LIMITATION AND USE OF ASSERTIONS IN OBTAINING AUDIT EVIDENCE


The quality and quantity of evidence is constrained by the following factors:

a) Absolute proof is not possible;

b) Some assertions are not material;

c) Time and cost must be considered as accounts must be produced within certain time scales and the auditor may have to do with less than perfection, and ideal evidence may be too expensive to obtain.

d) Sensitivity: some items are of greater importance than others or are capable of greater variations.

To summarise: the auditors degree of assurance is greater when evidence obtained from different sources is consistent with each other. However, when evidence from one source is inconsistent with that obtained from another then further procedures may have to be performed to resolve the inconsistency.

The Use of Assertions in Obtaining Audit Evidence

Management is responsible for the fair presentation of financial statements that reflect the nature and operations of the entity. In representing that the financial statements give a true and fair view (or are presented fairly, in all material respects) in accordance with the applicable financial reporting framework, management implicitly or explicitly makes assertions regarding the recognition, measurement, presentation and disclosure of the various elements of financial statements and related disclosures.

The auditor should use assertions for classes of transactions, account balances, and presentation and disclosures in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance of further audit procedures. The auditor uses assertions in assessing risks by considering the different types of potential misstatements that may occur, and thereby designing audit procedures that are responsive to the assessed risks. Other ISAs discuss specific situations where the auditor is required to obtain audit evidence at the assertion level.