Auditing and Assurance kasneb new syllabus notes



This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to conduct the audit of an entity.


A candidate who passes this paper should be ableto:

  • Demonstrate an understanding of the regulatory framework governing the external audit of financial statements
  • Demonstrate an understanding of International Standards on Auditing where appropriate and the International Code of Ethics for Professional Accountants (including International Independence Standards)
  • Implement the process of planning an audit, prepare audit programs and effectively conduct an audit
  • Undertake audit risk assessments (excluding group accounts)
  • Apply the risk based audit approach to audit of limited companies
  • Prepare non – complex audit reports for audit engagements.


  1. Nature and purpose of an audit

  • Nature and objectives of an audit
  • Development of audit (early audit and modern audit)
  • Users of audited financial statements
  • Features of audits
  • Distinction between auditing and accounting
  • Types and classification of audits
  • Situations when different audits are performed (interim, continuous, final, operational)
  • Advantages and disadvantages of various types of audits
  • Nature of work done for different audits
  • Inherent limitations of an audit

2.Assurance and non- assurance engagements

  • 2.1       Definition and objectives of assurance engagements
  • 2.2       Audit as an assurance engagement
  • 2.3       Elements of an assurance engagement
  • 2.4       Types of assurance engagements (Audit, Review assignments)
  • 2.5       Differences between audit and review engagements
  • 2.6       International Standard on Assurance Engagement-ISAE 3000
  • 2.7       Accepting appointment to perform assurance engagement
  • 2.8       Review of interim financial information – ISRE 2410
  • 2.9       Levels of assurance and reports issued on assurance engagements
  • 2.10     Non-assurance engagements (Agreed upon procedures engagement -ISRS 4400 and compilation assignments – ISRS 4410
  • 2.11     Attestation and direct reporting engagements

3.Legal and professional framework

  • 3.1 Regulatory framework for external audits
    • Appointment of the auditors
    • Qualifications and disqualifications of auditors
    • Removal and resignation of auditors
    • Remuneration of the auditors
    • Rights and duties of auditors
    • Mechanisms of regulations of auditors-role of professional bodies, Audit committee, rotation of audit firms
  • 3.2       Professional ethics/code of ethics for professional accountants
  • 3.2.1    Importance of the professional ethics
  • 3.2.2    Basic/fundamental principles for Code of Ethics for accountants
  • 3.2.3    Other professional guidelines on audit fees, conflict of interest, advertising and publicity and opinion shopping by clients
  • 3.2.4    Auditors independence /objectivity and its importance
  • 3.2.5    Threats to independence and safeguards.
  • 3.3       Threats on adherence to other fundamental principles and safeguards to the threats
  • 3.4       Development and status of ISAs in execution of audits
  • 3.5       Relationship between International Standards of Auditing and National Auditing Standards
  • 3.6       Purposes/importance of adoption of ISA in the audit.
  1. Planning and Risk Assessment

  • 4.1          Obtaining, accepting and retention of an audit engagement
  • 4.1.1    Matters to consider before and after acceptance of nomination
  • 4.1.2    Pre-conditions of an audit
  • 4.1.3    Engagement letter, procedure of sending letter, purposes and contents of the letter-ISA 210
  • 4.1.4    Circumstances for revision of engagement terms
  • 4.1.5    Understanding the entity and its environment
  •       Background information about the entity or client.
  •       Ways of gathering knowledge about the business
  •       Reasons/importance of information gathered about the client
  •       Reasons of review of previous audit files and communication with previous auditors
  • 4.1.6    Overview of audit process

5.     Audit risk assessment

  • 5.1 Components of audit risk (Inherent, Control and Inherent risks)
  • 5.2 Assessment of different types of audit risks
  • 5.3 Factors leading to increase or decrease of inherent, control and detection risks
  •  5.4    Adoption of risk based audit, reasons and procedure
  • 5.5    Advantages and Disadvantages of the approach
  • 5.6    Evaluating and prioritising risk and control factors
  • 5.7    Mechanisms to minimise the risks associated with client audits.

