Considering the Relevance and Reliability of Audit Evidence This Financial Audit Guideline draws on the exposure draft of proposed International Standard on Auditing ISA 500 Proposed a
Trang 1ISSAI 1500 The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International
Organization of Supreme Audit Institutions, INTOSAI For more information visit www.issai.org
Considering the Relevance and Reliability of Audit
Evidence
This Financial Audit Guideline draws on the exposure draft of proposed International Standard on Auditing (ISA) 500 (Proposed and Redrafted), ” Considering the Relevance and Reliability of Audit Evidence” developed by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC) The proposed ISA is included in this Guideline with the permission of IFAC
Exposure Draft of INTOSAI Practice Note, pages 3-7
(ISA 500 enclosed for reference)
For Comments
30 October 2008 – 30 January 2009
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APPLICABILITY OF THE ISA IN PUBLIC SECTOR AUDITING 3
ADDITIONAL GUIDANCE ON PUBLIC SECTOR ISSUES 4
A UDIT P ROCEDURES FOR O BTAINING A UDIT E VIDENCE 4
S PECIFIC C ONSIDERATIONS IN A C OURT OF A CCOUNTS E NVIRONMENT 5
APPENDIX 1:
RISKS RELATED TO REGULARITY AND POSSIBLE CONTROL PROCEDURES 6
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ISSAI 1500
Practice Note1 to (Proposed and Redrafted)
International Standard on Auditing 500 –
Considering the Relevance and Reliability of
Audit Evidence
Background
This Practice Note provides supplementary guidance on (Proposed and Redrafted)
ISA 500 – Considering the Relevance and Reliability of Audit Evidence It is read
together with the ISA The Practice Note is effective the same date as the ISA
Scope of the ISA
This International Standard on Auditing (ISA) explains what constitutes audit
evidence in an audit of financial statements, and deals with the auditor’s
responsibility to design and perform audit procedures to obtain relevant and reliable
audit evidence
This ISA is applicable to all the audit evidence obtained during the course of the
audit Other ISAs deal with specific aspects of the audit, the audit evidence to be
obtained, the procedures to be performed in obtaining audit evidence, and the
evaluation of whether sufficient appropriate evidence has been obtained
ISA 500 (Proposed and Redrafted) is effective for audits of financial statements for
periods beginning on or after December 15, 2009
()Content of the Practice Note
P1 The Practice Note provides additional guidance for public sector auditors
related to:
a Sources of Audit Evidence
b Audit Procedures for Obtaining Audit Evidence
c Information to be Used as Audit Evidence
d Specific Considerations in a Court of Accounts Environment
Applicability of the ISA in Public Sector Auditing
P2 ISA 500 (redrafted) is applicable to auditors of public sector entities in their
role as auditors of the financial statements
1
All Practice Notes are considered together with General Considerations in the Financial Audit
Guidelines
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Additional Guidance on Public Sector Issues
Sources of Audit Evidence
P3 As noted in paragraph 3 of ISA 500 (Proposed Redrafted), the entity’s
accounting records are an important source of audit evidence along with
other sources inside and outside the entity Audit evidence comprises both
information that supports and corroborates management’s assertions, and any
information that contradicts such assertions In the case of financial
statements in the public sector management may often assert that transactions
and events have been carried out in accordance with legislation or proper
authority Such assertions may fall within the scope of a financial audit2
Public sector auditors consider INTOSAI Compliance Audit Guidelines in
this regard.3
P4 When considering information from sources independent of the entity as
referred to in paragraph A3 in ISA 500 (Proposed Redrafted), public sector
auditors may consider sources as independent of the entity even though they
ultimately report to the same authority e.g operationally independent
government agencies reporting to the same authority The nature of
benchmarking data in the public sector may include other sources e.g
comparisons between similar programs, performance indicators etc
P5 When considering the sources of evidence in accordance with paragraph A2
of ISA 500 (Proposed Redrafted), public sector auditors may also consider
the use of evidence obtained in performance audits or other audit activities
relevant to the entity
Audit Procedures for Obtaining Audit Evidence
P6 As explained in paragraph A5 of ISA 500 (Proposed Redrafted), audit
evidence obtained from previous audits may, in certain circumstances,
provide appropriate audit evidence where the auditor performs audit
procedures to establish its continuing relevance When relying on evidence
obtained in previous performance audits, public sector auditors evaluate
whether the assertions used and tests performed are adequate for the purpose
of the financial statement audit
P7 When the audit mandate includes objectives on regularity of transactions the
public sector auditors may need to consider the nature and timing of audit
procedures as explained in paragraph A6 of ISA 500 (Redrafted) e.g the
