ISSAI 200 · 2020. 12. 16. · 6 ISSAI 200 s FINANCIAL AUDIT PRINCIPLES 4) The main purpose of the...

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Organisation of Supreme Audit Institutions, INTOSAI, as part of

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ISSAI

INTOSAI

200

Financial Audit Principles

INTOSAI

INTOSAI, 2020

1) EndorsedasGeneralstandardsinGovernmentAuditingandstandardswithethicalsignificancein20012) Content reformulated and endorsed as Fundamental Principles of FinancialAuditingin20133) ContentreformulatedandapprovedasFinancialAuditPrinciplesin2020

ISSAI200isavailableinallINTOSAIofficiallanguages:Arabic,English,French,German and Spanish

TABLE OF CONTENTS

1. INTRODUCTION 5

2. AUTHORITY OF ISSAI 200 7

3. FRAMEWORK FOR FINANCIAL AUDITING 8

Definition and objectives of financial auditing 8

Preconditions for an audit of financial statements in accordance with the ISSAIs 8

Financial reporting framework 9

Assessing the financial reporting framework 10

4. ELEMENTS OF FINANCIAL AUDITING 12

Subject matter for financial auditing 12

Three parties in financial auditing 12

Criteria used in financial auditing 13

Reasonable assurance engagement 13

5. PRINCIPLES OF FINANCIAL AUDITING 14

Agreeingthetermsoftheengagement 14

Planning 15

Materiality 15

Understandingtheauditedentity 16

Riskidentificationandassessment 16

Response to assessed risks 17

Considerationsrelatingtofraud 17

Goingconcernconsiderations 18

Considerationsrelatingtolawsandregulationsinanaudit offinancialstatements 18

Audit evidence 19

Evaluatingmisstatements 19

Forminganopinionandreportingonthefinancialstatements 20

Modificationstotheopinionintheauditor’sreport 21

EmphasisofMatterparagraphsandOtherMatters paragraphsintheauditor’sreport 21

Considerationofsubsequentevents 22

Comparativeinformation-correspondingfiguresand comparativefinancialstatements 22

Theauditor’sresponsibilitiesinrelationtootherinformation indocumentscontainingauditedfinancialstatements 23

Considerationsrelevanttoauditsofconsolidated financialstatements 24

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INTRODUCTION

1) Thepublicsectorfinancialauditorworksinthepublicinterestbyprovidingfinancial audit services. This involves giving assurance on the financialinformationpreparedby public sector authorities or entities on their useandmanagementofpublicfundsandassets.Theresult-intheformofauditopinions and/or reports – can be used as a basis to hold those responsible toaccount.Assuch,financialauditconstitutesanimportantelementofthepublicfinanceaccountabilityprocess.

2) Professionalstandardsandguidelinesdrivethequalityandprofessionalismof public sector auditing and thereby underpin the credibility of theprofession and its work. The International Standards of Supreme AuditInstitutions (ISSAIs), developed by the International Organisation ofSupreme Audit Institutions (INTOSAI), aim to promote independent andeffectiveauditingandserveasabasisforINTOSAImemberstodeveloptheirown tailored professional approaches in accordance with their mandates andnationallawsandregulations.Theprinciplesinthesestandardsdonotoverridenationallaws,regulationsormandates.

3) ISSAI 100 - Fundamental Principles of Public-Sector Auditing establishes the fundamental principles which are applicable to all public sector audit engagements. ISSAI200complements the fundamentalprinciplesof ISSAI100 with the specific context of audits of financial statements. Togetherthey constitute the basis for INTOSAI’s complete set of professionalpronouncementsinthisarea,andshouldbothbecompliedwith.

