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I would like to ask for the following clarification:
1. Kaplan book states that ISAs are THE PROFESSIONAL GUIDELINES that auditor MUST follow to ensure each audit in performed consistently and to the required standard of quality.
2. ISAs ARE NOT LEGAL REQUIREMENTS. Countries have their own arrangements in place for regulating and implementing auditing standards, They may either develop their own auditing standards or may adopt and implement ISAs and possibly adopting them to the local needs.Since ISAs are not legal requirements why auditor must follow them??? As stated above countries have their own arrangements and ISAs MAY or MAY NOT be adopted by them. Why for an auditor is a MUST to follow ISAs???
Thank you very much!
KasiaShouldn’t an auditor follow local arrangements, which MIGHT take ISAs as issued by the IAASB and modify them for the local needs?
However to me that doesn’t mean ISAs MUST be followed. They can be considered in individual countries but don’t have to be.So assuming me being an auditor – what would I have to follow? ISAs issued by the IAASB (being professional guidelines) or local auditing standards (a country law, which might consider ISAs but doesn’t have to)?
Thank you for clarifying!
KasiaISAs are standards rather than guidelines. They are professional because they are issued by IAASB (a board of IFAC). ACCA, for example, is a professional body that is one of the members of IFACs. The standards are for the profession internationally.
For an auditor’s report to say that an audit has been performed in accordance with ISAs – this must be true – the ISAs must have been followed.
ISAs cannot override national standards – so if an audit firm conducts an audit in accordance with different standards – this is what the auditor’s report will say – for example,
“We conducted our audit in accordance with auditing standards generally accepted in the United States of America.”So, instead of stating that “ISAs are professional guidelines that the auditor MUST follow to ensure each audit in performed consistently and to the required standard of quality.” is not true! There are cases where audit firm conducts an audit in accordance with different standards. It just needs to be reported.
Better phrase would be “Auditing standards SHOULD BE followed during all audits unless there are exceptional circumstances which would mean the audit objective would not be met” or “ISAs must be applied in all but exceptional cases. Where the auditor deems it necessary to depart from ISA to achieve the overall aim of the audit, this departure must be justified.”- another two statements from the book.
Statements in the above two paragraphs explain auditing standards, however they are not cohesive.
My understanding is the following:
ISAs must be followed if taken and modified to local use/needs. Otherwise local standards should be followed and departure must be justified.
In other words, at the end nationals standards are followed, which are or not developed based on ISAs. Whichever standards are followed, auditor must report.Thank you!
ISAs mostly use “shall” in expressing requirements – but this is especially confusing to many non-native English students – does that mean its only a recommendation rather than a requirement? So for the purpose of a text for students requirements tend to be conveyed with “must”.
The AA syllabus mostly concerns the application of ISAs in an audit engagement – there is only one learning outcome (A2g) which concerns the relationship between ISAs and national standards – so don’t get too hung up about it.
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