Pratice Of Auditing
International Statements on Auditing should be much more prescriptive about how an audit is carried out.'
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As a result of legislation, there is a tendency to think that all audit firms produce the same audit. But this is not a homogenous product..," (Williams 2006). The scope of work and time requirements of an audit vary between companies; factors include the auditors experience and knowledge to make appropriate judgements based on the evidence gathered and tested. The time requirements are influenced by the size and complexity of the audit being undertaken. The following essay will highlight the use of auditors' judgement, risks involved and the impact of making the standards more prescriptive, to both parties.
The two approaches used by auditors are systems based and substantive auditing. Both are equally important, however their uses vary according to clients. Systems based auditing involves testing systems and internal controls of a company, whereas substantive auditing involves auditors carrying out independent investigations, obtaining written evidence/confirmation, for verification of the figures (Dassen and Wallage, 2005). If the audit process was made more prescriptive, auditors would have to use both approaches even when unsuitable. Auditors currently at their own discretion evaluate the best cost effective approach by taking into account factors such as strict deadlines. Standardising would restrict these decisions and furthermore, increase unnecessary work loads resulting in a waste of resources and opportunity costs.
Auditors use the ISA audit risk model to assess the level of materiality within the company thus aiding them to decide the level of testing required (Easter, 2006). The higher the risks the more work required and the lower the materiality expected. These risks lead to auditors making wrong judgements thus making wrong conclusions. By using this model, auditors can prevent this risk. The...
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