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ISSAI 200 - FINANCIAL AUDIT PRINCIPLES

4) ThemainpurposeoftheISSAIsonfinancialauditistoprovideINTOSAImemberswithacomprehensivesetofprinciplesandstandardsfortheauditoffinancialstatements(orotherformsoffinancialinformation)ofpublic-sectorentities.AccordinglytheprinciplessetoutinISSAI200,formthebasisformorespecificauditstandardsonfinancialaudit(ISSAIs2000-2899)aswellasGuidelinesonhowtoapplythem(GUID2900-2999). ISSAIscontain [applicationmaterial] issued by INTOSAI to provide guidance on the application of the relevantInternational Standards on Auditing (ISAs) developed by the InternationalAuditingandAssuranceStandardsBoard(IAASB).SupremeAuditInstitutions(SAIs)maysometimescombinefinancialauditswithelementsofcomplianceand/or performance audit, in which case the related principles apply to the specificaudittypesasapplicable.

5) ISSAI200providesthekeyprinciplesfortheauditofindividualorconsolidatedfinancialstatements,orspecificelementsthereof.Itcoversthe:

• authority of ISSAI 200;

• frameworkforfinancialauditing;

• elementsoffinancialauditing;and

• financialauditprinciples.

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2AUTHORITY OF ISSAI 200

6) ISSAI200providestheprinciplesforanauditoffinancialstatementsorotherformsofpresentationoffinancial information.Theprinciplesestablishtheminimumrequirements forpublicauditingstandardssetatnational level,orstandardsappliedbyaSAIwhichithasdevelopeditself,orbyothers.TheauthorityoftheISSAIsiscoveredbyISSAI100.

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3FRAMEWORK FOR

FINANCIAL AUDITING

Definition and objectives of financial auditing

7) Financial audit involves determining, through the collection of auditevidence, whether an entity’s financial information is presented in itsfinancialstatementsinaccordancewiththefinancialreportingandregulatoryframework applicable. In the case of fair presentation frameworks, theauditorassesseswhethertheinformationisfairlypresented.Inthecaseofcomplianceframeworkstheauditorassessestheextenttowhichcomplianceisachieved.

8) The objective of financial audit is, through the collection of sufficientappropriate evidence, to provide reasonable assurance to the users, in the formofanauditopinionand/orreport,astowhetherthefinancialstatementsorotherformsofpresentationoffinancial informationarefairlyand/orinallmaterialrespectspresentedinaccordancewiththeapplicablefinancialreportingandregulatoryframework.

Preconditions for an audit of financial statements in accordance with the ISSAIs

9) Beforecommencingafinancialauditengagementtheauditorshould:

• assess the acceptability of the financial reporting framework of theauditedentity;and

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• ensurethatthemanagementoftheentityacknowledgesandunderstandsitsresponsibilityfor:

» preparing the financial statements in accordancewith the applicablefinancialreportingframework;

» internalcontrolthatmanagementdeemsnecessaryforthepreparationoffinancialstatementsthatarefreefrommaterialmisstatementwhetherdue to fraud or error; and

» providing the auditor with access to all information and personsnecessarytocompletetheaudit.

Financial reporting framework

10) Financialreportingframeworksareeither:

• generalpurpose:designedtomeettheinformationneedsofawiderangeof users; or

• specialpurpose:designedtomeettheneedsofaspecificuserorgroupofusers(forexamplethefinancialreportingprovisionsestablishedbyaninternationalfundingorganisation,agoverningbody,thelegislatureorbyacontract).

11) TheprinciplesofISSAI200arerelevantforauditsofdifferenttypesoffinancialstatements,suchasthosepreparedinaccordancewithbothgeneralpurpose(eg, IPSAS, IFRS or national financial reporting frameworks) and specialpurposeframeworks.

12) Inaddition,financialreportingframeworkscanbeeither:

• compliance-based:settingouttherulesandrequirementstobefollowedstrictly in all cases; or

• fair presentation-based: recognizing that, in order to achieve a fairpresentationoftheentity’sfinancialstatements,itmaybenecessaryforthepreparerstodepartfromtherequirementsoftheframework,ortogiveadditionaldisclosures.

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13) TheprinciplesofISSAI200arealsoapplicabletoauditsofpublic-sectorentitiesthatpreparefinancial information, (including singlefinancial statementsorspecificelements,accountsoritemsofafinancialstatement),forotherpartiessuchasgoverningbodies,the legislatureorotherpartieswithanoversightfunction.

