What Are Statements on Auditing Standards?

Auditing standards are a code of conduct that a certified public accountant must follow when conducting an audit. It is a professional standard for auditors to perform audit operations, obtain audit evidence, form audit conclusions, and issue audit reports.

Auditing Standards

Auditing Standards Audit

The specific standards for independent auditing are the specific specifications for certified public accountants to perform auditing operations based on the basic standards. It is co-located with the Practice Bulletin on the second level of the code system. However, according to the content of Individual Standard No. 1, it is neither a specific standard for auditing business nor a basic standard with guiding significance. Some people believe that the content of specific guidelines for auditing accounting statements is complex and fragmented. The formulation of an accounting statement standard is conducive to the formation of a complete system of specific standard concepts, so this standard is the commander of other specific standards. Understood in this way, Specific Standard No. 1 can be regarded as a separate level, and the standard system is not three levels but four levels. Standard No. 1 lacks the role of specific norms. For example, the audit task agreement, audit plan, audit work confession draft, and audit report all have specific specific standards. They are all mentioned in the first standard, but they are quite economical, and some are corresponding to the basic standards. Repetition or simple expansion of some, even simpler than the basic guidelines. For example, Article 15 of the Basic Standard states: "A certified public accountant, Fang Weiwei, records the audit plan and its implementation process, results, and other important matters that need to be judged, and records it in the audit work confession draft." And Article 19 of the No. 1 Specific Standard provides "The certified public accountant should record the audit work and form a work-recognition draft." This is the only explanation for the formation of a work-recognition draft. One cannot help asking: where are the specific guidelines? And in the report section, the same problem will be found.

The importance of auditing standards

Materiality is defined in Article 2 of the Standard: "The materiality referred to in this Standard refers to the severity of misstatement or omission in the accounting statements of the audited entity, which may affect the users of accounting statements in certain circumstances. Judgment or decision-making. "This concept is highly abstract, and the judgment or decision-making requirements of report users will be different. It is not clear what type of report user is targeted by Article 2.

In addition, Articles 19 to 23 of the standard enumerate various situations in which importance should be considered when evaluating audit results, but the author believes that the considerations in the standard are still incomplete. On the surface, the standard seems to cover all aspects: When evaluating the audit results, the CPA should summarize the misstatements or omissions that have been found but not adjusted to consider whether the amount and nature have a significant impact on the reflection of the accounting statements.

When the certified public accountant summarizes the misstatements or omissions that have not yet been adjusted, it shall include the discovered and inferred misstatements or omissions, and consider whether the post-period and contingent matters have been properly handled.

If the total number of misstatements or omissions that have not been adjusted exceeds the materiality level, the CPA should consider expanding the scope of the substantive test or asking the audited entity to adjust the accounting statements to reduce audit risks.

If the audited unit refuses to adjust the accounting statements or expand the scope of substantial testing, the total number of misstatements or omissions that have not been adjusted still exceeds the materiality level, the certified public accountant shall issue a qualified opinion or a negative opinion.

If the total number of misstatements or omissions that have not been adjusted is close to the materiality level, and because the total number of misstatements or omissions that have not been found may exceed the materiality level, the CPA should implement additional audit procedures, or request the audited entity to further Adjust any misstatements or omissions found to reduce audit risk.

The established level of importance has become the sole criterion for evaluating the audit results, but in practice, the value of the level of importance should vary with the specific circumstances of the audit. Especially when a company is in a critical state of profit or loss or the actual profit is only one step away from the predicted profit, only a small misreport can make the company reach its goal. At this time, the level of importance should be determined from the perspective of affecting the overall statement. Among the five factors that should be considered in determining the level of importance in Article 11 of the standard, there is no mention of the degree of influence of misreporting on the overall statement. China's "Securities Law" stipulates that a listed company must temporarily suspend trading for three consecutive years of losses. Assuming a company has suffered losses for two consecutive years and the difference between the third year and the breakeven is only 3%, then it is likely to create some small errors to fill the gap, If a certified public accountant measures a false negative report with an importance level of 5%, the small error of 3% is not important, and an unqualified audit report can be issued, but such a report will more or less induce some investors to make a wrong decision .

The improvement of the certified public accountant's practice quality depends to a large extent on the improvement of independent auditing standards. Therefore, the theoretical community should strengthen the study of the standards and make recommendations for the establishment of a logically coherent, clear structure, clear and specific, and operable independent auditing standards. Make it better and better in order to better play its due role.