ability to apply certain audit procedures to establish the regularity of the
transaction or the effectiveness of the controls may be adversely affected by
the passage of time
2
Financial audit in the context of the additional guidance provided in the Practice Notes refers to audits
of financial statements and additional assertions on regularity and compliance when dealt with in
association with an audit of financial statements (Financial/Regularity audits) The ISAs deals with audits
of financial statements
3
The Compliance Audit Guidelines are not yet approved, but are expected to be effective on the same
date as the Practice Note
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P8 Public sector entities will usually have established internal controls designed
to secure the regularity of transactions However, where the audited entity is
responsible for giving grants or other financial assistance to other parties, it is
often the case that the regularity of the transaction will depend on the other
parties satisfying the criteria and meeting the terms for receiving assistance
Evidence might then be required on the entity's exercise of its responsibilities
to satisfy itself about the transactions of these other parties (as demonstrated
in Appendix 1)
P9 When considering the guidance in paragraph A7 of ISA 500 (Proposed
Redrafted), public sector auditors take into account that data retention
requirements for public sector entities may be different as stipulated by
relevant legislation Public sector auditors familiarize themselves with
applicable legislation in regard to retention of data
Specific Considerations in a Court of Accounts Environment
P10 Public sector auditors operating in a Court of Accounts environment may be
subject to laws and regulations requiring the auditors to understand and
follow precise procedures related to rules of evidence Public sector auditors
familiarize themselves with policies and procedures describing additional
requirements relating to audit evidence and that are designed to ensure
compliance with applicable rules The following matters may affect evidence
collection and are considered by the auditor:
Legislation imposing additional requirements on audit evidence
The scope of additional requirements (i.e., are they to be imposed on every
document from the audit assignment or on specific documents relating to
certain audit issues)
Additional processing, formalities or requirements to which audit evidence
is subject
The purpose of each additional requirement as regards due process of law
in following the steps of the audit
Any restrictions that may be placed upon audit evidence due to specific
ways it has been collected and/or produced
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Appendix 1: Risks related to regularity and possible
control procedures
Risk Description Mitigating Controls
Complexity of
regulations
The more complex the regulations the greater the risk of error This may occur either through a misunderstanding or misinterpretation of the regulation or through an error in application
Formal procedures for the translation of statutory requirements into operating
instructions
Formal control plans prepared and monitored by scheme managers
Review of scheme control plans and operating manuals by internal audit or some other independent audit
New Legislation New legislation may
require the introduction
of new administrative an control procedures This may result in errors in either the design or operation of controls required to ensure regularity
The controls identified above involving formal procedures for the translation of statutory requirements into scheme rules Formal control plans and the independent review of operating instructions and control plans will also apply where schemes are introduced following new
legislation
International Schemes
(funded by the United
Nations, EU or other
institutions)
Where regulation is developed by such institutions there is a risk that regulations and guidance may be misinterpreted or omitted from internal instructions
The mitigating controls identified in connection with the complexity of regulations apply equally to such funded Schemes
Services and programmes
delivered through third
parties
Where programmes are administered by agents, departments lose a degree
of direct control and may have to rely on agents to ensure compliance with authorities
Formal agreements between the entity and the agent defining control procedures to
be applied in the administration of services
Management control
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and monitoring of third party activities
Inspection visits by internal audit to third parties to review systems and procedures, including those relevant to regularity
Independent certification of payments and receipts
by the third parties' auditor
Payments and receipts
made on the basis of
claims or declarations
An entity's ability to confirm compliance with authorities may be restricted where, for example, criteria specified for receipt of grant are not subject to direct verification
Established criteria for making claims, clearly set out in departmental instructions and guidance to claimants
Standard requirements for documentation evidencing entitlement
to be submitted in support of claims
