INTERNATIONAL STANDARDS OF AUDITING
Introduction
An Audit report is a formal disclaimer or opinion given by either an internal auditor or an outside auditor (Collings, 2011). The audit report, after completion, is handed over to the consumer, the company or organization in which the evaluation was done, so as to show assurance of service. The report can then be applied in decision making by the user or can be put to other uses. The audit report is a very paramount instrument when it comes to reporting financial information to businesses or organizations. The International Standards of Auditing (ISA) are the professional standards and guidelines that help in the process of performing the financial audit of financial information. The International Standards of Auditing are issued by the International Federation of Accountants (IFAC). The IFAC issue these standards through the International Auditing and Assurance Standards Board (IAASB) (Collings, 2011). This article discusses the various International Standards of Auditing and also gives a company case study.
The International standards of auditing can be looked at in three sections namely;
- Introduction
The section applies to auditor’s report issued in relation with audits of historical financial statements. These historical financial statements are projected to show financial position; the cash flows as well as results of operations (Stamp, 1979). The introduction section will differentiate the types of reports. Section two neither applies to the unaudited financial statements nor applies to reports on incomplete financial information. The section illustrates that the justification for the expression of the opinion of the author lies on conformity of the audit carried out and the general standards of auditing.
- Explanatory language that is added to Auditors Report
Certain situation may require the auditor to attach an explanatory paragraph to the audit report. Some of these circumstances include:
- When the auditors’ opinions are based, in parts, on the report of another auditor.
- When the level of doubt about the entity’s ability to continue as a growing concern is substantial.
- When there has been a material change between the periods in principles of accounting or when there is a change in the methods of their application.
- When the material misstatement in financial statement issued earlier has been revised.
- When there exist certain circumstances relating to reports’ financial statements.
- When the selected quarterly financial data that is required by SEC Regulation S-K was omitted or when the financial data has been reviewed.
- When the supplementary data required by Financial Accounting Standards Board (FASB) or the Federal Accounting standards Advisory Board (FASAB), has not been included.
- When other data or information in a document that contains the audited financial statements is materially consistent with the information contained in the in financial statements.
- Explanatory paragraphs may also be added by the auditor so as to emphasize a matter that regards the financial statements.
- Effective Date and transition
Here, the auditor who recently included uncertainties explanatory paragraphs is not expected to repeat the paragraph. The auditor is also not expected to add an emphasis paragraph that is related to the uncertainty in the reissuance of the said report or even in a report that is on subsequent periods’ financial statements. The audit is defined for the purpose of this section as an evaluation of historical financial statements and is performed in accordance with the accepted auditing standards (Steven, 2014). An auditor from the United States may be asked to report on the financial statements of the United States entity that have been presented in conformity with the principles of accounting that are accepted in another country. In such cases, the auditor is expected to refer to the guidelines found in section 534 (“Reporting of financial Statements Prepared for use in Other Countries”.)
In the case study, we will evaluate an example of a company’s process of preparing an audit report. The company to be evaluated here is an It company by the name Grant Thornton. The audit process begins with the conclusion on audit implementation that is adopted by the auditor general. The document contains the entity to be audited; the timeline to be covered with the audit and what is to be audited. The auditor general then issues an authorization to the person to conduct the audit. The person will then gather sufficient and adequate information so as to state an opinion on audited entity. The auditor has the authority to seize documents that point to a possible criminal offence. The entity to be audited must cooperate and give all the information required by the auditor. If the entity is not cooperating, the auditor general gives order for submitting all the documents required.
The audit report is then presented in writing. The audit report can be presented in the draft or inform of proposal. Once the audit report is presented, it marks the end of the audit process (Steven, 2014). Both the draft and the proposal are confidential. The audit report draft is handed over to the audited entity that has the right to file an objection within fifteen days from the day the report is delivered to them. After meeting, the auditor develops a proposal of the audit report and delivers it to the entity that was audited.
In the company there are three types of opinions that are usually given depending on the report. These opinions include; the qualified opinion, the unqualified opinion and the adverse opinion. Qualified opinion is given in situations where the auditor faced situations that do not comply with the accepted principles of accounting. Adverse opinion report is given when there auditor finds out that the financial statements of the entity being audited are misstated. Unqualified opinions are almost similar to the qualified opinion, but they are not accompanied with explanatory paragraphs.
Writing of Audit Reports Examples
Examples of Grant Thornton Audit Reports
Statement of Financial Position
Statement of Cash Flows
Reference
Collings .S (2011). Interpretation and Application of International Standards on Auditing. WILEY Publishers.
Stamp .E, Maurice Moonitz, (1979). International Auditing Standards, Prentice-Hall International Press.
Steven Hayes (2014). Principles of Auditing: An Introduction to International standards of Auditing. Pearson Education Limited.
