are
material to F/S as whole considering both size and nature of misstatements and effect of
misstatements related to prior periods. If an individual misstatement is considered material it
cannot be offset by other misstatements.
- Communicate uncorrected misstatements to TCWG and explain the effect this will have on
audit opinion.
- Request written representation from management and TCWG that they believe the effects of
uncorrected misstatements are immaterial.

ISA-500 Audit Evidence

Requires auditor to obtain sufficient appropriate evidence to be able to draw reasonable
conclusions.
Sufficient Evidence:
- Measure of quantity
- Affected by risk and materiality of balances and quality of evidence.
Appropriate Evidence:
Measures quality of evidence
i) Reliability: Internal v/s External, Effective Controls, Direct v/s Indirect, Written v/s Verbal,
Original v/s Copies
ii) Relevance: Evidence relates to F/S assertion being tested.
Audit procedures for obtaining evidence:
- Inspection
 - Observation
- External Confirmation
- Recalculation to confirm numerical accuracy
- Re-performance by auditor of procedures or controls
- Analytical Procedures
- Enquiries of knowledgeable parties
Tests of Controls are designed to evaluate the operating effectiveness of audit client’s controls at
preventing, detecting and correcting material misstatements.
Substantive Procedures are designed to detect material misstatements in F/S. (Tests of Detail and
Analytical Procedures)
Relying on work of Management’s Expert
Auditor must:
- Evaluate the competence, capabilities and objectivity of that expert.
- Obtain an understanding of work of that expert.
- Evaluate the appropriateness of that expert’s work as audit evidence for relevant assertions.

ISA-501 Audit Evidence – Specific Considerations for Selected Items

1. Existence and Condition of Inventory
- Attendance at Inventory Count
- Perform procedures over final inventory records to ensure that they reflect actual inventory
count results.
2. Completeness of litigation and claims involving the entity
- Enquiry of management and in-house legal counsel
- Reviewing minutes of board meetings and meetings with legal counsel
- Inspecting legal expense account
- If there is significant risk of material misstatement due to unidentified claims or litigation the
audit should seek direct communication with entity’s external legal counsel
3. Presentation and Disclosure of segmental information
- Understand, evaluate and test methods used by management to determine segmental
information
- Perform analytical procedures

ISA-505 External Confirmations

In order to ensure evidence remains reliable, Auditor should:
- Determine the information to be confirmed
- Select appropriate third party
- Design the confirmation requests and provide return information for responses to be sent
directly to the auditor
- Send the requests, including follow up when no response is received
If management refuses to allow the auditor to send such requests, auditor should consider whether
this is reasonable or not in circumstances. This may impact auditor’s fraud risk assessment and
reliance upon written representations from management. Auditor should perform alternative
procedures to obtain evidence.
If auditor concludes that management’s request is unreasonable and they cannot obtain sufficient
appropriate evidence by other means, matter should be communicated to TCWG.
The auditor must be alert to risk of interception, alteration or fraud and maintain appropriate
professional scepticism when considering reliability of responses which may have been received
indirectly or appear not to come from intended party.

ISA-510 Initial Engagements – Audit Considerations

When auditors take on new client, they must ensure that:
- Opening balances do not contain material misstatement
- Appropriate accounting policies have been consistently applied or changes adequately
disclosed
Audit Procedures:
- Read the most recent F/S and auditor’s report for information relevant to opening balances
and disclosures
- Determine whether prior period closing balances have been correctly brought forward or
restated
- Determine whether the opening balances reflect application of appropriate accounting
policies
- Review the previous auditor’s working papers
- Evaluate whether the audit procedures performed in current period provide evidence
relevant to opening balances
- Substantive testing of any opening balances where above procedures are unnecessary
Implications for auditor’s report
- If there is an inability to obtain sufficient appropriate evidence over opening balances,
qualified or disclaimer of opinion would be issued
- If opening balances contain misstatement affecting current year’s F/S materially or
accounting policies have not been consistently applied, qualified or adverse opinion should be
issued