(This may be a condition of payment
of grant or a requirement once the activity supported by the grant has been completed)
Physical inspection of claimants' records etc.,
to confirm eligibility
Procedures for assessing the financial standing of claimants before awarding a grant and for monitoring continuing solvency
Independent certification of the application of grant by external auditor
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Trang 8Exposure Draft
April 2007 Comments are requested by September 15, 2007
International
Auditing
and Assurance
Standards Board
Proposed Redrafted International Standard on Auditing
ISA 500, Considering the Relevance and Reliability of Audit Evidence
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The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body within the International Federation of Accountants (IFAC), approved the exposure draft, proposed International Standard on Auditing (ISA) 500 (Redrafted), ―Considering the Relevance and Reliability of Audit Evidence,‖ for publication in April 2007 This proposed ISA may be modified in light of comments received before being issued in final form
Please submit your comments, preferably by email, so that they will be received by September 15,
2007 All comments will be considered a matter of public record Comments should be addressed to:
International Auditing and Assurance Standards Board
International Federation of Accountants
545 Fifth Avenue, 14th Floor New York, New York 10017 USA Comments should be emailed to Edcomments@ifac.org They may also be faxed to
+1-212-286-9570 or mailed to the above address
Copies of the exposure draft may be downloaded free-of-charge from the IFAC website at http://www.ifac.org
Copyright © April 2007 by the International Federation of Accountants All rights reserved Permission is granted to make copies of this work to achieve maximum exposure and feedback provided that each copy bears the following credit line: ―Copyright © April 2007 by the International Federation of Accountants All rights reserved Used with permission.‖
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CONTENTS
Page
Explanatory Memorandum 4
Introduction 4
Background 4
Significant Proposals 4
Effective Date 5
Guide for Respondents 5
Supplement to the Exposure Draft 6
Exposure Draft Proposed International Standard on Auditing (ISA) 500 (Redrafted), ―Considering the Relevance and Reliability of Audit Evidence‖ 7
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EXPLANATORY MEMORANDUM
Introduction
This memorandum provides background to proposed International Standard on Auditing (ISA) 500 (Redrafted), ―Considering the Relevance and Reliability of Audit Evidence.‖ The proposed ISA has been redrafted in accordance with conventions agreed by the International Auditing and Assurance Standards Board (IAASB) to be applied to all ISAs The IAASB approved the proposed redrafted ISA for exposure in April 2007
Background
As part of its project to improve the clarity of its International Standards, the IAASB has undertaken
to redraft all of its ISAs in accordance with its new clarity drafting conventions This approach responds to the desire for all ISAs to be consistently drafted, and subject to a single statement of their authority and effect The IAASB has agreed, in response to the general call for the Clarity project to be completed within a reasonable time, that while a significant number of the ISAs are under substantive revision as well as redrafting to reflect the new conventions, others will be subject
to a limited redrafting to reflect only the conventions and matters of clarity generally ISA 500 is in the latter category
The conventions used by the IAASB in redrafting ISA 500 for exposure, and the authority and obligation attaching to those conventions, are established in the amended ―Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services‖1(Preface), approved by the IAASB in September 2006
Significant Proposals
Obtaining Sufficient Appropriate Audit Evidence
The IAASB is of the view that the overarching bold type requirement in paragraph 2 of extant ISA
500, ―Audit Evidence‖ for the auditor to obtain sufficient appropriate audit evidence is a fundamental audit requirement, appropriate for inclusion as a requirement in proposed ISA 200 (Revised and Redrafted), ―Overall Objective of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing.‖2 Further, the IAASB believes that including this requirement in proposed ISA 200 (Revised and Redrafted) provides the appropriate context for the requirement of that ISA that the auditor use objectives to consider whether sufficient appropriate audit evidence has been obtained
Accordingly, the requirement for the auditor to obtain sufficient appropriate audit evidence has been moved from extant ISA 500 to proposed ISA 200 (Revised and Redrafted) along with supporting Application and Other Explanatory Material As a result of the repositioning of this requirement,
1 The Preface can be accessed at http://web.ifac.org/download/IAASB_Preface.pdf
2 The IAASB approved in April the Exposure Draft, proposed ISA 200 (Revised and Redrafted) This Exposure Draft
is available on the IAASB website at http://www.ifac.org/Guidance/EXD-Details.php?EDID=0079
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