ISA 200 overall objectives of the independent auditor and the Conduct of an audit

This is the complete summary of ISA 200, Overall Objectives of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing.

The summary follows the standard structure of ISA which starts from Introduction, and follow by Objective, Definition, Requirement, and finally Application of Standard.

Introduction

• Overall responsibilities of auditor auditing the financial statements based on ISA
• Enable the independent auditor to meet those objectives
• Explains the scope, authority, and structure of the ISAs
• Cover when the audit financial statements by ISA

• Increase the degree of confidence of users of financial statements
• By express their option on the financial statements according to the framework they are preparing.
• The financial statements re-prepare by management and under the supervision of Those Charged with governance.
• It is not over right any law and regulation
• It requires the auditor to obtain reasonable assurance on financial statements
• Reasonable Assurance is not an absolute assurance, inherent limitation.
• The form of opinion expressed by the auditor will depend upon the applicable financial reporting framework and any applicable law or regulation

Overall Objectives ISA 200:

Overall, the main objective of this ISA are:

• To obtain reasonable assurance on the financial statements
• To report on the financial statements, and communicate as required by the ISAs, in accordance with the auditor’s findings.

Definitions of the key term in ISA 200:

For a definition, please refer to the full ISA.

• Applicable financial reporting framework—Refer to the framework that management use to prepare its entity’s financial statements and acceptable by relevance authority and regulator
• Audit evidence—Refer to any kind of information that audit use in order to drive conclusions on their audit.
• Audit risk—The that prevent auditor to make the right conclusion.
• Auditor—Professional who perform audit works.
• Detection risk—is basically refer to the risk that auditor might not detect.
• Financial statements—The five statements including Balance Sheet, Income Statements, Statement of Change in Equity, Statement of Cash Flow and Noted to Financial Statement.
• Historical financial information—Please refer to full ISA
• Management—Please refer to full ISA
• Misstatement—Please refer to full ISA
• Professional judgment—Please refer to full ISA
• Professional skepticism—Please refer to full ISA
• Reasonable assurance—Please refer to full ISA
• Risk of material misstatement—Please refer to full ISA

Requirements of ISA 200:

• Ethical Requirements Relating to an Audit of Financial Statements— Comply with relevant ethical requirements.
• Professional Skepticism— plan and perform an audit with professional skepticism.
• Professional Judgment— exercise professional judgment in planning and performing
• Sufficient Appropriate Audit Evidence and Audit Risk— sufficient appropriate audit evidence to reduce audit risk to an acceptably low level
• Conduct of an Audit in Accordance with ISAs— comply with all ISAs relevant to the audit, understand the entire areas of ISA.

Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing

ISA 200 Scope “Para 1-09”

• ISA 200 deals with the independent auditor’s overall responsibilities when conducting an audit of financial statements in accordance with ISAs.
• Explains the scope, authority and structure of the ISAs.
• ISAs are written in the context of an audit of financial statements.
• An audit in accordance with ISAs is conducted on the premise that management and, where appropriate, those charged with governance have acknowledged certain responsibilities that are fundamental to the conduct of the audit.
• The audit of the financial statements does not relieve management or those charged with governance of their responsibilities

Effective Date of ISA 200: for periods beginning on or after 15 December 2009

ISA 200 Objective

• To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework; and
• To report on the financial statements, and communicate as required bythe ISAs, in accordance with the auditor’s findings.

Definitions

For definitions refer definition page

ISA 200 Requirements

• Compliance with ethical requirement relating to audit of financial statement.
• Auditor shall exercise professional judgement in planning and performing audit of financial statement.
• Auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level for expression of opinion
• Auditor shall comply with all ISAs relevant to the audit.
• Auditor shall comply with each requirement of an ISA unless, entire ISA is irrelevant or requirement is conditional and condition doesn’t exist
• In case of departure from ISA auditor shall perform alternative audit procedures to achieve the aim of that requirement.
• If objective of ISA cannot be achieved auditor shall evaluate whether this prevents the auditor from achieving the overall objectives of the auditor and thereby requires the auditor, in accordance with the ISAs, to modify the auditor’s opinion or withdraw from the engagement. Document the same in accordance with ISA 230.