ISA-520 Analytical Procedures

Use of analytical procedure as substantive evidence is generally more applicable where:
- There are large volumes of transactions that tend to be predictable over time, and
- Controls are working effectively
Auditor should:
- Determine the suitability of analytical procedures for given assertion
- Evaluate the reliability of data from which expectation is developed
- Develop an expectation and evaluate whether it is sufficiently precise to identify material
misstatement
- Determine the difference between expected amount and recorded amount
Investigate through:
- Enquiry of management
- Other procedures as deemed necessary

ISA-530 Audit Sampling

Auditors should select appropriate samples for testing that provide reasonable basis to draw
conclusions about population from which sample is selected.
Auditor should:
- Consider purpose of procedure and characteristics of population from which sample will be
drawn
- Ensure sample size is sufficient to reduce sampling risk to an acceptable level
- Ensure each sampling unit has chance of selection
If auditor identifies misstatement, nature and cause should be investigated
If misstatement is identified when performing tests of details, misstatement should be projected
across the population
(Statistical and Non Statistical Sampling)

ISA-540 Auditing Accounting Estimates and Related Disclosures

Requires the auditor to obtain an understanding necessary to allow auditor to identify and assess
ROMM relating to accounting estimates. This involves obtaining an understanding of:
- Entity’s environment including the requirements of applicable financial reporting framework
and regulatory factors relevant to accounting estimates.
- Entity’s system of internal controls related to accounting estimates including control activities
component, the need for specialised skills, and governance in place over FR process relevant
to estimates and how management reviews outcome of previous accounting estimates and
responds to results of review.
Auditor must separately assess Inherent and Control Risk when assessing ROMM relating to
accounting estimates. When assessing inherent risk, auditor should consider:
- Degree to which estimate is subject to estimation uncertainty.
- Degree of complexity and subjectivity involved in method, assumptions and data used to
make estimate.
- Degree of complexity and subjectivity used in selection of management’s point estimate.
When responding to ROMM in accounting estimates, auditor must perform following procedures:
- Obtain evidence from subsequent events
- Test how management made the estimate
- Develop an auditor’s point estimate or range

ISA-550 Related Parties

Auditor should obtain sufficient appropriate evidence that F/S achieve fair presentation of related
party relationships and transactions and have been accounted for in accordance with financial
reporting framework.
If transactions have not been disclosed in accordance with IAS-24 requirements the potentially
significant deficiencies should be reported to TCWG.
Indicators of related party transactions: Overly complex, abnormal terms of trade, not having
logical business reason, not processed in usual or routine way, Transactions with individual
customers or suppliers having high volume or high value, unrecorded transactions
Risk Assessment Procedures: Auditor should obtain an understanding of:
 - Identity of related parties, nature of related party relationships, type and purpose of
transactions with these parties
- Controls established by clients such as approval and authorisation of transactions
Further audit procedures:
- Inspecting prior year working papers
- Inspecting S/H records for details of principal shareholders
- Inspect minutes of S/H meetings and other relevant minutes and records
- Enquiring of other auditors involved in audit
- Inspecting entity’s income tax returns and other information supplied to regulatory
authorities
Where not prohibited by laws or regulations:
- Confirm transactions with banks, law firms or other intermediaries
- Confirm terms of related party transactions with related party
- Read F/S or other relevant financial information of related party for evidence of transactions
Audit team members need to be aware that they should consider possibility of undisclosed related
party transactions when carrying out audit procedures
If auditor identifies related parties that were not previously identified or disclosed they should:
- Communicate that information to rest of engagement team
- Request that management identifies all transactions with related party and enquire why they
failed to identify them
- Perform appropriate substantive procedures relating to transactions with these entities
- Reconsider the risk that other unidentified related parties may exist
- Evaluate implications if non-disclosure by management appears intentional
If auditor identifies related party transactions outside normal course of business they should also:
- Inspect underlying contracts or agreements to establish business rationale, terms of
transaction, whether appropriate disclosures have been made
- Obtain evidence that transactions were appropriately authorised

