Page 12 - Internal Auditing Standards

Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts

The overview is followed by a more detailed discussion of the subject matter, and practical step-by-step
guidance/methodology on how to implement the relevant ISAs. This can include some cross-references
to the applicable ISAs. While the Guide focuses exclusively on the ISAs (other than the 800 series)
that apply to audits of historical financial information, reference is also made to the Code of Ethics for

Professional Accountants issued by the International Ethics Standards Board for Accountants (the IESBA
Code), and the International Standard on Quality Control 1 (ISQC 1), Quality Control for Firms that Perform
Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.
• Consider Points
A number of Consider Points are included throughout the Guide. These Consider Points provide
practical guidance on audit matters that can easily be overlooked, or where practitioners often have

difficulty understanding and implementing certain concepts.

• Illustrative Case Studies
To demonstrate how the ISAs can be applied in practice, Volume 2 of the Guide includes two case
studies. At the end of many chapters within Volume 2, two possible approaches to documenting the
application of the ISA requirements are discussed. Please refer to Volume 2, Chapter 2 of this Guide for
details about the case studies.

The purpose of the case studies and the documentation presented are purely illustrative. The

documentation provided is a small extract from a typical audit file, and it outlines just one possible way
of complying with the ISA requirements. The data, analysis, and commentary provided represent only
some of the circumstances and considerations that the auditor will need to address in a particular audit.
As always, the auditor must exercise professional judgment.

The first case study is based on a fictional entity called Dephta Furniture. This is a local, family-owned

furniture manufacturer with 10 fulltime employees. The entity has a simple governance structure, few
levels of management, and straightforward transaction processing. The accounting function uses an off -
the-shelf, standard software package.

The second case study is based on another fictional entity called Kumar & Co. This is a micro-sized entity

with two fulltime staff plus the owner and one part-time bookkeeper.

Other IFAC Publications
The Guide to Quality Control for Small- and Medium-Sized Practices may also be read in conjunction with this
Guide which can be downloaded free of charge from the IFAC online publications and resources site at http://
web.ifac.org/publications/small-and-medium-practices-committee/implementation-guides

1.3 Glossary of Terms

The Guide uses many of the terms as defined in the IESBA Code, Glossary of Terms, and ISAs (as contained in
the 2010 IFAC Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services

Pronouncements). Both partners and staff must be aware of these defi nitions.
The Guide also uses the following terms:

Anti-Fraud Controls
These are controls designed by management to prevent or detect and correct frauds. With respect to
management override, these controls may not prevent a fraud from occurring, but would act as a deterrent
and make perpetrating a fraud more difficult to conceal. Typical examples are:

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