Auditing & Assurance: 4.

Bankers – FS influence their decision to lend money

to the company.
Specialized Industries 5. Suppliers – FS influence their decision of whether to
SCOPE sell goods to the company.
6. Customers – FS influence their decision of whether
The following are the scope of the course: their supply of goods is secure.
1. Audit and Assurance Basic Concept 7. Employees – FS influence their decision of whether
2. Risk Assessment their employment is secure.
3. Risk Responses 8. Investors – FS influence their decision of whether to
4. Accounting Estimates and Judgements invest in the company.
5. Journal Entry Testing
6. Revenue Recognition What is the objective of an audit?
Audit and Assurance Basic Concept The overall objectives of conducting an audit of FS are:
What is Auditing?  To obtain reasonable assurance about whether the
FS as a whole are free from material misstatements,
The act of independently accumulating and evaluating
whether due to fraud or error, thereby enabling the
evidence of an economic entity for the purpose of
auditor to express an opinion on whether the FS are
reporting on the degree of compliance of information
prepared, in all material respects, in accordance
produced with established criteria (such as Generally
with an applicable financial reporting framework.
Accepted Accounting Principles).
 To report on the FS and communicate as required by
We, as auditors gather evidence about a company’s FS
the AFRF, in accordance with the auditor’s findings.
by performing our testing procedures with the goal of
communicating our audit findings to the users (usually, 1. The phrases we use to express our audit opinion are
delivering an audit report to the company to include in its that the FS “give a true and fair view” or “are
period-end report to its shareholders or stakeholders). presented fairly, in all material respects,“ in
accordance with the AFRF.
2. It is important to understand that the user cannot
Why are audits performed?
assume that the opinion is an assurance as to the
Certain entities may be required to have an audit future viability of the entity or the efficiency or
performed by law, such as: effectiveness with which management has
 Publicly held companies conducted the affairs of the entity.
 Publicly accountable entities
 Privately-owned companies What are financial statements?
 Sole proprietorships and partnerships
 Are a structured representation of historical financial
You may be wondering why audits must be performed information, including related disclosures intended to
when law does not require them to be. communicate an entity’s economic resources or
obligations at a point in time or the changes therein
The auditors’ report provides credibility to the financial for a period of time in accordance with a financial
statements produced by manage-ment. Therefore, audits reporting framework.
often are performed even though, by law, they may not
be required to be. The term “FS” ordinarily refers to a complete set of FS that
consists of:
You may be able to think of some other examples of why  Statement of Profit or Loss and Other
an audit could be required or requested in your country. Comprehensive Income (US GAAP: Income
Some users of the entity‘s FS, including lenders, investors, Statement)
suppliers and government, may specifically request the FS  Elements: Income, Expenses
to be audited by an auditor so they can confidently rely  Statement of Financial Position (US GAAP:
on the information provided in the financial statements to Balance Sheet)
make economic decisions.  Elements: Assets, Liabilities and Equity
 Statement of Cash Flows
The purpose of audit is to enhance the degree of
 Statement of Changes in Equity
confidence of intended users in the FS by issuing an
 Notes to FS
opinion on whether the FS are prepared, in all material
respects, in accordance with an applicable financial
FS portray the financial effects of transactions and other
reporting framework.
events by grouping them into broad classes according to
Users: their economic characteristics. These broad classes are
1. Shareholders - FS help them monitor the custody and termed the elements of FS.
performance of their investments. Management-prepared FS must comply with the basic
2. Analysts – FS provide the basis for them to value a principles of accounting – how assets, liabilities, revenues
company and advise their clients. and expenses are to be applied, measured and
3. Regulatory Authorities – FS provide the basis for them reported. The basic principles of accounting are listed
to monitor a company. below.
Accrual Basis of Accounting Financial Statement Assertions
FS are prepared on the accrual basis of accounting. The FS consists of many accounts which may include the
Under this basis, the effects of transactions and other following:
events are recognized when those effects occur (and not  Cash
as cash or its equivalent is received or paid) and they are  Trade Receivables
recorded in the accounting records and reported in the  Sales
FS of the periods to which they relate.  Payroll Expense
FS prepared on the accrual basis inform users not only of Each FS account has FS assertions implicit in the
past transactions involving the payment and receipt of financial statements.
cash but also of obligations to pay cash in the future and Financial statement assertions are representations of
of resources that represent cash to be received in the management, explicit or otherwise, embodied in the
future. Hence, they provide the type of information about financial statements as used by the auditor to
past transactions and other events that is most useful to consider the different types of potential
users in making economic decisions. misstatements that may occur.
