Auditing and Assurance New Revised Syllabus CPA KASNEB notes

Auditing and Assurance new revised syllabus notes

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1. Nature and purpose of an audit

  • Nature and objectives of an audit
  • Development of audit (early audit and modern audit)
  • Users of audited financial statements
  • Features of audits
  • Distinction between auditing and accounting
  • Types and classification of audits
  • Situations when different audits are performed (interim, continuous, final, operational)
  • Advantages and disadvantages of various types of audits
  • Nature of work done for different audits
  • Inherent limitations of an audit

2. Assurance and non- assurance engagements

  • Definition and objectives of assurance engagements
  • Audit as an assurance engagement
  • Elements of an assurance engagement
  • Types of assurance engagements (Audit, Review assignments)
  • Differences between audit and review engagements
  • International Standard on Assurance Engagement-ISAE 3000
  • Accepting appointment to perform assurance engagement
  • Review of interim financial information – ISRE 2410
  • Levels of assurance and reports issued on assurance engagements
  • Non-assurance engagements (Agreed upon procedures engagement -ISRS 4400 and compilation assignments-ISRS 4410
  • Attestation and direct reporting engagements

 3. Legal and professional framework

  • Regulatory framework for external audits
    • Appointment of the auditors
    • Qualifications and disqualifications of auditors
    • Removal and resignation of auditors
    • Remuneration of the auditors
    • Rights and duties of auditors
    • Mechanisms of regulations of auditors-role of professional bodies, Audit committee, rotation of audit firms
  • Professional ethics/code of ethics for professional accountants
    • Importance of the professional ethics
    • Basic/fundamental principles for Code of Ethics for accountants
    • Other professional guidelines on audit fees, conflict of interest, advertising and publicity and opinion shopping by clients
    • Auditors independence /objectivity and its importance
  • Threats to independence and safeguards.
  • Threats on adherence to other fundamental principles and safeguards to the threats
  • Development and status of ISAs in execution of audits
  • Relationship between International Standards of Auditing and National Auditing Standards
  • Purposes/importance of adoption of ISA in the audit.

4. Planning and Risk Assessment

  • Obtaining, accepting and retention of an audit engagement
  • Matters to consider before and after acceptance of nomination
  • Pre-conditions of an audit
  • Engagement letter, procedure of sending letter, purposes and contents of the letter-ISA 210
  • Circumstances for revision of engagement terms
  • Understanding the entity and its environment
    • Background information about the entity or client.
    • Ways of gathering knowledge about the business
    • Reasons/importance of information gathered about the client
    • Reasons of review of previous audit files and communication with previous auditors
  • Overview of audit process

5. Audit risk assessment

  • Components of audit risk (Inherent, Control and Inherent risks)
  • Assessment of different types of audit risks
  • Factors leading to increase or decrease of inherent, control and detectionRisks
  • Adoption of risk based audit, reasons and procedure
  • Advantages and Disadvantages of the approach
  • Evaluating and prioritising risk and control factors
  • Mechanisms to minimise the risks associated with client audits.

6. Audit planning

  • Purpose and challenges in audit planning
  • Planning for new and existing clients
  • Development of the overall audit strategy
  • Contents of audit planning memorandum/ overall plan
  • Relationship between audit strategy and audit plan
  • Design of audit programs, importance and problems of the programs
  • Impact of material misstatements on audit strategy and degree of work done
  • Influence of interim audit work on the year end/final audit.

7. Audit documentation

  • Reasons and importance of audit documentation
  • Sources, features and purposes of working papers
  • Storage of working papers-permanent audit file and current audit file, auditors note book or diary
  • Lien or custody on working papers
  • Standardisation of working papers – advantages and disadvantages
  • Safe custody and retention of working papers
  • Form and content of working papers
  • Automated working papers
  • Quality control policies and procedures implemented by audit firm
  • Objectives of quality controls to the audit firm/ auditors
  • Peer review and its objectives

8. Internal control systems and Internal Audit Function

Internal control systems (ICS)

  • Objectives of internal control system
  • Component of internal control system
  • Features of Internal control system
  • Designing of internal control system.
  • Auditors and management responsibility over ICS
  • Advantages and disadvantages /inherent limitations of ICS
  • Indicators of weaknesses in ICS and actions taken by management
  • The evaluation of internal control systems by auditors using Internal Control Questionnaire, Flow charts and narrative notes
  • Tests of controls on specific control environments
  • Internal controls theory and practice-sales and debtors, purchases and creditors, inventories and work in progress, fixed assets, salaries and wages
  • Communication of improvements on ICS weaknesses/ risks associated – Management letter.

Internal Audit Function

    1. Overview of Forensic Accounting, Errors, Frauds and Irregularities
    2. Errors, Frauds and Irregularities
    3. Audit evidence
    4. Auditing in the public sector
    5. Auditors Reports
    6. Auditing in a computerised system
    7. Contemporary and emerging issues in audit

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