What is the definition of an audit?
A systematic process of objectively gathering and evaluating evidence about management’s assertions on economic actions to determine their correspondence with pre-defined criteria and communicate results to users.
What is the difference between accounting and auditing?
Accounting records, classifies, and summarizes transactions, while auditing independently evaluates the fairness and accuracy of the resulting financial statements.
Why is there a need for auditors?
Due to the separation of ownership and management, public confidence in financial reporting, and accountability of directors.
What are management assertions in financial statements?
Representations by management about recognition, measurement, presentation, and disclosure of financial information.
What is the main objective of an audit according to ISA 200?
To obtain reasonable assurance that the financial statements are free from material misstatement and express an audit opinion.
Does an audit guarantee that a company exists or that no fraud occurred?
No, the auditor does not guarantee the company’s existence or that all fraud has been detected.
What type of assurance does an audit provide?
Reasonable assurance, not absolute assurance.
What are the inherent limitations of an audit?
Use of judgment, nature of audit evidence, potential management fraud or concealment, time and cost constraints, and sampling.
What factors limit an auditor’s ability to detect misstatements?
Nature of financial reporting, reliance on management explanations, and time/resource constraints.
Who regulates auditors in South Africa?
The Independent Regulatory Board for Auditors (IRBA).
What is the main purpose of the IRBA?
To protect and promote the interests of the public and investors and support auditors.
What is SAICA’s main purpose?
To protect and promote the interests of Chartered Accountants in South Africa.
What is IFAC?
The International Federation of Accountants — develops and promotes high-quality global auditing and assurance standards.
What is IAASB?
The International Auditing and Assurance Standards Board — issues ISAs and develops auditing standards globally.
What is the Auditing Profession Act?
South African legislation governing the regulation and conduct of auditors.
Who appoints the auditor of a company?
The shareholders.
What is an assurance engagement?
An engagement where the auditor provides a conclusion or opinion to enhance confidence of users in financial statements.
What are the two types of assurance engagements?
Reasonable assurance (audit) and limited assurance (review).
What is a non-assurance engagement?
An engagement with no opinion or conclusion, such as agreed-upon procedures, compilations, or tax services.
What is the difference between audit and review engagements?
An audit provides reasonable assurance; a review provides limited assurance.
What is an agreed-upon procedures engagement?
An engagement where specific procedures are performed and factual findings are reported without an opinion.
What is an external auditor?
An independent auditor who examines and reports on financial statements of an entity.
What is an internal auditor?
An employee of the company who evaluates and improves internal control, risk management, and governance processes.
Who is the Auditor-General?
A public sector auditor who audits government departments and entities under the Public Audit Act.
