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ISA 402 – Audit consideration relating to an entity using a service organization
ISA 402 deals with the user auditor’s responsibility to obtain sufficient appropriate audit evidence when a user entity uses the services of one or more service organizations. It defines the objectives of the user auditor and the requirements relating to audit of the entity using a service organization. These requirements comprise: · Obtaining an Understanding of the Services Provided by a Service Organization, Including Internal Control. · Responding to the Assessed Risks of Material Misstatement. · Type 1 and Type 2 Reports that Exclude the Services of a Subservice Organization. · Fraud, Non-Compliance with Laws and Regulations and Uncorrected Misstatements in Relation to Activities at the Service Organization. · Reporting by the User Auditor.
Materiality in planning and performing an audit
Materiality Misstatements, including omissions, are considered to be material if they, individually or in aggregate, could reasonably influence the economic decisions of users taken on the basis of the financial statements. Financial statements are reliable if there are no material misstatements in them. Accordingly, when conducting an audit, it becomes necessary to determine the level of materiality .

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