14) Whentheauditorisrequiredtoundertakeauditsofbudgetaryexecutionthiscanincludetheexaminationoftheregularityofbudgetarytransactionsandcomparisonbetweenactual andbudget. Thismayoften involve specificorindividualfinancialreportingframeworks.Forthistypeofauditengagement,thepreconditionsestablishedbytheISSAIsonfinancialauditmaynotbeinplace,buttheprinciplestheycontainshouldbeappliedtotheextentpossible.

Assessing the financial reporting framework

15) Thefinancialreportingframeworkshouldbeapplicabletothecircumstancesof the audited entity, notably in terms of giving a fair presentation of thefinancial results and position when appropriate. The financial reportingframeworkappliedisnormallyprescribedbylaw,regulationorotherrelevantauthority.Ifnot,itisatthediscretionofmanagement.

16) Theauditorshouldassesstheacceptabilityofthefinancialreportingframeworkused.Atpresent,thereisnoobjectiveandauthoritativebasisthathasbeengenerallyrecognisedgloballyforjudgingtheacceptabilityofgeneralpurposeframeworks. In the absence of such a basis, financial reporting standardsestablishedbyorganisationsthatareauthorisedorrecognisedtopromulgatestandards(eg,IPSAS,IFRS)tobeusedbycertaintypesofentitiesarepresumedtobeacceptableforgeneralpurposefinancialstatementspreparedbysuchentities, provided the organisations follow an established and transparentprocessinvolvingdeliberationandconsiderationoftheviewsofawiderangeof stakeholders. To be acceptable, a financial reporting framework has toensurethattheinformationprovidedinthefinancialstatementsisofvalueto the intended users, namely: relevant, complete, reliable, objective andunderstandable.

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17) If the framework is not considered acceptable, the auditor should assess the effectonthefinancialstatementsintermsofmissinginformationoritsimpactonthefinancialresultsorposition:

• when the choice of the reporting framework is at the discretion ofmanagement,theauditorshouldsuggesttheframeworkbechanged;or

• whenachangeintheframeworkisnotpossible,suchaswhenprescribedbylaworregulation,theauditorshouldinformtheauditeeofadditionaldisclosures needed in the financial statements to avoid them beingmisleading.

18) Theauditorshould,takingaccountoftheauditee’sresponse,determinetheimpact on the audit opinionor consider an emphasis ofmatter explainingthe impactof thefinancial reporting frameworkon the results, assets andliabilitiesorotheraspects.TheauditormayalsoconsiderotheractionssuchasinformingthelegislatureorwithdrawingfromtheauditengagementiftheSAIisabletodoso.

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4ELEMENTS OF FINANCIAL

AUDITING

19) Inapublicsectorfinancialaudit,theelementsdefinedinISSAI100(subjectmatter,auditor,responsibleparty,intendedusersandcriteria)mayvaryfromoneauditeetoanother.Auditorsshouldexplicitlyidentifytheseelementsforeachaudit,andanalysetheimplications.

Subject matter for financial auditing

20) Thesubjectmatterofafinancialauditistheaccountingandrelateddataofanentity,normallypresentedintheformoffinancialstatements(thelatterknownasthesubjectmatterinformation).

Three parties in financial auditing

21) The responsibility of the auditor is to plan and perform the audit in accordance withtheapplicableauditingstandardsandmandate,andcommunicatetheresults.

22) Theresponsiblepartyisresponsibleforthesubjectmatterinformationandunderlyingsubjectmatter.

23) The‘intendeduser’offinancialstatementsinthepublicsectorisprimarilythelegislature,whichrepresentscitizens(theultimateusers).Thelegislatureholdsgovernmenttoaccountfortheuseofpublicfunds,largelybasedontheinformationprovidedbygovernment.Theassuranceonthereliabilityof

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thisinformationthroughfinancialauditisthereforeakeypartofthisprocess.Otherintendedusersmayincludeministriesinthecaseoffinancialstatementsofpublicsectorentitiesworkingontheirbehalf.

