Auditing and Assurance
Auditing and Assurance tests the Myanmar Standards on Auditing (MSA), which are based on ISAs, plus ethical requirements and the audit report. Expect risk assessment, materiality, evidence, internal control, going concern and reporting.
Core rules
- Audit risk = inherent risk × control risk × detection risk; detection risk is managed by the auditor.
- Obtain sufficient appropriate evidence; external evidence is generally more reliable than internal evidence.
- Materiality is a matter of professional judgment; performance materiality is set below overall materiality.
- Communicate significant deficiencies in internal control to those charged with governance.
- Modify the opinion for material misstatement or inability to obtain evidence; add an emphasis of matter paragraph only when required.
Worked example
Profit before tax is 80m. The auditor selects 5% as benchmark: overall materiality = 4m. Performance materiality at 75% = 3m. Clearly trivial threshold at 5% of overall materiality = 200k. A 500k misstatement is above clearly trivial but below performance materiality, so it is accumulated, not automatically adjusted; evaluate it in aggregate.
Traps
Do not treat materiality as a fixed rule. Do not confuse the emphasis of matter paragraph with a qualified opinion. Sampling risk is not the same as non-sampling risk. Document the basis for materiality and the rationale for significant judgments.