Page 185 - Internal Auditing Standards

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

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Paragraph # Relevant Extracts from ISAs
402.20 The user auditor shall modify the opinion in the user auditor’s report in accordance with ISA

705 if the user auditor is unable to obtain sufficient appropriate audit evidence regarding the
services provided by the service organization relevant to the audit of the user entity’s fi nancial
statements. (Ref: Para. A42)
402.21 The user auditor shall not refer to the work of a service auditor in the user auditor’s report

containing an unmodified opinion unless required by law or regulation to do so. If such reference
is required by law or regulation, the user auditor’s report shall indicate that the reference does
not diminish the user auditor’s responsibility for the audit opinion. (Ref: Para. A43)
402.22 If reference to the work of a service auditor is relevant to an understanding of a modifi cation to
the user auditor’s opinion, the user auditor’s report shall indicate that such reference does not
diminish the user auditor’s responsibility for that opinion. (Ref: Para. A44)

When a type 1 or 2 report from a service organization is used, the auditor’s report on the entity would not
make reference to the service organization’s report unless required by law.

However, a modified auditor’s report is appropriate if sufficient appropriate audit evidence, relevant to the

audit about the service organization, could not be obtained.
15.4 ISA 501—Audit Evidence—Specific Considerations for Selected Items

Paragraph # ISA Objective(s)

501.3 The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:
(a) Existence and condition of inventory;
(b) Completeness of litigation and claims involving the entity; and
(c) Presentation and disclosure of segment information in accordance with the applicable

financial reporting framework.

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Attendance at Physical Inventory Count t
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Paragraph # Relevant Extracts from ISAs

501.4 If inventory is material to the financial statements, the auditor shall obtain suffi cient
appropriate audit evidence regarding the existence and condition of inventory by:
(a) Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)
(i) Evaluate management’s instructions and procedures for recording and controlling the
results of the entity’s physical inventory counting; (Ref: Para. A4)
(ii) Observe the performance of management’s count procedures; (Ref: Para. A5)
(iii) Inspect the inventory; and (Ref: Para. A6)
(iv) Perform test counts; and (Ref: Para. A7-A8)
(b) Performing audit procedures over the entity’s final inventory records to determine

whether they accurately reflect actual inventory count results.
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