ISA-560 Subsequent Events

An event occurring between date of F/S and date of auditor’s report and facts that become known
to auditor after date of auditor’s report.
ISA-560 requires:
- Obtain sufficient appropriate evidence about whether events occurring between date of F/S
and date of auditor’s report that require adjustment or disclosure are appropriately reflected
in accordance with applicable financial reporting framework.
- Respond appropriately to facts that become known to auditor after auditor’s report
B/w Date of F/S and Auditor’s Report:
- Auditor should perform procedures to identify events requiring adjustment or disclosure
- Ask management for amendment if material adjusting events are not adjusted or non-
adjusting are not disclosed
- Consider impact on auditor’s report and whether modification is necessary if amendments
are not made
Subsequent Event Procedures:
 - Enquiring management if they are aware of any events that have not yet been adjusted or
disclosed
- Enquiring management procedures/systems for identification of events after reporting date
- Review minutes of members and director’s meetings
- Reviewing A/C records: budgets, cash flow forecasts etc.
- Obtain written representation from management stating they have disclosed all subsequent
events to auditor and have appropriately adjusted in F/S
- Inspection of correspondence with legal advisers
- Reviewing progress of known risks and contingencies
- Considering relevant information coming from outside the entity
- Inspecting after date receipts from Receivables
- Inspecting post year end cashbook
- Inspecting sales prices of inventories post year end
B/w Date of Auditor’s Report and F/S being issued:
- No obligation to perform procedures however must take action if become aware
- Asking client to amend F/S, auditing amendments and reissuing report
- If not amended and report has not been issued, auditor can still modify opinion
- If report has been issued to client, notify management and TCWG to not to issue F/S before
amendments are made
- If client issues, take actions to prevent reliance
- Legal advice should be sought in this situation
After F/S are issued:
- No obligation to perform procedures however must take action if become aware
- Discuss matter with management and consider if it requires amendment
- Perform procedures on amendments to ensure they have been put through correctly
- Review steps taken by management to ensure anyone who is in receipt of previously issued
F/S is informed
- Should issue new auditor’s report including EOM paragraph to draw attention that F/S and
auditor’s report have been reissued
- If management refuses, auditor shall take action to prevent reliance

ISA-570 Going Concern

Responsibilities of Management
- Management is responsible for preparing F/S and must make specific assessment of entity’s
ability to continue as going concern
- This requires judgements about future outcome of events or conditions which are inherently
uncertain
- Prepare F/S on most appropriate basis
1. Where there is material uncertainty over future of company, directors should include
disclosure in F/S. Material Uncertainty exists when magnitude of its potential impacts and
likelihood of occurrence is such that disclosure of nature and implications of uncertainty is
necessary for fair presentation of F/S not to be misleading.
Disclosures should explain:
- Principal events or conditions and management’s plan
- Co may be unable to realise its assets and discharge liabilities in normal course
2. Where directors have been unable to assess going concern in usual way, this should be
disclosed
3. Where F/S are prepared on basis other than going concern basis, basis should be disclosed
Auditor Responsibilities:
- Obtain sufficient appropriate evidence regarding appropriateness of management’s use of
going concern basis
- Conclude whether material uncertainty exists about entity’s ability to continue as going
concern
- Report in accordance with ISA-570
Procedures to assess management’s evaluation of Going Concern:
- Evaluate management’s assessment of going concern
- Assess the same period that management has used in its assessment and if it is less than 12
months, ask them to extend
- Consider whether management’s assessment includes all relevant information
Procedures where there is doubt over Going Concern:
- Analyse and discuss cash flow, profit and other relevant forecasts with management
- Analyse and discuss entity’s latest available interim F/S
- Review terms of loan debentures and agreements and determine whether they have been
breached
- Read minutes of meetings with reference to any financial difficulties
- Enquire of entity’s lawyer regarding existence of litigation and claims and reasonableness of
management’s assessment of their outcome and estimate of their financial implications
- Confirm existence, legality and enforceability of arrangements to provide financial support
with related third parties and assessing financial ability of such parties to provide additional
funds
- Review subsequent events to identify those that either mitigate or otherwise affect entity’s
ability to continue as going concern
- Review correspondence with customers for evidence of any disputes that might impact
recoverability of debts and impact on future sales
- Review correspondence with suppliers for evidence of issues regarding payments that might
impact company’s ability to obtain supplies or credit
- Review correspondence with bank for indication that bank loan or overdraft may be cancelled
- Written representation from management regarding their plans and how to address going
concern issues
Reporting:
Depends on whether basis for preparing is appropriate or not and whether there is material
uncertainty related to going concern
When there is material uncertainty related to going concern which is adequately disclosed,
Material uncertainty related to going concern paragraph is included.
ISA-580 Written Representations
Requires auditor to obtain sufficient appropriate evidence from management:
- That it has fulfilled its responsibility for preparation of F/S
- To support other audit evidence relevant to F/S or specific assertions if deemed necessary or
required by specific ISAs
- That auditor has been provided with all relevant information
- That all transactions have been recorded and reflected in F/S
Written representations do not provide sufficient appropriate evidence about any matters which
they deal
Reporting Implications:
Issue disclaimer of opinion if:
- Auditor concludes that there is sufficient doubt about management integrity which means
written representations are not reliable
- Management does not provide written representations required