6. Audit planning

  • 6.1       Purpose and challengesin audit planning
  • 6.2       Planning for new and existing clients
  • 6.3       Development of the overall audit strategy
  • 6.4       Contents of audit planning memorandum/ overall plan
  • 6.5       Relationship between audit strategy and audit plan
  • 6.6       Design of audit programs, importance and problems of the programs
  • 6.7       Impact of material misstatements on audit strategy and degree of work done
  • 6.8       Influence of interim audit work on the year end/final audit.
  1. Audit documentation

  • Reasons and importance of audit documentation
  • Sources, features and purposes of working papers
  • Storage of working papers-permanent audit file and current audit file, auditors note book or diary
  • Lien or custody on working papers
  • Standardisation of working papers – advantages and disadvantages
  • Safe custody and retention of working papers
  • Form and content of working papers
  • Automated working papers
  • Quality control policies and procedures implemented by audit firm
  • Objectives of quality controls to the audit firm/ auditors
  • Peer review and its objectives

8.  Internal control systems and Internal Audit Function

  • 8.1             Internal control systems (ICS)
  • 8.1.1          Objectives of internal control system
  • 8.1.2          Component of internal control system
  • 8.1.3          Features of Internal control system
  • 8.1.4          Designing of internal control system.
  • 8.1.5          Auditors and management responsibility over ICS
  • 8.1.6          Advantages and disadvantages /inherent limitations of ICS
  • 8.1.7          Indicators of weaknesses in ICS and actions taken by management
  • 8.1.8          The evaluation of internal control systems by auditors using Internal Control Questionnaire, Flow charts and narrative notes
  • 8.1.10        Tests of controls on specific control environments
  • 8.1.11        Internal controls theory and practice-sales and debtors, purchases and creditors, inventories and work in progress, fixed assets, salaries and wages
  • 8.1.12        Communication of improvements on ICS weaknesses/ risks associated- Management letter.
  1. Internal Audit Function

  • 9.1       Scope and objectives of internal audit
  • 9.2       Criteria of using internal audit work
  • 9.3       Areas of support on external auditors’ work
  • 9.4       Internal audit review reports and actions by management and those charged with governance
  • 9.5       Design of risk based internal audit plan
  • 9.6       Internal audit key performance indicators
  • 9.7       Managing and monitoring follow up of audit recommendations made to board/ management.
  • 9.8       Outsourcing internal audit function-advantages and disadvantages.
  • 9.9       Audit committee-functions, merits and demerits.
  • 9.10     Internal check systems-scope, features, advantages and disadvantages
  • 9.11     Information technology threats andcontrol
  • 9.12     Auditors duty on compliance with laws and regulations.
  1. Overview of Forensic Accounting, Errors, Frauds and Irregularities

  • 10.1     Overview of forensic accounting
  • 10.1.1        Nature, purpose and scope of forensic accounting
  • 10.1.2        Types of forensic investigations: corruption, asset misappropriation, financial statement fraud, others
  • 10.1.3        Asset Recovery process and legal framework
  1. Errors, Frauds and Irregularities

  • 11.1        Differences between error andfrauds
  • 11.2        Types of errors-omission, commission, principle, reversal of entries
  • 11.3        Types of Frauds-Teeming and lading, ghost employees, window dressing, misappropriation of goods and fraudulent financial reporting
  • 11.4        Causes of frauds and fraudtriangle
  • 11.5        Indicators of errors andfrauds
  • 11.6        Detection and prevention of errors and frauds and deterrence-role of internal audit
  • 11.7        Materiality and Implications of errors and frauds in the financial statements
  • 11.8        Impact of errors and frauds on the audit plan
  • 11.9        Reporting on error andfrauds
  • 11.10      External auditors and Management responsibility on errorand frauds
  • 11.11      Auditors professional skepticism.