Criteria used in financial auditing

24) Criteriaarethebenchmarks,measuresorattributesagainstwhichthesubjectmatterismeasuredagainsttocometoaconclusionontheauditobjectives.Thecriteriausedintheauditoffinancialstatementswouldgenerallybebasedonthefinancialreportingframeworkusedbytheresponsiblepartyintheirpreparation.

Reasonable assurance engagement

25) Audits of financial statements conducted in accordance with the ISSAIsare attestation engagements which aim to provide reasonable assurance.Reasonable assurance is a high but not absolute level of assurance,whichmeans it is not a guarantee that theauditwill detect all casesofmaterialmisstatement.

26) Ingeneral,reasonableassuranceauditsaredesignedtoresultinaconclusionexpressedinapositiveform,suchas“inouropinionthefinancialstatementspresent fairly, in allmaterial respects (or give a true and fair view of) thefinancialpositionof…anditsfinancialperformanceandcashflows…”or,inthecaseofacomplianceframework,“inouropinionthefinancialstatementsareprepared,inallmaterialrespects,inaccordancewith…”.

27) Limitedassuranceengagements,suchassomereviewengagements,arenotcoveredbythecurrentISSAIsonfinancialaudit.

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5PRINCIPLES OF FINANCIAL

AUDITING

28) ThegeneralprinciplesofpublicsectorauditingaresetoutinISSAI1001, and instandardsonethics,qualitycontrol,andonoverallresponsibilitiesofanauditorinanauditoffinancialstatements.Theycover:

• ethics and independence;

• professionaljudgment,duecareandscepticism;

• qualitycontrol;

• auditteammanagementandskills;

• audit risk;

• materiality;

• documentation;

• reportingandfollowup,and

• communication.

29) The following paragraphs set out the specific principles related to publicsectorfinancialaudit.

» Agreeing the terms of the engagement

30) The terms of an audit engagement in the public sector are normallymandatedbylegislation.Thepublicsectorauditorshouldreachacommonunderstandingwithmanagementorthosechargedwithgovernanceabout

1 ISSAI100paragraphs34to43.

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therespectiverolesandresponsibilitiesforeachauditengagement,preferablyinwriting.Whenanengagementarises froma request frommanagement,those charged with governance or the legislature, then all parties shouldagreeonthetermsofthatengagement.

» Planning

31) Theauditorshouldplantheaudittoensurethatitisconductedinaneffectiveandefficientmanner,bydeterminingthescope,timingandapproachandthepracticalstepstobetaken.

32) Detailedplanningiskeytoauditingefficientlyandeffectively.Thenatureandextentoftheplanningneededwilldependonwhetheritisthefirstauditoftheentityor,arecurrenttask,thesizeandcomplexityoftheentity,andtheteammembers’previousexperiencewiththeentity.Planningshouldbeupdatedastheengagementprogressesinordertotakeaccountofunexpectedissuesoreventsaffectingtheriskassessmentorimplementationoftheaudit.

» Materiality

33) Theauditorshouldapplytheconceptofmateriality,bothinquantitative(byamount)andwhenrelevantinqualitative(bynature)terms,whenplanningandperformingtheaudit,evaluatingthefindingsandreportingontheresults.

34) Whenplanning theaudit, theauditor shoulddetermineanoverall levelofmateriality for the financial statements as a whole, taking account of thelevel ofmisstatement which could influence the decisions of the users ofthose statements. Theauditor should then reduce that levelofmaterialitywhenestablishingtheauditworktobeundertaken,inordertoreducetoanacceptable leveltheriskthattheaggregateofundetectedanduncorrectedmisstatementsdonotexceedoverallmateriality.