ISA-600 Special Considerations – Audits of Group Financial Statements

Auditor must:
- Determine whether it is appropriate to act as auditor of group F/S
- If acting as auditor of Group F/S:
i. Communicate clearly with component auditors about scope and timing of their work on
financial information related to components and their findings
ii. Obtain sufficient appropriate evidence regarding financial information of components
and consolidation process to express an opinion on whether group F/S are prepared in
all material respects in accordance with applicable financial reporting framework
Acceptance as Group Auditor:
Normal acceptance considerations and consider:
- Whether sufficient appropriate evidence can reasonably be expected to be obtained in
relation to consolidation process and financial information of components of group.
- Where component auditors are involved, the engagement partner shall evaluate whether
group engagement team will be able to be involved in work of component auditors.
Withdraw from engagement or not accept the engagement if sufficient appropriate evidence will
not be possible to obtain and will result in disclaimer of opinion.
Acceptance as Component Auditor:
- Independent of parent and component companies and can comply with ethical requirements
applying to group audit
- Special skills and competency to perform work
- Understanding of auditing standards relevant to group audit and can comply with them
- Understanding of relevant financial reporting framework applicable to group
- Comply with group audit team instructions like deadlines
- Whether willing to have group auditor involved in their work and evaluate it before relying on
it for group audit purposes
Overall Audit Strategy and Plan:
Group auditor is responsible for establishing an overall audit strategy and plan and group
engagement partner is ultimately responsible for reviewing and approving this.
- Obtain an understanding of:
i. Group, its components and their environments including applicable financial reporting
framework and system of internal controls.
ii. Component auditor
iii. Consolidation process
- Setting materiality for group including the components
- Responding to assessed risks including consideration of whether component is significant
- Reviewing subsequent events in relation to group
Understanding the group, its components and their environment
- Enhance its understanding of group, its components and their environment including group
wide controls, obtained during acceptance/continuance stage
 - Obtain an understanding of consolidation process including instructions issued by group
management to components
- Confirm or revise its initial identification of components that are likely to be significant
- Assess the risks of material misstatement
Understanding the component Auditor:
- Whether component auditor understands and will comply with code of ethics
- Professional competence of component auditor
- Whether group auditor will be able to be involved in work of component auditor
- Whether component auditor operates in regulatory environment that actively oversees
auditors
If group auditor has serious concerns about any of above issues, then they should obtain evidence
relating to component’s F/S without using work of component auditor
Understanding Consolidation process:
- Evaluate whether adjustments appropriately reflect events and transactions underlying them
- Determine whether adjustments have been correctly calculated, processed and authorised
- Determine whether adjustments are supported by sufficient appropriate documentation
- Ensure intra group balances and transactions reconcile and have been eliminated
For Risk Assessment, consider:
- Instructions issued by group management to components: A/C policies to be applied,
Identification of reporting segments, Related Party Transactions, Intra group transactions and
balances, Reporting Timetable
- Group-wide Controls: Regularity of meetings, Monitoring process, Group management’s risk
assessment process, Monitoring controlling reconciling and elimination of intra group
transactions, Controls in IT system, Activities of IA, Consistency of policies, Group wide codes
of conduct
- Consolidation Process
Materiality:
Group auditor is responsible for:
- Materiality and performance materiality for group F/S as whole
- Materiality for components where they are audited by other auditors. To reduce ROMM,
should be set at an amount below materiality for group as whole
Responding to assessed Risks:
Group audit team has to determine type of work to be performed on components irrespective of
who performed their audit.
Significant Component:
- Of individual significance to group (15% benchmark), or
- Likely to include significant ROMM to group F/S
Full audit must be performed
If performed by another auditor, group auditor should be involved in Risk Assessment which
includes:
- Discussing with component auditor the susceptibility of component to material misstatement
- Reviewing component auditor’s documentation of identified ROMM
- Performing Risk Assessment Procedures
If significant ROMM is identified, group auditor should evaluate whether audit procedures
performed were appropriate to address those risks.
Components including significant ROMM
Auditor can perform:
- Audit of component’s F/S
- Audit of one or more A/C balances which are considered to be significant risk
- Specific audit procedures relating to significant risks
Components which are not significant
Analytical Procedures to be performed
Communication with component auditor:
- Work to be performed by component and use made of this
- Form and content of communications made by component auditor to group auditor
- Request that component auditor cooperates with group team
- Ethical requirements relevant to group audit
- Component materiality and threshold for triviality
- Identified significant ROMM for group F/S
- List of identified related parties
Other matters to communicate: Compliance with ethical standards, audit instructions,
Identification of FI upon which component auditor is reporting, Instances of non-compliance of
laws and regulations, Uncorrected misstatements, Indication of management bias, Significant
deficiencies in Internal Control, Other significant matters to be communicated to TCWG, Other
matters relevant to group audit, Component auditor’s overall conclusion
Matters relevant to planning to component audit
Matters relevant to conduct of component auditor’s work
Other Information

