ISA (UK) 200: Objectives of the Auditor

ISA (UK) 200 deals with the independent auditor’s overall responsibilities when conducting an audit of financial statements in line with International Standards on Auditing UK (ISAs UK).

The objective of an audit is to boost the amount of confidence of intended users in the financial statements. This is accomplished by the declaration of an opinion by the auditor on whether the financial statements are prepared in accordance with relevant financial reporting mechanism.

There are few elements to ISA (UK) 200

1. Objectives

2. Definitions of the key terms

3. Requirements


1. Objectives:

ISA (UK) 200 states there are two overall objectives of the auditor. First: 'To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.' Secondly: 'To report on the financial statements, and communicate as required by the ISAs in accordance with the auditor's findings

2. Definitions of the key terms given in standard:

· Applicable financial reporting framework

· Audit evidence

· Audit risk

· Auditor

· Detection risk

· Financial statements

· Historical financial information

· Management

· Misstatement

· Professional judgment

· Professional skepticism

· Reasonable assurance

· Risk of material misstatement


3. Requirements:

ISA (UK) 200 carries five separate requirements.

a) Ethical Requirements Relating to an Audit of Financial Statements— Comply with relevant ethical requirements.

b) Professional Skepticism— plan and perform an audit with professional skepticism.

c) Professional Judgment— exercise professional judgment in planning and performing

d) Sufficient Appropriate Audit Evidence and Audit Risk— sufficient appropriate audit evidence to reduce audit risk to an acceptably low level

e) Conduct of an Audit in Accordance with ISAs— comply with all ISAs relevant to the audit, understand the entire areas of ISA.



Practice

As we discussed above that according to ISA (UK) 200 there are basically two overall objectives, (a) to obtain reasonable assurance, (b) to report on financial statements. Experts suggest that ISA (UK) 200 is of vital importance therefore due care should be given to its compliance while conducting audit. The auditor shall design and perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion as to whether the financial statements are consistent with the auditor’s understanding of the entity. ISA 200 contains an objective relating to situations where reasonable assurance cannot be obtained, in which case the auditor, depending on the circumstances, may qualify the audit opinion, or disclaim an opinion, or withdraw from the assignment.



References:

https://www.accaglobal.com/sg/en/member/discover/cpd-articles/audit-assurance/isa-200.html

https://www.researchgate.net/publication/46534009_Recently_aspects_regarding_International_Auditing_Standard_200_Overall_Objectives_of_the_Independent_Auditor_and_the_Conduct_of_an_Audit_in_Accordance_with_International_Standards_on_Auditing