35) This lowermateriality level (sometimesknownasperformancemateriality)should be used to help determine the nature, timing and extent of auditprocedures, and to assess the results of those procedures. The extent of

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uncorrectedmisstatementsinthefinancialstatementsshouldbecomparedtooverallmateriality,takingintoaccounttheirquantitativeeffectandnature,whenformingtheopinionintheauditor’sreport.Thematerialityappliedtoreportingmayneedtoberevisedcomparedwiththatestablishedforplanning,dependingontheentity’sfinalresultsorotherfactors.

» Understanding the audited entity

36) The auditor should obtain a sufficient understanding of the audited entityandtheenvironmentinwhichitoperates,theapplicablefinancialreportingframework and the entity’s systemof internal control, in order to identifyandassesstherisksofmaterialmisstatement.Anentity’ssystemofinternalcontrolcomprisesfivecomponents:thecontrolenvironment,theentity’sriskassessmentprocess, theentity’sprocess tomonitor the systemof internalcontrol,theentity’s informationsystemandthecontrolactivities(includingITcontrols).

» Risk identification and assessment

37) Theauditor’sidentificationandassessmentoftheriskofmaterialmisstatementtakes into account both inherent risk (the risk that a particular accountheadingorclassoftransactionswillbesubjecttoerrorormisstatement)andcontrolrisk(theriskthatinternalcontrolsdonotpreventordetectandcorrectparticularerrorsormisstatements).

38) Theauditoridentifiesandassessesinherentriskwithouttakingintoaccounttheeffectofanyrelatedcontrols,anddetermineswhetheranyoftheinherentrisks are significant.The auditor should evaluate the design of the controlsrelevant to the audit (notably in relation to significant inherent risks), andconsiderwhethertheyarelikelytobeimplementedinpractice.

39) Theauditorshouldidentifyandassesstheriskofmaterialmisstatementinthefinancialstatementsasawhole,andatassertionlevel,inordertodeterminethemostappropriateauditprocedurestoaddressthoserisks.

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40) Riskassessmentprocedureshelpidentifythenatureandextentoftheauditwork which should take place, but do not themselves provide sufficientappropriateauditevidenceonwhichtobaseanauditopinion.

» Response to assessed risks

41) The auditor should obtain sufficient appropriate audit evidence regardingtheassessedrisksofmaterialmisstatement,bydesigningandimplementingappropriateresponsestothoserisks..Thehighertherisk,themoreextensivemaybe the audit procedures required, and themorepersuasive the auditevidenceneeded.

42) Theauditorshoulddesignand implementoverall responsestoaddresstherisksofmaterialmisstatementat thefinancial statement level,and furtherauditprocedureswhosenature,timingandextenttakeaccountoftherisksofmaterialmisstatementattheassertionlevel.Suchauditproceduresusuallyinclude tests of control and substantive procedures (analytical proceduresand/ortestsofdetail).

43) If controlsare likely tobeeffective, theauditorcanconsider testing them.If testing shows that controls areoperatingeffectively, this can reduce theamountofsubstantivetestingneededtoaddresstheidentifiedrisk.Controlsshouldbetestedincircumstanceswhensubstantiveproceduresalonearenotsufficient.

» Considerations relating to fraud

44) As part of the identification and assessment of the risks of materialmisstatement, the auditor should consider whether material misstatements couldariseduetofraud,andundertakeappropriateresponsestothoserisks.

45) The primary responsibility for the prevention and detection of fraud restswithanentity’smanagementorthosechargedwithgovernance.Theauditoris responsible for providing reasonable assurance on the extent to whichthe financial statements are free from material misstatement. Material

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misstatements canarise fromerroror fraud.However, thenatureof fraudmakes it verydifficult for theauditor to identify,and therefore there isnoguaranteethatallmaterialmisstatementscausedbyfraudwillbedetected.Assuch, the auditor should consider what audit procedures should be undertaken asappropriatewhentheriskoffraudismaterial.Theauditorshouldconsiderbringinganycasesoffraudorsuspectedfraudidentifiedduringtheaudittotheattentionoftherelevantauthorities.

» Going concern considerations

46) The auditor should consider and conclude whether there are events or conditions that representamaterialuncertaintyabout theauditedentity’sintentionandabilitytocontinueasagoingconcern.

