Standards engagement principles evidence and opinions

ASB nonissuer standards history

The slides list Statements on Auditing Procedure from 1939 to 1972 and Statements on Auditing Standards from 1972 onward.

Auditing standards structure

Fundamental principles guide audit conduct; PCAOB auditing standards and ASB Statements on Auditing Standards provide requirements; interpretive publications guide application.

Audit engagement stages

Obtain or retain the client, plan the engagement, assess risk, gather audit evidence, and report.

Responsibilities principle

Auditors need competence and capabilities, independence, due care, professional skepticism, and professional judgment.

Independence in fact

Actual freedom from bias and conflicting interests when exercising professional judgment.

Independence in appearance

Avoiding relationships or circumstances that would cause an informed observer to doubt objectivity.

Due professional care

The diligence and performance expected of a reasonable auditor under similar circumstances.

Professional judgment

Applying training, knowledge, and experience to make informed audit decisions.

Performance principle

Plan and supervise the audit, consider materiality and risk, and obtain sufficient appropriate evidence to provide reasonable assurance.

Materiality

The importance of an omission or misstatement to users' decisions, considering both amount and nature throughout the audit.

Audit plan

Written documentation of planned audit procedures addressing relevant assertions for significant accounts and disclosures.

Sufficient evidence

Enough evidence in quantity to support the conclusion; required quantity is influenced by risk and the effectiveness of relevant controls.

Appropriate evidence

Evidence of sufficient quality, including relevance to the assertion and reliability of its source and circumstances.

Evidence relevance

Whether the evidence addresses the assertion or objective being tested.

Evidence reliability

Whether the evidence can be trusted, considering source, auditor control, method of obtaining it, and related controls.

Evidence source hierarchy in the slides

Direct auditor knowledge is generally stronger than external documentary evidence, which is generally stronger than internal documentary evidence, subject to circumstances.

Control effectiveness and evidence quantity

Effective controls and lower assessed control risk may support less substantive evidence; ineffective controls and higher risk generally require more.

Control effectiveness and procedure quality

Higher control risk requires more effective substantive procedures; lower risk may permit a less intensive substantive approach while still obtaining sufficient appropriate evidence.

Reporting principle

Express an opinion or explain why none can be expressed, evaluating statements against the applicable reporting framework.

Financial reporting framework

Criteria for measurement, recognition, presentation, and disclosure, such as GAAP, IFRS, or a special purpose framework.

Unmodified or unqualified opinion

The financial statements are fairly presented in conformity with the applicable framework in all material respects.

Qualified opinion

Except for specified matters, the financial statements conform to the applicable framework.

Adverse opinion

The financial statements are not fairly presented in conformity with the applicable framework because of material and pervasive misstatement.

Disclaimer of opinion

The auditor does not express an opinion, such as when sufficient appropriate evidence cannot be obtained and possible effects are material and pervasive.

Quality control elements in the slides

Leadership responsibility for quality, relevant ethical requirements, client and engagement acceptance and continuance, human resources, engagement performance, and monitoring.