Auditing Standards and Audit Methodology (ISA and Armenian Standards)
The ISA architecture
Understand ISA 200 (reasonable assurance, inherent limitations), ISA 315 (risk identification), ISA 320 (materiality), ISA 330 (responses to assessed risk), ISA 500-580 (evidence), ISA 700 series (reporting), and ISA 701 (key audit matters for listed entities). Armenia adopts ISAs as issued by IAASB, so the exam expects ISA terminology verbatim: "sufficient appropriate audit evidence", "professional scepticism", "pervasive", "modified opinion".
Materiality and performance materiality
Materiality is a matter of professional judgement; common benchmarks are 5% of profit before tax, 0.5-1% of revenue, or 1-2% of total assets. Performance materiality is set below overall materiality to reduce the probability that uncorrected misstatements exceed it. Trap: materiality is not a formula - questions test whether you understand the benchmark choice depends on the user's focus (lenders → assets/equity; shareholders → profit).
Opinion modifications
Distinguish: qualified (material but not pervasive), adverse (material and pervasive, financial statements misstated), disclaimer (material and pervasive, inability to obtain evidence). Emphasis of Matter and Other Matter paragraphs do not modify the opinion. Going concern: if material uncertainty exists but disclosures are adequate, use an Emphasis of Matter-type section under ISA 570 (Revised); if disclosures are inadequate, modify the opinion.
Worked example
If inventory of 40m AMD is unsupported and total assets are 400m, the misstatement is 10% - likely material but not pervasive, so a qualified opinion, not adverse.