47) The going concernof an audited entity is a fundamental principlewith animpact on the financial statements, as it affects the accounting basis thatshouldbeused,notablythecarryingvalueofassetsandliabilities.

48) Theauditorshouldobtainsufficientappropriateauditevidencetoconcludeonthemanagement’suseofthegoingconcernassumptionwhenpreparingthefinancialstatements,andreportasnecessary.

» Considerations relating to laws and regulations in an audit of financial statements

49) Theauditor should identify the risksofmaterialmisstatementdue tonon-compliancewithlawsandregulations,andrespondappropriately.

50) The auditor should obtain sufficient appropriate audit evidence regardingcompliancewiththeprovisionsofthoselawsandregulationshavingadirecteffect on the determination of material amounts and disclosures in thefinancialstatements.Theauditorshouldalsoperformauditprocedurestohelpidentifyinstancesofnon-compliancewiththoseother lawsandregulationsthatindirectlymayhaveamaterialeffectonthefinancialstatements.

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51) Inthepublicsector,theremaybeadditionalauditresponsibilitieswithrespecttotheconsiderationofanylawsandregulationswhichrelatetotheauditoffinancialstatementsorotheraspectsoftheentity’soperations.Insuchcases,theauditorshoulddistinguishbetweenthescopeofworkperformedtoverifycompliancewiththelawsandregulationsfortheneedsofissuingtheopinionon thefinancial statements, and theauditworkperformed to verifyothercomplianceissuesfortheneedsofissuingacomplianceauditopinionand/orreport.

52) The auditor should obtain an adequate understanding of the legal andregulatory framework applicable to the specific environment in which theauditedentityoperates,includinghowitcomplieswiththeframework.

53) Theprovisionsofsomelawsorregulationshaveadirecteffectonthefinancialstatements in that they determine the reported amounts and disclosures therein.Other lawsorregulationsaretobecompliedwithbytheentityorsettheprovisionsunderwhichtheentityoperates,butonlyhaveanindirecteffectonitsfinancialstatements.

» Audit evidence

54) Theauditorshoulddesignandperformauditproceduresinordertoobtainsufficient appropriate audit evidence (in terms of quantity and quality) onwhichtobasetheauditconclusionsandopinion.

55) Thequantityofauditevidenceneededtosupportaconclusiondependsontheauditor’sassessmentoftherisksofmisstatementandalsobythequalityof that evidence. The quality of audit evidence refers to its relevance andreliability.Thereliabilityofevidence is influencedby itssource,natureandthecircumstancesunderwhichitisobtained.

» Evaluating misstatements

56) Theauditor should recordmisstatements identifiedduring theaudit, bringthem to the attention ofmanagement or those chargedwith governance.

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The auditor should assess if the misstatements mean further audit work is requiredandtheirimpactonthefinancialstatements,ifuncorrected.

57) The auditor should assess whether uncorrected misstatements are material, individuallyorinaggregate,todeterminewhateffecttheymayhaveontheauditopinion.

» Forming an opinion and reporting on the financial statements

58) Based on the audit evidence, the auditor should form an opinion as towhetherthefinancialstatementshavebeenpreparedinaccordancewiththeapplicablefinancialreportingframework,andiftheyarefreefrommaterialmisstatement.

59) Inordertoformanopinion,theauditorshouldfirstconcludewhethertheyhavereasonableassuranceonwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement.

60) Theauditorshouldexpressanunmodifiedopinioniftheauditevidenceshowsthatthefinancialstatementshavebeenprepared,inallmaterialrespects,inaccordancewiththeapplicablefinancialframework.

61) If the auditor concludes that, based on the audit evidence obtained, the financial statements as a whole contain material misstatement, or theauditorisunabletoobtainsufficientappropriateauditevidencetoconcludeas towhether the financial statements as a whole are free frommaterialmisstatement,theauditorshouldmodifytheopinionintheauditor’sreportinaccordancewiththesectionon“Modificationstotheopinionintheauditor’sreport”.

