Auditing

Study lessons

1. 1

   The Audit Process, Risk, and Professional Ethics

   What an audit actually promises, how the audit risk model and materiality drive the plan, the five components of internal control, and the ethics rules that protect an auditor's independence.

   15 min
2. 2

   Audit Evidence, Procedures, Sampling, and the Auditor's Report

   How assertions connect to evidence, when a procedure is a test of controls versus substantive, how sampling risk works, and exactly which of the four opinion types fits which scenario.

   15 min
3. 3

   Audit Sampling: Attributes, Variables, and Monetary Unit Sampling

   How PSA 530 sampling really works: attribute sampling and the upper deviation limit for tests of controls, variables and monetary unit sampling for substantive tests, and how to decide whether a sample lets you rely or accept.

   15 min
4. 4

   The Auditor's Report and the Types of Opinion

   The structure of the unmodified report under PSA 700, going concern reporting under PSA 570, the PSA 705 decision matrix for modified opinions, Emphasis of Matter versus Other Matter under PSA 706, and Key Audit Matters under PSA 701.

   15 min
5. 5

   Completing the Audit: Subsequent Events, Going Concern, and Written Representations

   Work through the wrap-up phase of an audit: the two types of subsequent events and the three PSA 560 time periods, evaluating going concern under PSA 570, obtaining written representations under PSA 580, and the final evaluation of misstatements under PSA 450.

   15 min
6. 6

   Quality Management (PSQM 1 and PSQM 2) and the Code of Ethics

   Understand the firm-level system of quality management and its eight components under PSQM 1, engagement quality reviews under PSQM 2, engagement-level responsibility under PSA 220, and the conceptual framework that drives the Code of Ethics.

   15 min
7. 7

   Practical Audit Application: Account Balances, Working Papers, and Adjusting Entries

   Apply substantive tests to real account balances (cash, receivables, inventory, and liabilities), document them under PSA 230, and turn detected misstatements into audit adjusting entries, including a fully worked bank reconciliation.

   16 min
8. 8

   Fraud, Error, and Non-Compliance with Laws and Regulations (PSA 240, PSA 250)

   Separate fraud from error by intent alone, place primary responsibility for prevention on management and those charged with governance, treat revenue recognition as a presumed significant risk and management override as a risk in every entity, always test journal entries and review estimates for bias, and split laws that directly determine amounts from those that merely may have a material effect.

   18 min
9. 9

   Engagement Acceptance, the Terms of the Engagement, and Audit Planning (PSA 210, PSA 300)

   Test the two preconditions for an audit before accepting it, refuse an engagement whose scope management has already limited into a disclaimer, put the agreed terms in an engagement letter that need not be reissued every year, refuse a change to a lower level of assurance that has no reasonable justification, and build the overall audit strategy before the detailed audit plan.

   18 min
10. 10

    Risk Assessment in Depth: Significant Risks, IT Controls, and Service Organisations (PSA 315, PSA 330, PSA 402)

    Perform the three risk assessment procedures, identify a significant risk from the inherent risk factors, test controls only when you intend to rely on them or when substantive procedures alone will not do, retest a control relied on in a prior audit at least every third audit but never rotate a control over a significant risk, always perform substantive procedures for every material class, and read a service organisation report of the right type.

    20 min
11. 11

    Accounting Estimates, Related Parties, Litigation, and Inventory (PSA 540, PSA 550, PSA 501)

    Audit an estimate by testing how management made it, developing a point estimate or range, or examining events up to the report date, narrow an auditor's range to what the evidence supports, watch for bias that is reasonable item by item and one-sided in aggregate, treat an assertion of arm's length terms as a claim needing evidence, obtain a legal confirmation for litigation, and attend the physical inventory count.

    20 min
12. 12

    Using the Work of Others: Internal Audit, Experts, and Group Audits (PSA 610, PSA 620, PSA 600)

    Keep sole responsibility for the opinion however much work others contribute, evaluate an internal audit function for objectivity, competence, and a systematic and disciplined approach before using its work, never let internal auditors give direct assistance on significant judgements, never refer to an auditor's expert or a component auditor in an unmodified opinion, and set component materiality below group materiality.

    18 min
13. 13

    Other Assurance Engagements and Related Services (Reviews, Agreed-Upon Procedures, and Compilations)

    Place every engagement on a ladder of assurance, express reasonable assurance positively and limited assurance negatively, perform a review chiefly through inquiry and analytical procedures, express no assurance at all in an agreed-upon procedures report of factual findings or in a compilation, restrict distribution where the recipients agreed the procedures, and separate a forecast from a projection.

    18 min

Section practice test

5 test sets covering the whole Auditing section, 150 original questions with explanations. After you finish the lessons above, prove it here. Randomized every run.