International Standard on Auditing (ISA)

International Standard on Auditing ISA Auditing Standards IAASB Statutory Audit Financial Audit Compliance
An overview of the standards that provide the fundamental principles and essential procedures for auditing, issued by the International Auditing and Assurance Standards Board (IAASB).
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What is International Standard on Auditing (ISA)?

The International Standard on Auditing (ISA) refers to statements that outline the basic principles and essential procedures for auditing issued by the International Auditing and Assurance Standards Board (IAASB). These standards aim to enhance the quality and consistency of audits across the globe.

ISAs provide audit professionals with a framework that promotes transparency and accountability in financial reporting. They specify criteria for ethical conduct, auditor qualifications, and the scope of the audit work. In the UK and Ireland, auditors must comply with ISAs (UK and Ireland) for any statutory audit. Revised ISAs were issued in January 2015 and apply to audits for periods ending on or after December 15, 2016.

Examples

  1. ISA 315 (Revised): Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment.
  2. ISA 700 (Revised): Forming an Opinion and Reporting on Financial Statements.
  3. ISA 240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.

Frequently Asked Questions

What are ISAs used for?

ISAs are used to guide auditors in conducting high-quality audits by providing a comprehensive framework that sets out guidelines and procedures to ensure the reliability of the financial statements.

Who issues the ISAs?

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body that operates under the auspices of the International Federation of Accountants (IFAC).

Why are ISAs important?

ISAs are crucial for maintaining the integrity and uniformity of audits worldwide. They help enhance stakeholder confidence by ensuring the audits are conducted according to international standards, leading to more reliable and comparable financial statements.

How often are ISAs updated?

ISAs are periodically reviewed and updated to reflect the evolving nature of the auditing profession and the emerging needs of businesses and stakeholders. The last major update was issued in January 2015.

Are ISAs mandatory?

In many jurisdictions, including the UK and Ireland, compliance with ISAs is mandatory for statutory audits. Other jurisdictions may require or encourage their use depending on local regulations.

  • International Auditing and Assurance Standards Board (IAASB): An independent standard-setting body responsible for developing and issuing International Standards on Auditing and related assurance standards.
  • Statutory Audit: A legally required audit of the accuracy of a company’s financial statements and records.
  • Ethics in Auditing: Rules and guidelines defining the professional conduct expected from auditors.

Online References

Suggested Books for Further Studies

  • “Wiley Practitioner’s Guide to GAAS 2021: Covering all SASs, SSAEs, SSARSs, and Interpretations” by Joanne M. Flood.
  • “Auditing and Assurance Services: An Integrated Approach” by Alvin A. Arens, Randal J. Elder, Mark S. Beasley.
  • “Principles of Auditing & Other Assurance Services” by Ray Whittington and Kurt Pany.

Accounting Basics: “International Standard on Auditing (ISA)” Fundamentals Quiz

### What is the primary objective of ISAs? - [ ] To create business continuity plans. - [x] To enhance the quality and consistency of audits worldwide. - [ ] To manage company payrolls. - [ ] To provide tax planning strategies. > **Explanation:** The primary objective of ISAs is to enhance the quality and consistency of audits around the world by providing a detailed framework for conducting audits. ### Who issues the International Standards on Auditing? - [ ] Internal Revenue Service (IRS) - [x] International Auditing and Assurance Standards Board (IAASB) - [ ] Securities and Exchange Commission (SEC) - [ ] American Institute of Certified Public Accountants (AICPA) > **Explanation:** The International Standards on Auditing are issued by the International Auditing and Assurance Standards Board (IAASB). ### In which jurisdictions is compliance with ISAs mandatory for statutory audits? - [ ] Only in the United States - [x] In the UK and Ireland - [ ] Worldwide without exception - [ ] Only in countries of the European Union > **Explanation:** In the UK and Ireland, compliance with ISAs is mandatory for statutory audits. Other jurisdictions may require or encourage their use depending on local regulations. ### Which ISA addresses the auditor's responsibilities relating to fraud in an audit? - [ ] ISA 320 - [ ] ISA 500 - [ ] ISA 450 - [x] ISA 240 > **Explanation:** ISA 240 addresses the auditor's responsibilities relating to fraud in an audit of financial statements. ### What main benefit do ISAs provide stakeholders with regards to financial statements? - [ ] Reduced costs of production - [ ] Increased advertising potential - [x] Enhanced confidence due to reliability and comparability of financial statements - [ ] Faster audit processes > **Explanation:** ISAs provide stakeholders enhanced confidence due to the reliability and comparability of financial statements resulting from high-quality audits. ### When must auditors in the UK and Ireland comply with revised ISAs issued in January 2015? - [ ] Immediately after issuance - [x] For audits of periods ending on or after December 15, 2016 - [ ] From January 2016 onwards - [ ] From January 2015 onwards > **Explanation:** Auditors in the UK and Ireland must comply with revised ISAs issued in January 2015 for audits of periods ending on or after December 15, 2016. ### How often are ISAs typically reviewed and updated? - [x] Periodically - [ ] Monthly - [ ] Quarterly - [ ] Every 50 years > **Explanation:** ISAs are periodically reviewed and updated to reflect changes in the auditing field and new business needs. ### Which organization oversees the IAASB? - [ ] United Nations - [ ] American Accounting Association - [x] International Federation of Accountants (IFAC) - [ ] World Bank > **Explanation:** The International Federation of Accountants (IFAC) oversees the International Auditing and Assurance Standards Board (IAASB). ### What does ISA 315 focus on? - [ ] Fraud detection - [x] Identifying and assessing risks of material misstatement - [ ] Tax preparation - [ ] Internal control systems > **Explanation:** ISA 315 focuses on identifying and assessing the risks of material misstatement through understanding the entity and its environment. ### Can compliance with ISAs improve the work quality of auditors? - [x] Yes - [ ] No - [ ] Only in certain circumstances - [ ] It has no impact > **Explanation:** Yes, compliance with ISAs can significantly improve the work quality of auditors by providing a structured and reliable framework for conducting audits.

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