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WBCHSE HS Commercial Law and Preliminaries of Auditing study materials
WBCHSE HS Commercial Law and Preliminaries of Auditing study resources

WBCHSE HS Commercial Law and Preliminaries of Auditing: Preliminaries of Auditing: Meaning, Objectives and Types of Audit, Audit Programme, Working Papers, Evidence and Audit Sampling

WBCHSE HS Commercial Law and Preliminaries of Auditing · Work through your exam, one topic at a time.

All guide sections

Preliminaries of Auditing: Meaning, Objectives and Types of Audit, Audit Programme, Working Papers, Evidence and Audit Sampling

This domain tests the vocabulary and planning tools of auditing: audit objectives, types, programme, working papers, evidence and sampling.

Core rules

  • An audit is an independent examination of financial information to express an opinion. SA 200 states the objective is reasonable assurance that financial statements are free from material misstatement, whether due to fraud or error; it is not absolute assurance.
  • Primary objective: opinion on truth and fairness. Secondary objective: detection and reporting of material fraud and error. The auditor is not responsible for preventing fraud, but must plan to detect material misstatement.
  • Types include statutory audit (e.g., under the Companies Act, 2013), internal audit, external or independent audit, government audit, tax audit, management audit, performance audit, special audit, interim audit, final audit and forensic audit.
  • An audit programme is a written plan listing procedures, timing and extent of work. It aids supervision and documentation but must be tailored and revised; it is not a substitute for professional judgement.
  • Working papers record procedures performed, evidence obtained and conclusions reached (SA 230). They should be sufficient for an experienced auditor to understand the work; they belong to the auditor and are confidential.
  • Audit evidence must be sufficient and appropriate (SA 500). Reliability is higher for external, original, documentary evidence obtained directly by the auditor. Procedures include inspection, observation, confirmation, recalculation, re-performance, analytical procedures and inquiry.
  • Audit sampling (SA 530) applies procedures to less than 100% of a population. Sampling risk is the risk that the conclusion based on a sample differs from the population; non-sampling risk arises from human error or inappropriate procedures.

Worked example

An auditor tests 50 of 2,000 invoices for authorization. The population is 2,000 invoices; the sample is 50. If one invoice lacks approval, the auditor investigates whether it is an isolated exception. If the deviation rate exceeds the tolerable rate, the auditor expands testing or modifies the audit approach. The reasoning is that a sample supports a conclusion only about the population within assessed sampling risk.

Traps

Reasonable assurance is not a guarantee. More evidence is not automatically better; relevance and reliability matter. Working papers do not replace the client's accounting records. Sampling risk and non-sampling risk are different.