Completion and Review

Review of work of component auditor:
Group auditor must review work of component auditor to ensure it is sufficient and appropriate to
rely on for purpose of group auditor’s report. Group auditor can make an assessment of whether
any additional work is needed.
- If any significant matters have arisen they should discuss with component auditor or group
management
- If necessary, group auditor should then also review other relevant parts of component
auditor’s working papers
- If group auditor is not satisfied with component auditor’s work, they should determine what
additional procedures are required
- If it is not feasible for component auditor to perform this, then group auditor must perform
procedures
- When all procedures on components have been completed group engagement partner must
consider whether aggregate effect of any uncorrected misstatements will have material
impact on group F/S
Other Completion Activities: Subsequent Events, Going Concern and Final Analytical Procedures
Letters of Support: Directors must give component auditor letter of support which confirms their
intention to support subsidiary. Evaluate whether resources are there.
Parent Co must disclose it in their F/S

Reporting:
One or more subsidiaries having modified audit opinion:
- If matter is not material in group context, unmodified opinion will be issued
- If matter is material to both, consider whether it can be resolved through consolidation
adjustment. If so, unmodified opinion will be issued.
- If cannot be resolved, modified opinion will be issued.
Reporting to management and TCWG:
Deficiencies in controls identified by group audit team or component auditors should be reported
to management of group.
Any frauds or deficiencies in group wide controls identified should be reported to group
management.
Matter to be communicated to TCWG:
- Overview of work performed and involvement in component auditor’s work
- Areas of concern over quality of component auditor’s work
- Difficulties obtaining sufficient appropriate evidence
- Fraud identified or suspected

