Immersing in audit

  Group auditor actions if some components of the group are audited by an auditor other than the group auditor. If the component auditor is the other company than the group auditor company the group auditor should do the following steps : (a)    To obtain an understanding of the following matters relating to component auditor: ·     Whether the component auditor understands and will comply with the ethical requirements that are relevant to the group audit and is independent. ·        The component auditor professional competence. ·        Whether the component auditor operates in a regulatory environment that actively oversees auditors. (b)    To communicate to the component auditor on a timely basis the following requirements: ·        The work to be performed, the use to be made of that work, and the form and content of the component auditor communication with the group engagement team. ·        A component`s auditor confirmation about cooperation with the group engagement team. ·

  Objectives of the group financial statements audit Group audit is the audit of group financial statements. Group financial statements are financial statements that include the financial information of more than one component. The term “group financial statements” also refers to combined financial statements aggregating the financial information prepared by components that have no parent but are under common control. Component is an entity or business activity for which group or component management prepares financial information that should be included in the group financial statements. The objectives of the group auditor of the group financial statements are: (i)               To communicate clearly with component auditors about the scope and timing of their work on financial information related to components and their findings; and (ii)            To obtain sufficient appropriate audit evidence regarding the financial information of the components and the consolidation pr

  The engagement letter, the management’s representation letter and the management letter (letter of weakness or report to management) are commonly used by auditors in the audit process but each of these documents has its own purpose.

  Written representation is a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. The written representations shall be in the form of a representation letter addressed to the auditor.

  ISA 540 deals with the auditor’s responsibilities relating to accounting estimates and related disclosures in an audit of financial statements.  This ISA defines   requirements relating to risk assessment procedures and related activities connected with accounting estimates, identification of the risks of material misstatement, responses to the assessed risks of material misstatement, disclosures related to accounting estimates, indicators of possible management bias and the evaluation of misstatements of accounting estimates and related disclosures.

  Going concern basis of accounting Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for the foreseeable future. When the use of the going concern assumption is appropriate, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business. The financial statements should be prepared on a going concern basis unless management either intends to liquidate the entity or has no realistic alternative but to do so. When management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose the basis on which it prepared the financial st