62) Inaddition to theopinionon thefinancial statements, theauditormayberequiredbylaworregulationtoreportobservationsandfindingswhichhavenotaffectedtheopinion,andanyrecommendationsmadeasaresultthereof.Theseelementsshouldbeclearlydistinguishedfromtheopinion.

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» Modifications to the opinion in the auditor’s report

63) The auditor should modify the opinion in the auditor's report when the auditorconcludes,basedontheauditevidenceobtained,thatthefinancialstatements as a whole contain material misstatement, or if the auditor was unabletoobtainsufficientappropriateauditevidencetoconclude.

64) Auditorsmayissuethreetypesofmodifiedopinion:

• a qualified opinion –when the auditor concludes that, or is unable toobtain sufficient andappropriateaudit evidenceabout,misstatements,whether individually or in aggregate are, or couldbe,material but notpervasive;

• an adverse opinion –when the auditor, having obtained sufficient andappropriate audit evidence, concludes that misstatements, whether individuallyorinaggregate,arebothmaterialandpervasive;or

• adisclaimerofopinion–whentheauditorisunabletoobtainsufficientandappropriateauditevidenceduetoanuncertaintyorscopelimitationwhichisbothmaterialandpervasive.

65) Thedecisionregardingwhichtypeofmodifiedopinionisappropriatedependsuponthe:

• nature of thematter giving rise to themodification - that is, whetherthefinancialstatementsaremateriallymisstatedor, intheeventthatitwasnotpossibletoobtainsufficientappropriateauditevidence,maybematerially misstated; and

• auditor’s judgment about the pervasiveness of the effects or possibleeffectsofthematteronthefinancialstatements.

» Emphasis of Matter paragraphs and Other Matters paragraphs in the auditor’s report

66) If the auditor considers it necessary to draw users’ attention to a matterpresentedordisclosedinthefinancialstatementsthatisofsuchimportance

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that it is fundamental to their understanding of the financial statements,andthereissufficientappropriateevidencethatthematterisnotmateriallymisstatedinthefinancialstatements,theauditorshouldincludeanemphasisofmatterparagraphintheauditor’sreport.

67) If the auditor considers it necessary to communicate amatter other thanthosethatarepresentedordisclosed inthefinancialstatements,which, inthe auditor’s judgement, is relevant to users’ understanding of the audit,theauditor’sresponsibilitiesortheauditor’sreport,andprovidedthisisnotprohibitedbylaworregulation,thisshouldbedoneinaparagraphwiththeheading’OtherMatters’oranotherappropriateheading.

» Consideration of subsequent events

68) Theauditorshouldobtainsufficientappropriateauditevidencethatalleventsoccurringbetweenthedateofthefinancialstatementsandthedateoftheauditor’sreportthatrequireanadjustmentto,ordisclosurein,thefinancialstatementshavebeenidentifiedandappropriatelyreflectedinthefinancialstatements.

69) The auditor should also respond appropriately to facts that became known afterthedateoftheauditor’sreportandwhich,hadtheybeenknownatthatdate,mayhavecausedtheauditortoamendtheauditor’sreport.

» Comparative information - corresponding figures and comparative financial statements

70) Theauditorshouldobtainsufficientappropriateauditevidenceaboutwhetheranycomparative information included in thefinancial statementshasbeenpresented,inallmaterialrespects,inaccordancewiththerequirementsforcomparativeinformationintheapplicablefinancialreportingframeworkandreportinaccordancewiththeauditor’sreportingresponsibilities.

71) Comparative informationreferstoamountsanddisclosures included inthefinancialstatementsinrespectofoneormorepriorperiods.Corresponding

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figuresareamountsandotherdisclosuresforthepriorperiodincludedasanintegralpartofthecurrentperiodfinancialstatements.Comparativefinancialstatements are where amounts and other disclosures for the prior period are includedforcomparisonwiththefinancialstatementsofthecurrentperiodwiththesamelevelofinformationasthecurrentperiod.

