An independent engagement that gathers evidence and expresses an opinion on whether the statements are prepared, in all material respects, under the applicable framework.

Management prepares them and maintains the internal control it considers necessary. The auditor evaluates the statements and reports an opinion.

A high level of assurance obtained by reducing audit risk to an acceptably low level through sufficient appropriate evidence.

Auditors use judgement and selective testing, and evidence often supports conclusions through corroboration rather than certainty.

An error or omission that could reasonably influence decisions users make from the financial statements, individually or in aggregate.

Yes. Its nature or circumstances may matter, for example if a misstatement hides a breach of a loan covenant.

The risk of expressing an inappropriate opinion when the financial statements are materially misstated.

Risk of material misstatement and detection risk. Inherent and control risk are components of the risk of material misstatement at the assertion level.

How susceptible an assertion is to a potentially material misstatement before considering controls.

The risk that internal control fails to prevent, or detect and correct, a potentially material misstatement on time.

The risk that audit procedures fail to detect an existing misstatement that could be material.

A questioning mindset that stays alert to possible error or fraud and critically assesses evidence.

It helps the auditor make informed decisions about risks, procedures, evidence and conclusions using relevant training and experience.

It protects objective judgement and supports users’ confidence in the opinion.

Sufficiency concerns quantity. The amount needed depends on assessed risk and evidence quality.

Appropriateness concerns quality, including relevance to the assertion and reliability in the circumstances.

Select recorded sales and trace them to supporting evidence such as dispatch records and customer acceptance where relevant.

Select evidence of deliveries or completed services and check that the related transactions appear in the sales records.

Checking that transactions are recorded in the correct reporting period, often by testing items before and after year-end.

A response the auditor obtains directly from a third party, such as a customer confirming a receivable balance.

Investigate the difference using evidence such as invoices, receipts, returns and timing records.

A test of controls evaluates whether a control operates effectively. A substantive procedure seeks to detect material misstatements at the assertion level.

Inquiry can guide testing, but corroborate explanations when needed to support a conclusion about an assertion or a control.

The auditor concluded that the financial statements are prepared, in all material respects, under the applicable reporting framework.

Document the procedure, items tested, evidence obtained, exceptions and conclusion so an experienced auditor can understand the work.