ASAD ULLAH.
ROLL NO 50.
CLASS BBA 7TH A.
ASSIGNMENT AUDITING SIR AMIR HUSSAIN.
AUDITING.
Audit is the examination or inspection of various books of accounts by an
auditor followed by physical checking of inventory to make sure that all
departments are following documented system of recording transactions. It is
done to ascertain the accuracy of financial statements provided by the
organisation.
HISTORICAL OVERVIEW.
Auditing has been a worldwide profession for hundreds of years. Historically,
auditing was concerned with accounting for government activities and
reviewing the work done by tax collectors. In the early years of auditing, the
keeping and maintaining of accounting records was done primarily to detect
fraudulent activity.
The industrial revolution in the mid 1700s to the mid 1800s was responsible
for the increased demand in auditors because this period saw an increase in
responsibility being passed from owners to managers. This led to an increased
requirement for auditors who were independent of management and who
were engaged not only to be alert for errors within financial records but also
errors within the records. In simple terms, deliberate errors in order to achieve
personal financial gain were deemed to be fraudulent activity (as is still the
case today) whilst error was (and still is) unintentional.
INTERNATIONAL STANDARDS ON AUDITING (ISA).
International Standards on Auditing (ISA) are professional standards for
the auditing of financial information. These standards are issued by
the International Auditing and Assurance Standards Board (IAASB).
International standards on auditing (ISA) guides the auditor to add value to the
assignment hence building confidence of investors.
The ISA standards cover various areas of auditing including
 Respective responsibilities
 Audit planning.
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Internal control.
 Audit evidence.
 Audit engagements.
 Using the work of other experts.
 Audit conclusions.
 Audit reports and standards for specialized areas during the audit
process.
THE DEVELOPMENT OF INTERNATIONAL
STANDARDS ON AUDITING.
International standards on auditing are promulgated by the International
Auditing Practices Committee (IAPC) of the International Federation of
Accountants. A codified core set of international standards on auditing were
completed and released in 1994. The release of the core set has led to a
growing acceptance of the standards by national standards setters and
auditors involved in global reporting and cross-border financing transactions.
In addition, the growth of assurance services has led to the development of a
new framework and a new direction for the work of the IAPC.
The benefits for the use of common global accounting standards by preparers
of financial statements and common auditing standards by auditors of those
statements have been debated for a number of years. Although the debate
continues, there is strong support for the creation of a common set of
standards for use in capital markets around the world, particularly for crossborder financing transactions.
Two important sets of standards have emerged as candidates for widespread
adoption: the accounting standards being developed by the International
Accounting Standards Committee (IASC) and the auditing standards being
developed by the International Auditing Practices Committee (IAPC) of the
International Federation of Accountants (IFAC).
The International Standards on Auditing (ISA) have come a long way since the
start of their development in the late 1970s. They started as guidelines under
the harmonisation process of international federation of accountants (IFAC)
and its member bodies. The AICPA is one of the founding member bodies of
IFAC and has participated in its activities since inception. IFAC's main focus is
the enhancement and further development of the worldwide accountancy
profession through its activities in ethics, education, the public sector,
management accountancy, technology, and auditing. The IAPC has been
charged with the responsibility to enhance and expand the worldwide use of
auditing standards. Its objective is to improve the quality and uniformity of
international practice by
a. Issuing international standards on auditing;
b. Issuing guidance on the application of such standards;
c. Promoting the adoption of the committee's pronouncements as
the primary source of national standards and as guidance in
cross-border offerings;
d. Promoting the endorsement of the standards by legislators and
securities exchanges; and
e. Promoting debate with practitioners, users, and regulators
throughout the world to identify user needs for new standards
and guidance.
The IAPC receives public interest input through the Consultative Advisory
Group (CAG), whose membership includes many of the leading international
organisations of the world. CAG's purpose is to provide advice to the IAPC on
its agenda; on issues of importance to the national, regional, and world
communities; on new issues or revisions of existing material; on matters of
public interest in the development of auditing standards; and on other practice
guidance. The IAPC issued 29 international auditing practice guidelines through
1990. At that time, it became clear that global capital markets needed auditing
standards for cross-border financing. When the IFAC membership endorsed a
change from guidelines to standards, the IAPC started on a lengthy
comprehensive project to revise the guidelines and codify international
auditing standards. In 1994, the IAPC issued a comprehensive, common body
of international standards on auditing (ISAs), primarily focused on the audit of
financial statements.
PROCEDURES OF INTERNATIONAL STANDARDS ON
AUDITING.
Substantive Procedures.
Substantive procedures are classified as processes, steps, and physical examinations
done by auditors. These procedures provide evidence relating to the correctness,
completeness, disclosure, rights, and valuations included in statements related to the
company’s financial position.