ISA-610 Using the work of Internal Auditors

Evaluating Internal Audit Function:
- Extent to which IA Function’s organisational status and relevant policies and procedures
support objectivity of Internal auditors.
- Competence of IA Function.
- Whether IA Function applies systematic and disciplined approach including quality control.
Evaluating Objectivity:
- Whether IA function reports to TCWG or has direct access to TCWG
- Whether IA function is free from operational responsibilities
- Whether TCWG are responsible for employment decisions such as remuneration
- Whether any constraints are placed by management or TCWG
- Whether internal auditors are member of professional bodies which requires compliance with
ethical requirements
Evaluating Competence:
- Whether resources of IA Function are appropriate and adequate for size of organisation and
nature of its operations.
- Whether there are established policies for hiring, training and assigning internal auditors to
internal audit engagements.
- Whether internal auditors have adequate technical training and proficiency, including
relevant professional qualifications and experience.
- Whether internal auditors have required knowledge of entity’s FR and applicable framework
and possesses the necessary skills to perform work related to F/S.
 - Whether internal auditors are member of professional body which requires continued
professional development
Evaluating systematic and disciplined approach:
- Existence, adequacy and use of internal audit procedures and guidance
- Application of quality control policies and procedures such as those in ISQMs
If auditor considers it appropriate to use work of internal auditor they have to determine areas and
extent to which work of IA function can be used and incorporate this into their planning to assess
impact on nature, timing and extent of further audit procedures.
Evaluating Internal Audit Work:
Evaluate whether:
- Work was properly planned, performed, supervised, reviewed and documented
- Sufficient appropriate evidence has been obtained
- Conclusions reached are appropriate in circumstances
- Reports prepared are consistent with work performed
External auditor must re-perform some of procedures that internal auditor has performed to
ensure they reach same conclusion
Extent of work to be performed will depend on amount of judgement involved and risk of
misstatement in that area.
When reviewing and re-performing some of work, external auditor must consider whether their
initial expectation of using the work is still valid.
Responsibility for opinion cannot be devolved and no reference should be made in report.
Using Internal auditor to provide direct assistance:
Consider following:
- Direct assistance cannot be provided where laws and regulations prohibit.
- Competence and objectivity of Internal auditor. Where threats to objectivity are present,
significance of them and whether they can be managed to an acceptable level must be
considered.
- External auditor must not assign work to internal auditor which involves significant
judgement, high ROMM or with which internal auditor has been involved.
- Planned work must be communicated with TCWG so agreement can be made that use of
internal auditor is not excessive.
Where agreed that can provide direct assistance:
- Management must agree in writing that internal auditor can provide such assistance and that
they will not intervene in their work
- Internal auditor must provide written confirmation that they will keep external auditors
information confidential
- External auditor will provide direction, supervision and review of internal auditor’s work
- During direction, supervision and review of work, external auditor should remain alert to risk
that internal auditor is not competent or objective
Documentation:
- Evaluation of Internal auditor’s objectivity and competence
- Basis for decision regarding nature and extent of work performed by internal auditor
- Name of reviewer and extent of review of internal auditor’s work
- Written agreement of management
 - Working papers produced by internal auditor

ISA-620 Using the work of an auditor’s expert

Auditor must determine whether expert’s work is adequate for auditor’s purposes
Auditor must evaluate whether expert has necessary competence, capability and objectivity for
purpose of audit
Evaluating competence: Personal experience of working with expert, discussions with expert,
discussions with other auditors, knowledge of expert’s qualifications memberships of professional
bodies and licenses, published papers or books written by experts, audit firm’s quality control
procedures
Evaluating Objectivity:
- Make inquiries of client about known interest or relationships with chosen expert
- Discuss applicable safeguards with expert
- Discuss financial, business and personal interests in client with expert
- Obtain written representation from expert
Agreeing Work: Auditor must obtain written agreement of following:
- Nature, scope and objectives of expert’s work
- Roles and responsibilities of auditor and expert
- Nature, timing and extent of communication between two parties
- Need for expert to observe confidentiality
Evaluating the work: Auditor should consider:
- Reasonableness of findings and their consistency with other evidence
- Relevance and reasonableness of significant assumptions
- Relevance, completeness and accuracy of source data used
Responsibility for work of an expert:
Use of auditor’s expert is not mentioned in auditor’s report unless required by law or regulation.
Reference to work of an expert may be included in report containing modified opinion if it is
relevant to understanding of modification. This does not diminish auditor’s responsibility for
opinion.

