Independent Auditing Standards (IAS)

• This text outlines the general responsibilities of independent auditors during financial statement audits, in accordance with Independent Auditing Standards (IAS).
• It specifies the objectives of an independent audit and describes its nature and scope, as well as responsibilities applicable in all independent audits, including compliance with IAS.
• The term "auditor" refers to the independent auditor, and "audit" pertains to independent audits.

IAS Application

• IAS are intended for auditing financial statements, but can be adapted for other historical financial information engagements.
• IAS do not address responsibilities arising from legal or regulatory requirements, separate from those outlined in IAS.
• In such cases, auditors may find IAS approaches helpful, but compliance with laws and professional obligations remains the auditor's own responsibility.

Financial Statement Audits

• The purpose is to enhance confidence in financial statements among users
• This is achieved through the auditor's opinion on conformity with the applicable financial reporting framework.
• The opinion typically addresses whether the financial statements present fairly, in all material respects, or provide a true and fair view, in conformity with the framework.
• An audit conducted in accordance with IAS and ethical requirements enables the auditor to form this opinion.
• Audited financial statements are prepared by management, under the oversight of those charged with governance.

Management Responsibilities

• IAS does not impose responsibilities on management or those charged with governance, nor does it override regulations governing their responsibilities.
• An audit assumes that management and, where appropriate, those charged with governance, acknowledge certain responsibilities fundamental to the audit’s execution

Overall Objectives

• IAS require the auditor to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error.
• Reasonable assurance is a high level of assurance, but not an absolute guarantee.
• Auditors reduce audit risk to an acceptably low level when obtaining sufficient appropriate audit evidence

Audit Limitations

• Due to the nature of audit evidence, most audit evidence is persuasive rather than conclusive, reasonable assurance is not absolute assurance.
• The concept of materiality guides the planning, execution, and evaluation of audit findings; misstatements are material if they could reasonably influence the economic decisions of users
• Judgments about materiality consider surrounding circumstances and can be affected by the size or nature of a misstatement, assessed relative to financial statement users' needs.

Auditor Responsibilities

• Opinions address financial statements as a whole.
• Auditors are not responsible for detecting misstatements that, in total, are immaterial to the financial statements.
• Objectives, requirements, and application guidance in IAS support reasonable assurance.
• To support reasonable assurance, auditors are required to use professional judgment, maintain professional skepticism

Required Actions

• Identify and assess material misstatement risks, whether due to fraud or error, based on understanding the entity, its environment, and internal controls.
• Obtain sufficient appropriate audit evidence about whether material misstatements exist, by designing and implementing appropriate responses to the assessed risks.
• Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained

Audit Opinions

• The form of the auditor's opinion depends on the applicable financial reporting framework and regulations.
• Auditors also have specific communication and reporting responsibilities to users, management, governance or external parties, determined by IAS or regulations.
• The IAS is effective for audits of financial periods starting on or after 1/1/2017, became effective on the date of publication.
• The financial audit's goals is to obtain reasonable assurance about material misstatements and reporting findings by the IAS.

Audit Requirements

• Assurance must be sought that financial records do not contain mistakes or errors, and provide opinions in reports
• If one cannot obtain reasonable assurance to report their opinion, the auditor should not express an opinion or should withdraw from the audit

Definitions

• Independent auditor: the firm or individual conducting the audit
• Audit evidence: Information the auditor uses in arriving at the conclusions on which the auditor’s opinion is based, including both information contained in the accounting records underlying the financial statements and other information.
• Sufficiency of audit evidence: the measure of the quantity of audit evidence, which is affected by the auditor’s assessment of the risks of material misstatement.
• Appropriateness of audit evidence: the measure of the quality of audit evidence and its relevance and reliability.
• Audit Risk: the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated, which is a function the risks of material misstatement and detection.
• Financial Statements: a structured representation of historical financial information, including related notes.
• Reasonable assurance: In the context of a financial statement audit, a high, but not absolute, level of assurance.
• Professional Judgment: The application of relevant training, knowledge, and experience, within the context provided by auditing, accounting, and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.
• Professional skepticism: An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.
• Substantive procedures: An audit procedure designed to detect material misstatements at the assertion level.
• Risk of Material Misstatement: the risk that the financial statements are materially misstated prior to audit, consisting of two components
• Inherent Risk: the susceptibility of an assertion about a class of transactions, account balance or disclosure to a misstatement that could be material, before consideration of any controls.
• Control Risk: the risk that a misstatement that could occur in an assertion about a class of transactions, account balance or disclosure and that could be material, will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control.

Historical Financial Info

• Information expressed in financial terms about a particular entity, derived primarily from the entity's accounting system, regarding economic events occurring in past periods.
• Detection Risk the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, when aggregated with other misstatements. .
• Financial Reporting Framework: A set of criteria used to determine the measurement, recognition, presentation and disclosure of all material items appearing in the financial statements.
• "Fair presentation framework" A financial reporting framework that requires compliance with the requirements of the framework and - acknowledges explicitly or implicitly that, to achieve fair presentation, it may be necessary for management to provide disclosures beyond those specifically required by the framework
• Compliance framework A financial reporting framework that requires compliance with the requirements of the framework, but does not contain the acknowledgements in (i) or (ii) above.
• Those charged with governance: The person(s) or organization(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity, including overseeing the financial reporting process.
• Misstatement: A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. Misstatements can arise from error or fraud.
• Management The person(s) with executive responsibility for the conduct of the entity’s operations.
• Precondition for an Audit The premise, relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit is conducted.

Ethical Requirements

• Auditors must adhere to ethical requirements, including those pertaining to independence
• Those requirements often include the Code of Ethics for Professional Accountants and any other restrictions in place.
• It is essential for auditors need to be impartial and unbiased when performing financial audits.
• The Ethics Code establishes core ethical guidelines for accountants
• It utilizes a conceptual framework determining how to act or take approach when recognizing a threat
• A denetçinin is required to maintain objectivity throughout an audit to provide a public service function.
• Quality Control Standard or any other guidance the entity's responsibilities for any assurance the firm delivers services that meet requirements

Professional Skepticism

• Due care requires auditors to maintain a questioning mindset throughout the audit process

Professional Judgement

• Professional judgment is required during standards.
• Training is also mandated, particularly for risks and responsibilities like assessment and fraud.
• Auditors must maintain objective assessments, without bias

Audit Evidence

• Relevant and reliable audit evidence must be obtained to come to reasonable conclusion about the financial statements

• Audit evidence should be cumulative procedures

• Additional evaluation will be ordered if a discrepancy emerges on specific claims

• Audits must make efficient, effective use of all resources; time and cost should be in balance