Historical Cost Principle
Assets are recorded at the amount of cash or cash
equivalents paid, or the fair value of the consideration Financial Statement Assertions are categorized as:
given to acquire them, at the time of their acquisition.
Balance Sheet Income Statement
Liabilities are recorded at the amount of proceeds Existence Occurrence
received in exchange for the obligation, or at the
Completeness Completeness
amounts of cash or cash equivalents expected to be
paid to satisfy the liability in the normal course of business. Rights and Measurement
Obligations
Realization Principle
Valuation Presentation and
Income, or revenue, should be recognized only when its Disclosure
conversion into cash has occurred or is reasonably
certain. Presentation and
Disclosure
Consistency Principle
*based on ISA.
The consistency principle of accounting requires that
entities give accountable events the same presentation
and accounting treatment from period to period to During an audit, we determine which FS assertions are
ensure comparability of FS with those of previous periods. relevant to the significant accounts and disclosures.
The consistency principle means that an entity applies We design and perform substantive procedures at the
the same methods from period to period in accordance assertion level to identify material misstatements and, if
with the AFRF, but it does not mean that the entity found, to quantify their effect in the FS.
cannot switch from one method of accounting to
another in certain circumstances. Financial Statement Assertions
Full Disclosure Principle *Based on PSA
Accountants have adopted a principle of full disclosure
that generally calls for revealing in the FS any facts of Classes of transactions and events for the period under
sufficient importance to influence the judgment of an audit:
informed reader. a. Occurrence
Thus, the full disclosure principle requires the presentation b. Completeness
of sufficient information to permit the knowledgeable c. Accuracy
reader to reach an informed decision instead of d. Cut-off
indulging in a guessing game. e. Classification
The common methods of disclosure are presenting an
Account balances at the period ended:
account with a balance, parenthetical disclosure and
a. Existence
footnote disclosure.
b. Rights and Obligations
Objectivity (Verifiability) Principle c. Completeness
The objectivity principle states that accounting d. Valuation and Allocation
information and financial reporting should be
independent and supported with unbiased evidence. Presentation and Disclosure:
a. Occurrence and Rights and Obligations
This means that accounting information must be based b. Completeness
on research and facts, not merely a preparer’s opinion. c. Classification and Understandability
The objectivity principle is aimed at making FS more d. Accuracy and Valuation
reliable.
What is an Audit Opinion?
The primary output of an audit is an opinion on an entity’s opinion on the FS due to the potential interaction
FS. of the uncertainties and their possible cumulative
 After completion of all audit procedures, we effect on the FS.
review and assess the conclusions drawn from
the audit evidence obtained. These conclusions
are the basis for the expression of our opinion on  The general reader of the company’s FS will not
the FS. know the details of our audit, nor will he or she be
able to look at the work papers that you prepared
 The audit opinion is the final step in the entire
to document your testing of the client’s cash
audit process.
balances.
The review and assessment considers whether the FS  The reader of the FS will be able to read our opinion,
have been prepared in accordance with an AFRF. These and if it is an unqualified opinion, then know that the
can be either of the following: audit team has obtained reasonable assurance that
International Financial U.S. Generally the FS as a whole are free from material
Reporting Standards Accepted Accounting misstatement, whether due to fraud or error.
(IFRS) Principles
Another authoritative, What do we mean by “presents fairly, in all material
comprehensive respects”?
financial reporting
Relevant National  There is no legal definition of the phrases “presents
framework that has
Accounting Standards fairly” or “true and fair”
been designed for use
or Practices
in financial reporting  Determining this requires significant judgment
and is applicable in the because auditing is not an exact science.
FS.
 The view presented in any set of financial statements
is only one of several possible true and fair views.
Types of Audit Opinions
 Throughout your career, you will develop the
Unmodified Opinion judgment needed to determine these concepts
An unmodified opinion should be expressed when the related to clients’ FS.
auditor concludes that the FS are prepared, in all
material respects (or give a true and fair view) in
accordance with the AFRF. What is Materiality?
 You are auditing the cash account and are currently
Qualified Opinion working on a client-provided cash reconciliation
A qualified opinion should be expressed when the auditor schedule.
concludes that misstatements, individually or in the  While you are agreeing the beginning bank balance
aggregate, are material, but not pervasive, to the FS; or is statement, you notice that the person who prepared
unable to obtain sufficient appropriate audit evidence the reconciliation accidentally used MU 1.3 million as
on which to base the opinion , but concludes that the the beginning balance on the reconciliation.
possible effects on the FS of undetected misstatements, if
any, could be material but not pervasive.  The bank statement says the beginning balance is
actually MU 1.8 million, resulting in a MU 500,000
Adverse Opinion difference.