ISA-700 Forming an Opinion and Reporting on Financial Statements

Objectives of Auditor:
- To express an opinion of Financial Statements on the basis of evaluation of conclusions drawn
from audit evidence obtained, and
- To express clearly that opinion through written report
Structure of Report:
 Title (Independent Auditor’s Report)
 Addressee (To whom auditor owes duty of care)
 Auditor’s Opinion
 Basis for Opinion
 Material uncertainty related to Going Concern (if applicable)
  Key Audit Matters for Listed Entities
 Emphasis of Matter paragraph (if applicable)
 Other Information
 Responsibilities of Management
 Auditor’s Responsibilities
 Report on Other Legal and Regulatory Requirements
 Other Matter (if applicable)
 Signature
 Auditor’s address
 Date
EOM paragraph may be positioned before or after KAM depending on auditor’s judgement
Unmodified Opinion: Express unmodified opinion when auditor concludes that F/S are prepared in
all material respects in accordance with applicable financial reporting framework.
- F/S adequately disclose significant A/C policies
- A/C policies selected are consistently applied and appropriate
- A/C estimates made by management are reasonable
- Information is relevant, reliable, comparable and understandable
- F/S provide adequate disclosures to enable users to understand effects of material
transactions and events
- Terminology used is appropriate

ISA-701 Communicating Key Audit Matters in Independent Auditor’s Report

Required by auditors of listed companies
Key audit matters are those that in auditor’s professional judgement were of most significance in
audit and are selected from matters communicated to TCWG.
Purpose is to enable users in understanding the entity, and to provide basis for users to engage
with management and TCWG about matters relating to entity and F/S.
Each matter should describe why matter was considered to be significant and how it was addressed
It includes:
- Areas of higher ROMM
- Significant auditor judgements related to areas in F/S involving significant management
judgement
- Effect on audit of significant events or transactions that occurred during the audit
Matters giving rise to qualified or adverse opinion, related to going concern are by nature key audit
matters, however, not described in this section of report.
If no key audit matters to report:
- Discuss with EQR
- Communicate conclusion to TCWG
- Explain in KAM section that there are no matters to report

ISA-705 Modifications to Opinion in Independent Auditor’s Report:

Auditor will need to modify opinion if concludes that:
- Based on evidence obtained, F/S as whole are not free from material misstatements
 - They have been unable to obtain sufficient appropriate evidence to be able to conclude that
F/S as whole are free from material misstatements.
Actions when Opinion is to be modified:
1. Discuss matter with TCWG
2. Consider management integrity
3. Seek External Advice
4. Resign
Considering management integrity and resignation should be considered at acceptance stage but
also considered at completion to decide whether to continue with engagement.
Pervasive:
- Effects are not confined to specific elements, amounts or items of F/S
- If so confined, represent or could represent substantial proportion of F/S
- In relation to disclosures are fundamental to users understanding of F/S
(Wrong treatment of subsidiary, Converting Profit to Loss or Net Asset to Liability, Going Concern)
Nature of Issue Not Material Material only Material and
Pervasive
Misstatement Unmodified Modified Modified
Opinion Qualified Adverse
Opinion Opinion (Do not
(“except for”) give true and
fair view)
Inability to Unmodified Modified Modified
obtain Opinion Qualified Disclaimer of
sufficient Opinion Opinion (No
appropriate (“except for”) opinion
evidence expressed)

Impact of Disclaimer of Opinion:

- Statement that sufficient appropriate evidence has been obtained is not included
- Statement that F/S have been audited is changed to “we were engaged to audit the F/S”
- Statement regarding audit being conducted in accordance with ISAs, and independence and
other ethical responsibilities are positioned within Auditor Responsibilities section.
- KAM section is not included in report
Management imposed limitation of scope: (After Acceptance)
Auditor must:
- Request that limitation is removed
- If management refuse, communicate with TCWG
- Perform alternative audit procedures if possible
- Issue qualified audit opinion if matter is considered material but not pervasive
- Issue qualified opinion if matter is material but not pervasive
- Withdraw from engagement if matter is pervasive. If can’t withdraw Disclaimer of Opinion
should be issued
- Communicate any material misstatements identified during audit to TCWG before
withdrawing
Basis for Opinion Section
- Refers to professional standards auditor has followed
 - In case of modified opinion, reason why opinion is modified
- Title must reflect the type of opinion being issued
- Quantification of financial impact of modification will be included
- In case of disclosures, explanation of how disclosures are misstated and when omitted,
disclosure should be included

