ISA 320 addresses materiality in planning and performing an audit. It requires setting materiality for the financial statements as a whole, performance materiality (lower, to reduce aggregation risk), and revising these as the audit progresses. Materiality guides the nature, timing, and extent of procedures and the evaluation of misstatements.
Real-world exampleThe team sets overall materiality at 1% of revenue and performance materiality at 75% of that under ISA 320.
Common follow-ups: What is performance materiality for? | Why revise materiality during the audit?
ISA 570 deals with going concern: the auditor's responsibility to obtain sufficient evidence about, and conclude on, the appropriateness of management's use of the going concern basis, and whether a material uncertainty exists. It sets out procedures, evaluation of management's assessment, and the reporting implications of going concern issues.
Real-world exampleUnder ISA 570, the auditor evaluates cash-flow forecasts and covenant compliance to assess going concern.
Common follow-ups: What is a material uncertainty related to going concern? | How does going concern affect the report?
Going ConcernAudit Report & OpinionsISA Standards
What is the role of ISQM 1 (formerly ISQC 1) in audit quality?
Advanced
ISQM 1 requires firms to design, implement, and operate a system of quality management using a risk-based approach, covering governance, ethics, acceptance/continuance, engagement performance, resources, information/communication, and monitoring/remediation. It shifts from a compliance checklist to proactively managing quality risks across the firm's engagements.
Real-world exampleThe firm identifies quality risks and tailors responses under ISQM 1, then monitors and remediates deficiencies each year.
Common follow-ups: How does ISQM 1 differ from ISQC 1? | What are the components of a quality management system?
What is an assurance engagement and what are its elements?
Beginner
An assurance engagement is one where a practitioner expresses a conclusion to enhance the confidence of intended users about a subject matter against criteria. Its five elements are: a three-party relationship (practitioner, responsible party, users), a subject matter, suitable criteria, sufficient appropriate evidence, and a written assurance report.
Real-world exampleAn audit of financial statements is an assurance engagement measuring the statements against the reporting framework criteria.
Common follow-ups: What are the five elements of assurance? | Is an audit a type of assurance engagement?
What is the difference between reasonable assurance and limited assurance engagements?
Intermediate
A reasonable assurance engagement (like an audit) reduces engagement risk to an acceptably low level and gives a positive conclusion ('the statements are fairly presented'). A limited assurance engagement (like a review) performs fewer procedures, gives a negative-form conclusion ('nothing has come to our attention'), and provides a lower, but still meaningful, level of assurance.
Real-world exampleAn audit gives a positive opinion, while a review of interim statements gives limited assurance in negative form.
Common follow-ups: What is a negative-form conclusion? | Which engagement does more work?
How do the ISAs require documentation of the audit (ISA 230)?
Advanced
ISA 230 requires audit documentation sufficient to enable an experienced auditor with no prior connection to understand the nature, timing, and extent of procedures, results and evidence obtained, and significant matters and conclusions. It supports the report, evidences compliance with ISAs, and must be assembled into the final file within a set period and retained.
Real-world exampleWorking papers document who did what, when, what was found, and the conclusions—so a reviewer can retrace the audit.
Common follow-ups: What is the 'experienced auditor' test? | What is the assembly period for the file?
What does ISA 260 and ISA 265 require regarding communication?
Intermediate
ISA 260 requires communicating with those charged with governance about the audit scope, significant findings, auditor independence, and other matters. ISA 265 requires communicating significant deficiencies in internal control identified during the audit, in writing, to management and those charged with governance on a timely basis.
Real-world exampleThe auditor sends a management letter reporting a significant control deficiency in the payments process under ISA 265.
Common follow-ups: What is a significant deficiency? | Who are 'those charged with governance'?
What is the auditor's responsibility under ISA 720 for other information?
Advanced
ISA 720 addresses the auditor's responsibilities relating to other information (e.g., the annual report's narrative sections) accompanying the audited statements. The auditor reads it to identify material inconsistencies with the financial statements or their knowledge, and material misstatements of fact, and reports on this responsibility in the auditor's report.
Real-world exampleThe auditor spots that the chairman's statement contradicts the audited profit figure and requires it to be corrected under ISA 720.
Common follow-ups: What does the auditor do if other information is inconsistent? | Is the auditor giving an opinion on other information?
What is professional skepticism and why do ISAs emphasize it?
Intermediate
Professional skepticism is an attitude of a questioning mind, alertness to conditions indicating possible misstatement, and critical assessment of evidence—not accepting management's assertions at face value. ISAs (200, 240) require it throughout because it helps auditors detect fraud and error and avoid over-reliance on management, underpinning audit quality.
Real-world exampleApplying skepticism, the auditor corroborates management's optimistic revenue explanation with third-party evidence rather than accepting it.
Common follow-ups: How does skepticism relate to fraud detection? | What behaviors show a lack of skepticism?