An adverse opinion should be expressed when the Is this a material difference? What if the difference were
auditor, having obtained sufficient appropriate audit only MU 1,000?
evidence, concludes that misstatements, individually or in
 The concept of materiality as it relates to our audit
the aggregate, are both material and pervasive to the
can be tricky. A material difference at one of your
FS.
clients might not be a material difference at another
client. It all depends on the materiality levels
established by your team in response to the factors
Disclaimer of Opinion at that particular client. The determination of
materiality is not a mathematical exercise but
A disclaimer of opinion should be expressed when the requires professional judgment involving audit
auditor is unable to express an opinion because: executives, including the partner in charge of the
 They are unable to obtain sufficient appropriate audit.
audit evidence on which to base the opinion, and
the auditor concludes that the possible effects on Materiality is defined as the magnitude of an omission or
the FS of undetected misstatements, if any, could misstatement that, individually or in the aggregate, in
be both material and pervasive. light of the surrounding circumstances, could reasonably
be expected to influence the economic decisions of the
 In circumstances involving multiple uncertainties,
users of the FS.
and not withstanding having obtained sufficient
appropriate audit evidence regarding each of the
individual uncertainties, it is not possible to form an
(What if the MU 500,000 error were to change an PSA and ISA.
investor’s mind as to whether she wants to invest in the
company’s stock?
An auditor should plan and perform an audit with an
The MU 500,000 then would be material to that
attitude of professional skepticism.
company.)
Questioning mind of an auditor.

 The objective of an audit of FS is to enable the

auditor to express an opinion about whether the FS
are prepared, in all material respects, in
accordance with an AFRF.
 Our audits are designed to provide reasonable
assurance (not absolute assurance) that the FS are
not materially misstated.
The basic concepts related to materiality are: Code of Ethics
We, as auditors, are not responsible for making sure that for Professional Accountants
the client’s FS are 100% correct or to identify every small
difference.  Sets standards of conduct for professional
accountants.
We are responsible for expressing an opinion about
whether the FS are prepared, in all material respects, in  States the fundamental principles that should be
accordance with an AFRF. observed by professional accountants in order to
achieve common objectives.
In instances where a national requirement is in conflict

General Principles and with a provision in the code, the national requirement
prevails.
For example, the American Institute of Certified Public
Scope of an Audit Accountants (AICPA) sets out the principles and rules that
should be observed by accountants practicing in the US.

Introduction to General Principles of an Audit Integrity

The three general principles of an audit: The principle of integrity imposes an obligation on all
professional accountants to be straightforward and
An auditor should comply with a code of ethics honest in all professional and business relationships.
Similar to other professions, like law and medicine, the Integrity also implies fair dealing and truthfulness.
accounting profession has a code of ethics, which we
should comply with at all times, unless certain parts of it
being precluded by laws and regulations in specific Objectivity
circumstances.
The principle of objectivity imposes an obligation on all
As an auditor, you should comply with the Code of Ethics professional accountants not to compromise their
for Professional Accountants issued by the International professional or business judgment because of bias,
Federation of Accountants (IFAC). conflict of interest or the undue influence of others.

IFAC believes that the identity of the accountancy

profession is characterized worldwide by its endeavor to
Professional Competence and Due Care
achieve a number of common objectives and by its
observance of certain fundamental principles for that The principles of professional competence and due care
purpose. imposes the following obligations on all professional
accountants:
IFAC, recognizing the responsibilities of the accountancy
profession and considering its own role to be that of 1. To attain and maintain professional knowledge and
providing guidance, encouraging continuity of efforts skill at the level required to ensure that clients or
and promoting harmonization, has deemed it essential to employers receive competent professional service,
establish the International Code of ethics for Professional based on current technical and professional
Accountants to be the basis on which the ethical standards and relevant legislations.
requirements for professional accountants in each
2. To act diligently in accordance with applicable
country should be founded.
technical and professional standards.

