Audit Nature and Objective

Nature of an Audit

• An audit is a review of financial statements to provide assurance.
• It is not an investigation of fraud within an organization.

Objective of an Audit

• The primary objective of an audit is to express an opinion on the financial statements.

Scope of Audit

• The scope of an audit includes examination of financial statements and evaluation of internal controls.
• It does not include preparation of financial statements.

Auditor's Responsibility

• An auditor's responsibility is to express an opinion based on evidence obtained.
• It is not to ensure financial statements are free from all errors or to give an absolute assurance.

Benefits of Audit

• One of the benefits of an audit is assurance to stakeholders.

Assurance Engagements

• An element of an assurance engagement is a practitioner.
• The purpose of an assurance engagement is to enhance the degree of confidence of intended users.
• The responsible party in an assurance engagement is the company management.

Limited Assurance Engagements

• Limited assurance engagements provide a lower level of assurance than reasonable assurance engagements.
• They do not provide absolute assurance.

Reviews and Audits

• A review provides limited assurance and distinguishes it from an audit.

Qualities of Auditing Standards

• An auditor must possess integrity as a quality.
• The quality applies to the audit of historical financial information.

Importance of Standards on Auditing

• Standards on auditing are important as they establish benchmarks for audit quality.

Components of an Assurance Engagement

• Components of an assurance engagement include sufficient appropriate evidence, suitable criteria, and a written assurance report.
• Independent financial statements are not a component of an assurance engagement.

Standards on Quality Control

• The purpose of Standards on Quality Control is to establish standards for a firm's system of quality control.

Evidence in an Assurance Engagement

• Evidence in an assurance engagement should be sufficient and appropriate.

Standards on Auditing

• SA 200 deals with the overall objectives of the independent auditor.
• Audit documentation is not optional.