12.Audit evidence

  • 12.1           Financial statement assertions and audit evidence
  • 12.2       Types and features of audit evidence (sufficiency, reliability and relevance)
  • 12.3       Audit evidence gathering procedures/ techniques
  • 12.4       Materiality and limitations of audit evidence
  • 12.5       Financial statement assertions and audit evidence
  • 12.6       Audit sampling techniques – statistical and non-statistical
  • 12.7       Analytical reviews procedures- nature, objectives, timing and extent of support evidence
  • 12.8       Types of analytical Procedures-Variance analysis, reasonableness tests, trend analysis
  • 12.9       Using the work of experts- areas of support and considerations
  • 12.10     Using management representations (importance, procedures adopted and matters covered).

13.Auditing in the public sector

  • 13.1           Introduction to auditing in the public sector and regulatory provisions
  • 13.2       Objective and scope of public sector audit (compliance, performance, financial, value for money)
  • 13.3       Establishment, mandate and functions of public sector auditors
  • 13.4       The parties to audit in public sector-auditor, responsible party and intended users
  • 13.5       Role of internal audit function in public entities
  • 13.6       Relationship between external and internal auditors in the publicsector
  • 13.7       Audit reports by office of Auditor General.
  • 13.8       Functions of audit advisory board and executive committee in Auditor General office.

14.0 Auditors Reports

  • 14.1        Purposes of auditors’ report and concept of true and fair view
  • 14.2        Legal /Statutory provisions on audit reports
  • 14.3        Basic elements contents of audit reports
  • 14.4        Emphasis of the matter paragraph and key audit matters
  • 14.5        Types and Consequences of different types of audit reports issued.
  • 14.6        Features of unqualified and qualified audit reports
  • 14.7        Reasons for qualifications of audit reports (Limitation of scope, inherent uncertainties, disagreements)
  • 14.8        Types of qualifications-disclaimer, except for and adverse opinions.
  • 14.9        Overall audit review and finalisation
  • 14.10      Subsequent events/Post balance sheet events review (adjusting and non – adjusting events, auditor’s responsibility and audit procedures)
  • 14.11      Going concern review (Auditors and management responsibility, indicators of going concern difficulties, audit procedures, mitigation plans and reporting)
  • 14.12      Management representations on contentious matters affecting financial statements like guarantees made, capital commitments, borrowings, unusual accounting adjustments.
  • 14.13      Review of compliance with accounting policies, opening balances, prior period audits by other auditors
  • 14.14      Format for presentation of independent auditor’s report.
  1. Auditing in a computerised system

  • 15.1     Audit objectives in computerised systems
  • 15.2     Differences between computerised and manual systems
  • 15.3     Benefits and drawbacks of computerised accounting systems
  • 15.4     Types of controls in computerised systems (Administrative, system development, processing controls, application controls, master files and standing data
  • 15.5     Auditors use of computers in the course of audit
  • 15.6     Planning the audit in computerised systems
  • 15.7     Audit approaches – audit around, with and through the computer and circumstances when each is applied
  • 15.8     Loss of audit trail, causes and measures to mitigate the loss of audit trail
  • 15.9     Computer Assisted Audit Techniques (CAATS) – Audit software and test data
  • 15.10   Types of audit software and functions and types of test data
  • 15.11   Factors considered before using CAATS and steps in CAATS application
  • 15.12   Advantages and disadvantages of CAATS
  • 15.13   Use of embedded audit modules and integrated test facilities
  • 15.14   Information security controls (Encryption, Firewalls, Passwords, Antivirus)

16.      Contemporary and emerging issues in audit

  • 16.1   E- commerce auditing
  • 16.2   Cloud documentation
  • 16.3  Use of data analytics tools in audit (Anomaly detection, diagnostic analysis, predictive analysis.

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