An auditor should conduct an audit in accordance with

Confidentiality
applicable auditing standards.
The principle of confidentiality imposes an obligation on  Inherent in this mission statement is the understanding
all professional accountants to refrain from: that “services of consistently high quality” implies that
professional standards governing those services are
1. Disclosing outside the firm or employing organization
also of consistently high quality.
confidential information acquired as a result of
professional and business relationships without  The International Auditing and Assurance Standards
proper and specific authority or unless there is a Board (IAASB), which is designated by, and operating
legal or professional right or duty to disclose; and independently under the auspices of the IFAC, issue
the ISAs.
2. Using confidential information acquired as a result of
professional and business relationships to their  When local standards exist, they govern the practices
personal advantage or the advantage or the followed in the auditing of financial statements.
advantage of third parties.

Professional Skepticism
Professional Behavior
The principle of professional behavior imposes an  Plan and perform an audit with an attitude of
obligation on professional accountants to comply with professional skepticism.
relevant laws and regulations and avoid any conduct  Professional skepticism includes a questioning mind,
that the accountant knows or should know might bring being alert to conditions which may indicate possible
discredit to the profession. This includes actions which a misstatement due to fraud or error, and a critical
reasonable and informed third party would be likely to assessment of evidence.
conclude negatively affects the good reputation of the
profession. For example, an attitude of professional skepticism is
necessary throughout the audit process for the auditor to
reduce the risk of overlooking suspicious circumstances,
of overgeneralizing when drawing conclusions from audit
Responsibility of Professional Accountants observations, and using faulty assumptions in determining
the nature, timing and extent of the audit procedures
A distinguishing mark of a profession is acceptance of its
and evaluating the results.
responsibility to the public.
 It is your responsibility to make sure you do not
 Investors
become too comfortable working with your client and
 Employers that you always question and verify the information
that you obtain.
 Government
 Continue to question the reliability of documents and
 Creditors information until you are comfortable that you have
 Business community obtained sufficient appropriate audit evidence.

 Public  Not be too skeptical and not believe anything that

your client tells you.
 Representations from management alone are not a
 Sound financial accounting and reporting substitute for obtaining sufficient appropriate audit
 Effective financial management evidence to be able to draw reasonable conclusions
on which to base the audit opinion.
 Competent advice on a variety of business and
taxation matters  Always keep on your “auditor hat” to gather and
document sufficient appropriate audit evidence to
Professional accountant executes the services provided support your conclusion.
at the highest level of performance and in accordance
with ethical requirements.
Audit Scope
International Standards on Auditing (ISAs) Audit scope refers to the scope of services on a specific
audit required by statutory and other regulatory
 The auditor should conduct an audit of FS in requirements, entity expectations and/or professional
accordance with ISAs or local auditing standards, if requirements.
applicable.
 Number of locations
 IFAC will continue to strengthen the worldwide
accountancy profession and contribute to the  Number of procedures
development of strong international economies by  Kinds of procedures
establishing and promoting adherence to high-quality
professional standards.
The procedures required to conduct an audit in factors from the Process for Acceptance of Clients and
accordance with ISAs or applicable local auditing Engagements tool (PACE) at the beginning of the audit.
standards should be determined by the auditor. We determine the effect on our risk assessments and
incorporate the necessary additional actions or
procedures into our audit strategy and audit plan to
 Requirements of ISAs address these risk factors.
 Local Auditing Standards We obtain an engagement agreement prepared in
 Relevant professional bodies accordance with APM AGREE TERMS Engagement
 Legislation agreements for assurance engagements, supplemented
by local audit requirements, if applicable.
 Regulations
 Audit Engagement and Reposting requirements
 Laws and Regulations Evaluate compliance with ethical requirements, including
independence.
We determine compliance for both the firm and the
members of the audit team.
In accordance with Independence Policy, we perform

Audit Process and Other procedures to determine compliance with ethical

requirements, including independence, prior to
performing other significant activities for the current audit

Services period.
We determine that we are independent in fact and in
appearance with the entity being audited.
Phases of an Audit Engagement We ensure we have adequate professional competence
to perform the services required and we maintain client
confidentiality during the current audit period, including
The securing the work papers.
initial We ensure that we have fulfilled other ethical
phase requirements relevant to our audit.
of a FS
audit
involves Establish the team.
the Our understanding of the entity obtained during the
initial client and engagement acceptance or continuance
plannin process, including our expectations about service
g requirements of those charged with governance and
activitie management, helps us establish our audit team and
s. determine team roles and responsibilities.