ISA-706 Emphasis of Matter and Other Matter Paragraph

Emphasis of Matter paragraph
Used to refer to a matter that has been appropriately presented or disclosed in F/S by directors.
Auditor’s judgement is that matters are of fundamental importance to user’s understanding that
auditor should emphasize the disclosure.
- Cannot be used to draw attention towards immaterial misstatements, matters discussed in
KAM, or for matters on basis of which opinion has been modified
Other Matter Paragraph:
Included if auditor considers it necessary to communicate to users regarding matters other than
those presented or disclosed in F/S that in auditor’s judgement are relevant to understanding of
audit, auditor’s responsibilities or auditor’s report
Matters include:
- That auditor’s report is solely for intended users and should not be distributed to other
parties
- When laws or regulations permit or require
- Explain why auditor has not resigned when pervasive inability to obtain evidence is imposed
by management
- Communicate audit planning and scoping matters when laws and regulations require
- Where entity prepares two sets of F/S according to different framework]

ISA-710 Comparative Information – Corresponding figures and Comparative Financial Statements

Requires auditor to obtain sufficient appropriate evidence about whether comparative information
included in F/S has been presented in accordance with financial reporting framework.
Corresponding Figures: Where preceding period figures are included as integral part of current
period Financial Statements.
Comparative Financial Statements: Where preceding period amounts are included for comparison
with current period. If audited, they should be referred to in auditor’s opinion.
Audit Procedures:
- Comparative information agrees to prior year F/S or when appropriate has been restated.
- A/C policies reflected in comparative information are consistently applied or any changes
have been properly accounted for and adequately disclosed.
- Auditor should request written representation regarding any restatement made to correct
material that affects comparative information.
Implications for auditor’s report:
Corresponding figures:
- Auditor’s opinion does not refer to corresponding figures because opinion is on current
period F/S as whole including corresponding figures.
 - If prior period’s audit opinion was modified and matter which gave rise to modification is
unresolved, current audit opinion will also be modified either because of effects on current
period or because of effect of unresolved matter on comparability of current and
corresponding figures.
- If material misstatement is identified in prior period F/S on which an unmodified opinion was
issued and corresponding figures have not been restated, modified opinion should be given in
respect of corresponding figures.
- If prior year adjustment has been put through to correct material misstatements arising in
prior year, unmodified opinion can be issued. EOM paragraph will be needed to draw
attention to disclosure note explaining reason for restatement of opening balances.
Comparative Financial Statements:
- Auditor’s opinion will refer to each period
- If prior period F/S were audited by different auditor or were not audited, auditor may refer to
this in an Other Matter paragraph.

ISA-720 The Auditor’s Responsibilities Relating to Other Information

Other Information refers to financial and non-financial information other than Financial Statements
and auditor’s report.
If auditor obtains final version of other information before date of auditor’s report they must read
it to identify any material inconsistencies with F/S or auditor’s knowledge obtained during the
audit.
In case of material inconsistency:
- Perform procedures to evaluate inconsistency
- Discuss matter with management and ask them to make correction
- If management refuses, communicate to TCWG
- If matter remains uncorrected auditor must describe material misstatement in Other
Information Section
- Alternatively, auditor should withdraw from engagement if possible under applicable law or
regulation as the issue casts doubt over management integrity
Other Information Section:
- Identifies Other Information obtained by auditor prior to date of auditor’s report
- States that auditor has not audited other information and does not expresses conclusion on it
- Includes description of auditor’s responsibilities with respect to other information
- States either auditor has nothing to report or provides description of material misstatement
Purpose:
- Auditor must not be knowingly associated with information which is misleading
- Misstatement of other information exists when other information is incorrectly stated or
otherwise misleading
- Material misstatements or inconsistencies may undermine the credibility of F/S and auditor’s
report
Auditor must retain copy of Other Information final version on audit file
In case of Disclaimer of Opinion, it should not be included