AUDIT PROCESS AND RELATED SERVICES
1. Introduction
The audit process is a systematic and structured approach undertaken by auditors to obtain sufficient
and appropriate audit evidence, which enables them to express an opinion on the truth and fairness of
an entity’s financial statements. In today’s complex and regulated financial environment, audits play a
critical role in promoting transparency, accountability, and trust among stakeholders.
The International Standards on Auditing (ISAs), issued by the International Auditing and Assurance
Standards Board (IAASB), provide a comprehensive framework that guides auditors throughout the
audit lifecycle. Compliance with ISAs ensures the reliability of audit outcomes and upholds the
integrity of the audit profession globally.
2. Framework of Audit-Related Services
Audit-related services encompass a range of engagements including:
•
Audits of Financial Statements (ISA-compliant engagements)
•
Reviews of Financial Statements (guided by ISRE 2400 and 2410)
•
Assurance Engagements Other than Audits or Reviews (under ISAE 3000)
•
Agreed-Upon Procedures Engagements (ISRS 4400)
•
Compilation Engagements (ISRS 4410)
These services vary in scope and the level of assurance provided, with audits offering the highest
level of assurance.
3. Importance of the Audit Process and Compliance with ISAs
Compliance with ISAs ensures:
•
Fulfilment of professional obligations
•
Enhances comparability of audit opinions globally
•
Maintains audit quality and strengthens public confidence
•
Facilitates regulatory compliance and protects investors
•
Assists auditors in applying professional scepticism and judgement
Failure to comply with ISAs may result in poor audit quality and loss of professional credibility.
4. Steps in the Audit Process – Detailed Notes
Step 1: Engagement Acceptance
•
Evaluate client integrity and ethical considerations (ISA 220, ISQC 1)
•
Assess auditor’s competence and independence
•
Agree on the terms of the engagement (ISA 210)
Step 2: Planning
•
Establish an audit strategy and plan (ISA 300)
•
Perform risk assessment procedures (ISA 315)
•
Determine materiality (ISA 320)
•
Understand internal controls (ISA 330)
Step 3: Execution (Performing Audit Procedures)
•
Carry out tests of controls (if control reliance planned)
•
Perform substantive procedures (tests of detail and analytical procedures)
•
Obtain sufficient appropriate audit evidence (ISA 500 series)
Step 4: Evaluation and Conclusion
•
Evaluate audit findings and accumulated misstatements (ISA 450)
•
Form conclusions based on audit evidence (ISA 700)
•
Ensure sufficient evidence supports the auditor's opinion
Step 5: Reporting
•
Prepare audit report (ISA 700, 705, 706)
•
Communicate with those charged with governance (ISA 260)
•
Issue management letters and recommendations
5. Assurance Engagements
Definition: An assurance engagement involves the auditor expressing a conclusion designed to
enhance the confidence of the intended users about the outcome of the evaluation or measurement of
a subject matter.
Ethical Principles: Auditors must adhere to the IESBA Code of Ethics, which includes:
•
Integrity
•
Objectivity
•
Professional competence and due care
•
Confidentiality
•
Professional behaviour
Assurance Engagement Framework:
•
Three-party relationship: Practitioner, responsible party, intended users
•
Subject matter: Information to be evaluated
•
Criteria: Benchmarks for evaluation (e.g., IFRS)
•
Evidence: Sufficient appropriate audit evidence
•
Report: Written conclusion
Engagement Acceptance: Practitioners must ensure:
•
Preconditions for assurance are present
•
The engagement is ethical and within their capability
Other Assurance Engagements (Not Audits or Reviews):
•
Compliance with ISAE 3000
•
Examples include sustainability reports, compliance audits, and internal control reviews
6. Quality Control (ISA 220, ISQC 1 & 2)
ISA 220 outlines the auditor’s responsibilities for quality management at the engagement level. Key
responsibilities include:
•
Leadership responsibilities for quality
•
Ethical compliance and independence
•
Acceptance and continuance procedures
•
Engagement performance
•
Monitoring and documentation
ISQC 1 and ISQM 1 & 2 (effective December 2022 onwards):
ISQM 1: Focuses on firm-wide quality management systems.
•
Risk-based approach to quality
•
Governance and leadership
•
Relevant ethical requirements
•
Acceptance and continuance
•
Engagement performance
•
Resources and information
•
Monitoring and remediation
ISQM 2: Applies to Engagement Quality Reviews (EQR)
•
Qualifications and eligibility of EQR reviewers
•
Timing and scope of EQR
•
Documentation of EQR procedures
Maintaining robust quality control systems ensures high-quality audits and compliance with
professional standards.
Conclusion
The audit process is a cornerstone of accountability and transparency in financial reporting. A wellplanned and executed audit, in line with ISAs and quality standards, provides reliable assurance to
stakeholders. Understanding the framework of assurance engagements and embedding quality
management at every level of the audit enhances public confidence and supports the integrity of the
auditing profession.