INITIAL We determine the nature, timing and extent of resources

PLANNIN and establish the audit team to achieve the appropriate
G OF THE balance of skills, experience and competence necessary
AUDIT to perform the audit.
ENGAGEMENT We make a preliminary assessment of additional expertise
Understand service requirements and agree the scope of that is needed beyond that possessed by the members of
services. the audit team and develop a plan to obtain the
resources. We determine whether to use the expertise of
We understand the expectations of those charged with an internal specialist or an auditor’s external specialist.
governance and management to help us determine the
service requirements. We meet with those charged with
governance and management early in the audit to Determine the roles and responsibilities of team members.
agree the scope of services, the timing of our work, the
expected outputs and delivery dates, and any We establish the roles and responsibilities of team
expectations we have of management. members for preparing and reviewing audit
documentation.
The result of this meeting provides us with information for
planning the audit (e.g., the availability of data and use Appropriate levels of supervision should be in place so
of automated techniques) and gives us an initial insight members of the audit team understand the purpose of
into potential areas of audit focus. the assigned work and less experienced audit team
members receive appropriate support and on-the-job
We assess the results of our client and engagement training from more experienced team members.
acceptance and continuance process (including the risk
We conduct timely reviews to determine that the work In the execution phase, we perform tests of controls when
performed supports the conclusions reached and is we adopt a controls reliance strategy.
documented appropriately. More experienced team
We perform tests of controls when we plan to rely on
members, including the partner in charge (PIC), review
controls over a significant class of transactions or
work performed by less experienced team members.
significant disclosure process (SCOT) or in other special
circumstances. We then identify the controls, understand
their design and determine which are relevant to the
The second phase of an audit relates to audit.
identification and assessment of risks and
determination of our audit strategy. These are Test of controls may be performed either before, or at,
the balance sheet date. We exercise professional
crucial to a successful audit engagement.
judgment in deciding when to perform them. Testing
IDENTIFY AND ASSESS RISKS controls early may help us identify important matters at
an early stage of the audit and resolve them, with the
The amount of effort to identify and assess risks and
assistance of management, or address their effects on
determine the audit strategy will vary with the size and
the audit by identifying effective mitigating controls to
complexity of the client and the auditor’s knowledge of
rely on or revising our audit strategy.
and experience with the client.
Based on the result of our tests of controls, we evaluate
In general terms, the identify and assess risks element
the effectiveness of the design and operation of relevant
involves:
controls and assess the control risks as either ‘rely on
 Obtain an understanding of the client’s business and controls’ or ‘not rely on controls’, for each relevant
industry assertion for each significant account and disclosure. This
assessment, combined with our inherent risk assessment, is
 Understand management’s assessment process the basis for our combined risk assessment (CRA) for each
 Understand components of internal control at the relevant assertion.
entity level We design the nature, timing, and extent of our
 Identify and assess fraud risks substantive procedures to respond to our Combined Risk
Assessment (CRA). Substantive procedures may be
 Make preliminary judgments about materiality levels categorized as Primary Substantive Procedures (PSPs) or
 Identify significant accounts and disclosures and Other Substantive Procedures (OSPs), which may include
relevant assertions substantive analytical procedures, tests of details and /or
tests of items to obtain information.
 Identify and understand significant classes of
transactions (SCOTs) Our substantive procedures may be different if we adopt
a core GAM audit approach or a digital audit approach.
 Identify risks of material misstatement and make We customize our substantive procedures to respond to
inherent risk assessments our CRA.
 Design an audit strategy to address identified risks of In addition to the CRA, other factors that may influence
material misstatement, including fraud risks the timing of our procedures include:
 Execute the Executive discussion and approval points  The entity’s reporting deadlines, readiness and the
(EDAPs) availability of information to be audited.
 Audit team’s reporting deadlines, availability and
efficiency factors.
The third phase of the audit relates to the design
and execution of audit procedures to address the  The time needed for the entity or other parties to
identified risks. respond to audit requests.

