Back to: Auditing
Hello again!
Welcome back! Hope you’re enjoying learning about auditing so far. In our last note, we looked at the various types of audits.
Now, let’s explore the rules and guidelines that auditors must follow to ensure their work is trustworthy, professional, and up to global standards.
Audit Standards and Guidelines
Audit standards are essentially formalised rules and principles that guide auditors in performing their duties. They set out the objectives and responsibilities of auditors and the procedures they must follow to obtain audit evidence and form a conclusion.
These standards ensure that audits are performed:
Consistently, regardless of the auditor or country
Competently, with professionalism and due care
Independently, to ensure objectivity
Ethically, in line with a professional code
Why Are Standards Important?
Imagine if every auditor used their own approach to auditing—results would be unreliable, incomparable, and possibly misleading. Standards provide a common framework, helping users of audited financial statements trust the work that has been done.
In essence, standards:
Promote reliability
Support quality control
Enable comparability across audits
Serve as a benchmark for professional conduct
Provide guidance when dealing with complex or grey areas
Types of Audit Standards
There are different types of audit standards based on geographic regions or standard-setting bodies. Let’s take a look at the most prominent ones:
1. International Standards on Auditing (ISAs)
Issued by the International Auditing and Assurance Standards Board (IAASB), these are globally recognised and widely adopted standards.
Key features:
Applicable in over 100 countries
Focus on audit planning, evidence, risk assessment, and reporting
Constantly updated to reflect changes in the financial and regulatory environment
Some key ISAs include:
ISA 200: Overall Objectives of the Independent Auditor
ISA 315: Identifying and Assessing the Risks of Material Misstatement
ISA 500: Audit Evidence
ISA 700: Forming an Opinion and Reporting on Financial Statements
2. UK Auditing Standards
In the UK, the Financial Reporting Council (FRC) is responsible for setting auditing standards. The FRC has adopted ISAs with some UK-specific adaptations, known as ISAs (UK).
These include additional requirements to address issues particularly relevant to UK auditors, such as:
Communication with regulators
Corporate governance expectations
Brexit-related financial reporting implications
3. US Standards (for comparison)
In the United States, audits are governed by standards issued by the Public Company Accounting Oversight Board (PCAOB) or the AICPA depending on the type of entity audited. While not used in the UK, they are worth knowing for context, especially if you study international cases.
Audit Guidelines and Frameworks
Aside from standards, auditors also rely on guidelines and ethical frameworks to shape their judgement.
Key Supporting Materials Include:
The Code of Ethics issued by the International Ethics Standards Board for Accountants (IESBA)
FRC’s Ethical Standard (UK)
IFAC’s Handbook of International Quality Control, Auditing, Review, and Assurance Standards.
These resources support ethical behaviour, such as:
Objectivity
Integrity
Confidentiality
Professional scepticism
Structure of an Audit Standard
Most audit standards follow a structured format:
Introduction – Scope and purpose of the standard
Objectives – What the auditor is trying to achieve
Requirements – Specific steps or procedures to follow
Application and Other Explanatory Material – Clarifies complex areas
This structure ensures both clarity and accountability.
Evaluation
Let’s pause for a quick evaluation of what you’ve learned:
By the end of this topic, you should be able to:
Understand what audit standards are and why they matter
Identify the key standard-setting bodies (e.g. IAASB, FRC
Recognise major ISAs and their focus areas
Appreciate the role of ethical guidelines in the auditing profession
Audit standards form the backbone of reliable and meaningful audits. Without them, audits would lack credibility and consistency.
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