When performing audit procedures, the auditor is expected to gather sufficient
evidence to corroborate his or her audit opinion. This should be enough to enable
another auditor to apply the same conclusion about the operating effectiveness of
controls.
Analytical Procedures.
Analytical procedures are the processes, steps, and evaluations done to determine
plausible relationships between both financial and non-financial data. Depending on
which financial information is being audited, analytical auditing procedures can look
different.
COORDINATION OF INTERNATIONAL STANDARDS
ON AUDITING GLOBALLY.
International standards on auditing’s high-quality standards help create a
common audit language that reaches across borders to strengthen all
organizations, facilitate trade and support economic growth. The unique model
for developing these standards is currently under review, with the objective to
ensure that the international standard-setting model going forward is fit for
purpose in our rapidly changing world.
The Monitoring Group (MG), a group of international bodies has been charged with
the responsibility of overseeing the international audit and ethics standard-setting
processes.
Since ISA release, there has been a growing acceptance of ISAs, particularly
adoption and use of the standards by,
 A number of the large international accounting firms as the basis for
their worldwide auditing standards.
 Global public companies reporting outside their national borders.
 Companies involved in issuing securities in cross-border financing
transactions.
 Companies issuing securities in domestic financing transactions.
 Regulatory bodies accepting financial statements audited using the ISAs
for regulatory filings in their countries, or requiring the use of ISAs by
including them in company law.
 Global organisations, such as the organisation for Economic Cooperation
and Development, that have endorsed ISAs for use in auditing financial
statements in their jurisdictions.
 National accountancy bodies that have used ISAs as the basis for their
national auditing standards.
OBJECTIVES OF INTERNATIONAL STANDARDS ON
AUDITING.
The main objectives of the ISA are as follow,
 Analysing the comparability of national accounting as well as auditing
standards with international standards, determine the degree with which
applicable auditing and accounting standards are complied, and analyse
strengths and weaknesses of the institutional framework in sustaining highquality financial reporting.
 Assist the country in developing and implementing a country action plan for
improvement of institutional capacity with a view of strengthening the
corporate financial reporting system of the country.
FINDINGS OF INTERNATIONAL STANDARDS ON
AUDITING.
All of the proposed standards of ISA so far are given below,
 International Standard on Quality Control (ISQC) 1, Quality Controls for
Firms that Perform Audits and Reviews of Financial Statements, and
Other Assurance and Related Services Engagements
 ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an
Audit in Accordance with International Standards on Auditing.
 ISA 210, Agreeing the Terms of Audit Engagements.
 ISA 220, Quality Control for an Audit of Financial Statements.
 SA 230, Audit Documentation.
 ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of
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Financial Statements.
ISA 250, Consideration of Laws and Regulations in an Audit of Financial
Statements.
ISA 260, Communication with Those Charged with Governance.
ISA 265, Communicating Deficiencies in Internal Control to Those Charged
with Governance and Management.
ISA 300, Planning an Audit of Financial Statements.
ISA 315, Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment.
ISA 320, Materiality in Planning and Performing an Audit.
ISA 330, The Auditor’s Responses to Assessed Risks.
ISA 402, Audit Considerations Relating to an Entity Using a Service
Organization.
ISA 450, Evaluation of Misstatements Identified during the Audit.
ISA 500, Audit Evidence.
ISA 501, Audit Evidence-Specific Considerations for Selected Items.
ISA 505, External Confirmations.
SA 510, Initial Audit Engagements-Opening Balances.
ISA 520, Analytical Procedures.
ISA 530, Audit Sampling.
ISA 540, Auditing Accounting Estimates, Including Fair Value Accounting
Estimates, and Related Disclosures.
ISA 550, Related Parties.
ISA 560, Subsequent Events.
ISA 570, Going Concern.
ISA 580, Written Representations.
ISA 600, Special Considerations-Audits of Group Financial Statements
(Including the Work of Component Auditors).
ISA 610, Using the Work of Internal Auditors.
ISA 620, Using the Work of an Auditor’s Expert.
SA 700, Forming an Opinion and Reporting on Financial Statements.
ISA 705, Modifications to the Opinion in the Independent Auditor’s Report.
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 ISA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in
the Independent Auditor’s Report.
 ISA 710, Comparative Information-Corresponding Figures and
Comparative Financial Statements.
 ISA 720, The Auditor’s Responsibilities Relating to Other Information in
Documents Containing Audited Financial Statements.
 ISA 800, Special Considerations-Audits of Financial Statements Prepared in
Accordance with Special Purpose Frameworks.
 ISA 805, Special Considerations-Audits of Single Financial Statements and
Specific Elements, Accounts or Items of a Financial Statement.
 ISA 810, Engagements to Report on Summary Financial Statements.