Companies Act

Introduction Financial statements often contain amounts that management cannot measure precisely. Therefore, management uses accounting estimates based on judgment, assumptions, and past experience. For instance, companies estimate bad debts, depreciation, warranty expenses, and fair value of assets. To guide auditors in examining such estimates, the SA 540 – Auditing Accounting Estimates, Including Fair Value Accounting […]

Introduction Audit sampling means selecting and examining less than 100% of items in a population to obtain audit evidence. The auditor uses the results of the selected sample to form a conclusion about the entire population. Objective of Audit Sampling The auditor uses audit sampling to obtain a reasonable basis for drawing conclusions about the […]

Introduction SA 520 – Analytical Procedures requires the auditor to evaluate financial information by analyzing reasonable and logical relationships among financial and non-financial data. These procedures help the auditor identify unusual fluctuations, trends, or inconsistencies that may indicate a material misstatement in the financial statements. Objectives of the Auditor Under SA 520, the auditor aims […]

Introduction SA 510 explains the auditor’s responsibility in an initial audit engagement. The auditor verifies the opening balances of the current period. These balances come from the closing balances of the previous period. Therefore, the auditor ensures that the balances are correctly carried forward and free from material misstatements. Verification of Opening Balances First, the […]

Introduction External Confirmation under SA 505 means asking someone outside the company to confirm information directly to the auditor.  when an auditor checks a company’s accounts, they do not only trust what the company says. Instead, they also contact third parties — like customers, suppliers, banks, or lenders — to verify whether the figures shown […]