Types of Auditing Standards
The international standards on auditing can be classified into operational standards, reporting standards and personal or ethical standards.
The operational standard must be applied whenever an audit is being performed. In a bid to help auditors in the application of the standard, the following were used and advised to be followed.
Planning, Controlling and Recording: The standard states that auditors should adequately plan, control and record his work. This means that an auditor should not just jump into carrying out an audit work without proper thought with regard to the processes it would entail, test to carry out and the aim the audit hopes to achieve.
Accounting Systems: The standard says that the auditor should ascertain and document a client’s accounting system so as to have a reasonable basis to assess the adequacy of the accounting systems that led to the preparation of the financial statements.
Internal Control Systems: Companies usually put in place internal control systems to enable them reduce the occurrence of fraud or incidence of errors or misstatements of accounting information. Internal control systems should serve as a means by which an organization’s resources are directed, monitored and measured. The standard says that before placing reliance on any internal control system, the auditor should evaluate and test the control.
Audit Evidence: Audit evidence is essential in an audit process, it is the information an auditor comes across in the course of his audit, it enables him form an independent opinion on an enterprise’s financial statement. The standard says that the auditor should gather a relevant, reliable and sufficient audit evidence to enable him draw reasonable conclusions therefrom.
Review of Financial statements: The end result of record keeping in accounting is the preparation of financial statements which represents a formal record of the financial activities and position of a business, person or other entity. The standard says that after performing appropriate audit tests and procedures, the auditor should carry out a review of the financial statements as a whole for reasonableness.
This standard must be applied when issuing an audit report on a client’s financial statements. Reporting standards discusses the types if audit reports that can be issued , either unqualified or modified audit report. This standard also defines and explains the circumstances may lead an auditor to modify his opinion.
Personal or Ethical Standards
Professional bodies like the CFA have codes of ethics that must be followed by its members. It is even so important that it is one out of the 10 papers that must be written in every stage of the examination and carries weighting ranging from 5% – 10%. The CFA institute also encourages other professionals who are not necessarily its members to follow its code of ethics and guidelines to ensure the highest standards of ethics, education and professional excellence for the ultimate benefit of society.
In the professional accounting space in Nigeria, the code of ethics in the profession is spelt out by the Institute of Chartered Accountants of Nigeria (ICAN) in a document entitled “code of conduct of members”.