DESIGN AND EXECUTE RESPONSES TO RISKS

The primary objective of this audit phase is to design and CONCLUDE AND COMMUNICATE
perform audit procedures to obtain sufficient appropriate
We aggregate the individual pieces of audit evidence
audit evidence to be able to draw reasonable
obtained from our audit procedures for each relevant
conclusions on which to base our auditor’s opinion.
assertion to enable us to conclude whether we have
Sufficiency is the measure of the quantity of audit obtained sufficient appropriate audit evidence to
evidence obtained. Appropriateness is the measure of address the identified risks.
the quality of audit evidence; that is, its relevance and its
In addition, we evaluate the effect of accumulated
reliability in providing support for the conclusions on
misstatements, perform an overall analytical review,
which to base our auditor’s report. We consider all
reassess our risk assessment based on the results from our
relevant information from reliable sources, regardless of
procedures and revisit our audit strategy, prepare the
whether it corroborates or contradicts management’s
Summary Review Memorandum (SRM), perform
assertions, bearing in mind potential risks of bias.
subsequent events procedures, and obtain
We obtain audit evidence from substantive procedures management’s representation letter.
or combined with tests of controls, as appropriate.
We execute the Executive Discussion and Approval Points
(EDAPs) to discuss and conclude on the overall financial
statements, as well as agree the final versions of our Review Engagement
communications to management and those charged
with governance. In a review engagement, the auditor expresses a review
report that is designed to enhance the degree of
We prepare the audit report where we express our audit confidence of intended users regarding the preparation
opinion on the client’s financial statements. The audit of an entity’s FS in accordance with an applicable
report generally is issued when we have obtained financial reporting framework. The auditor’s report is
sufficient appropriate audit evidence to form our opinion based on the auditor obtaining limited assurance.
on the entity’s FS.
The auditor performs primarily inquiry and analytical
Finally, we wrap up the audit by completing the procedures to obtain sufficient appropriate evidence.
documentation of our audit procedures, including their
review and sign-off, and archiving our documentation In a review engagement, the auditor expresses a
within the required timeline. conclusion on whether anything has come to the
auditor’s attention that causes the auditor to believe the
FS are not prepared, in all material respects, in
accordance with an applicable financial reporting
framework.
Although the simplified descriptions of the phases of
For example, EY may be asked to issue a review report on
an audit give you only a general understanding of a company’s quarterly FS.
what an audit is all about, this understanding, along
with the other information you have learned so far
in this course, allows you to understand the big
Agreed-Upon Procedures
picture of what an audit really is.
(AUP) Engagement

Levels of Assurance Provided For agreed-upon procedures, the auditor is engaged to

carry out those procedures of an audit nature to which
the auditor, the entity and any appropriate third parties

from Different Type of Services have agreed and to report on factual findings. When
performing agreed-upon procedures, no opinion is
expressed.
Assurance refers to the auditor’s satisfaction as to the For example, the firm may be asked to complete agreed-
reliability of an assertion (i.e., the reliability of financial upon procedures related to a company’s profit-sharing
reporting and the preparation of FS) being made by one calculation for the company’s employees.
party (i.e., entity’s management) for use by another party
(i.e., the intended users of FS). Reasonable assurance is a
high, but not absolute, level of assurance.
Compilation Engagement
The degree of satisfaction achieved and, therefore, the
level of assurance that may be provided is determined Management may request a professional accountant in
by the procedures performed and their results. public practice to assist with the preparation and
presentation of financial information of an entity.
The level of assurance provided by the auditor is pre-
determined and agreed with those charged with In a compilation engagement, although the users of the
governance of the client prior to the acceptance or compiled information derive some benefit from the
continuance of engagement. professional accountant’s involvement, it is not an
assurance engagement. It does not require the
professional accountant to verify the completeness of the
TYPES OF SERVICES PROVIDED BY A PROFESSIONAL information provided by management for the
ACCOUNTANT compilation or otherwise to gather evidence to express
an audit opinion or a review conclusion on the
preparation of the financial information.
Audit Engagement Due to the requirements for independence, an auditor is
not allowed to prepare the FS that they will later audit.
In an audit engagement, the auditor provides a
reasonable, but not absolute, level of assurance that the
FS as a whole are free from material misstatements Course Summary
whether due to fraud or error.
In this course, you have learned about the basic
Reasonable assurance is a level of assurance. information surrounding what an audit is and the basic
An example of an audit engagement is the period-end concepts of auditing.
audit of a company’s FS.
The ultimate goal in performing an audit is to provide
reasonable assurance to the users of the financial
information that the balances are materially correct
through our audit opinion.
Remember the basic phases of an audit are:
 Initial Planning of the Audit
 Identify and Assess Risk
 Design and Execute Responses to Risks
 Conclude and Communicate

We follow the auditing standards and requirements of our

local countries and perform our audits in accordance
with fundamental ethical principles and with an attitude
of professional skepticism.