72) Theauditorshouldevaluatewhetherthecomparativeinformationmatchesthe amounts and other disclosures presented in the prior period or, when appropriate, they have been restated. The auditor should also evaluatewhether the accounting policies reflected in the comparative informationare consistent with those applied in the current period or, if there have been changes inaccountingpolicies,whether thosechangeshavebeenproperlyaccountedforandadequatelypresentedanddisclosed.

73) Forcorrespondingfigures,theauditor’sopiniononthefinancialstatementsreferstothecurrentperiodonly.Forcomparativefinancialstatements,theauditor’s opinion refers to each period for which financial statements arepresented.

» The auditor’s responsibilities in relation to other information in documents containing audited financial statements

74) The auditor should read all other information in an entity’s annual reportand consider whether there are any material inconsistencies or material misstatement of fact with the audited financial statements, or with theauditor’s knowledge obtained during the audit. If, when considering theotherinformation,theauditoridentifiesamaterialinconsistencyormaterialmisstatement of fact, the auditor should determine whether the audited financialstatementsortheotherinformationneedstoberevised.

75) Other information refers to financial or non-financial information (otherthanfinancial statements and the auditor’s report thereon) included in anentity’sannualreport.Thisusuallyrepresentsadocument,orcombinationofdocuments,preparedtypicallyonanannualbasisbymanagementorthosechargedwithgovernanceinaccordancewithlaw,regulationorcustom,thepurposeofwhichistoprovidestakeholderswithinformationontheentity’s

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operationsandtheentity’sfinancialresultsandfinancialpositionassetoutinthefinancialstatements.

76) In case of material inconsistency, the action the auditor should take mayinclude modifying the auditor's opinion, withholding the auditor's report,withdrawingfromtheengagement(intherarecaseswherethisispossibleinthepublicsector),notifyingthosechargedwithgovernance,orincludinganOtherMatterparagraphintheauditor'sreport.

77) Iftheauditoridentifiesamaterialinconsistencythatthemanagementoftheauditedentityrefusestocorrect,theauditorshouldnotifythosechargedwithgovernance.Auditorsmayalsoberequiredordecidetonotifyotherparties,suchasthelegislature,inadditiontothosechargedwithgovernance.

» Considerations relevant to audits of consolidated financial statements

78) Auditors engaged to audit consolidated financial statements should obtainsufficient appropriate audit evidence on the reliability of the financialinformation of the components and the consolidation process to expressanopinionas towhether the consolidatedfinancial statementshavebeenprepared,inallmaterialrespects,inaccordancewiththeapplicablefinancialreportingframework.

79) These principles apply to all public sector audits of consolidated financialstatements.Insituationswheretheauditorisengagedtoauditconsolidatedfinancial statements specific requirements and considerations may apply,includingensuringthequalityoftheworkofthecomponentauditors.

INTRODUCTIONAUTHORITY OF ISSAI 200

Definition and objectives of financial auditingPreconditions for an audit of financial statements in accordance with the ISSAIsFinancial reporting frameworkAssessing the financial reporting frameworkSubject matter for financial auditingThree parties in financial auditingCriteria used in financial auditingReasonable assurance engagementAgreeing the terms of the engagementPlanningMaterialityUnderstanding the audited entityRisk identification and assessmentResponse to assessed risks Considerations relating to fraudGoing concern considerationsConsiderations relating to laws and regulations in an audit of financial statementsAudit evidenceEvaluating misstatementsForming an opinion and reporting on the financial statementsModifications to the opinion in the auditor’s reportEmphasis of Matter paragraphs and Other Matters paragraphs in the auditor’s reportConsideration of subsequent eventsComparative information - corresponding figures and comparative financial statementsThe auditor’s responsibilities in relation to other information in documents containing audited financial statementsConsiderations relevant to audits of consolidated financial statements

ISSAI 200 · 2020. 12. 16. · 6 ISSAI 200 s FINANCIAL AUDIT PRINCIPLES 4) The main purpose of the...

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