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International Federation of Accountants
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This publication was prepared by the International Federation of Accountants (IFAC).
Its mission is to serve the public interest, strengthen the worldwide accountancy
profession and contribute to the development of strong international economies by
establishing and promoting adherence to high quality professional standards, furthering
the international convergence of such standards and speaking out on public interest
issues where the profession’s expertise is most relevant.
This publication may be downloaded free-of-charge from the IFAC website
. The approved text is published in the English language.
IFAC welcomes any comments you may have regarding this handbook. Comments may
be sent to the address above or emailed to









Copyright © March 2008 by the International Federation of Accountants (IFAC). All
rights reserved. Permission is granted to make copies of this work provided that such
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March 2008 by the International Federation of Accountants (IFAC). All rights reserved.

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ISBN: 978-1-934779-06-4
HANDBOOK OF INTERNATIONAL
AUDITING, ASSURANCE, AND ETHICS
PRONOUNCEMENTS
2008 EDITION
PART II
Scope of Part II of the Handbook
Part II of the handbook contains background information on the project of the
International Auditing and Assurance Standards Board (IAASB) to improve the clarity
of its pronouncements (Clarity project), an amended Preface to the International
Standards on Quality Control, Auditing, Review, Other Assurance and Related Services,
and the International Standards on Auditing that have been redrafted in accordance with
the clarity conventions.
Part I of the handbook contains background information on the International Federation
of Accountants (IFAC) and the currently effective pronouncements on ethics, quality
control, auditing, review, other assurance, and related services issued by IFAC as of
January 1, 2008.
How Part II of the Handbook is Arranged
The contents of Part II of the handbook are arranged by section as follows:
Background Information on the Clarity Project of the International Auditing
and Assurance Standards Board 1
Preface to the International Standards on Quality Control, Auditing, Review,
Other Assurance and Related Services (December 2006) 5
Glossary of Terms 12
Redrafted and Revised and Redrafted International Standards on Auditing 16

CLARITY PROJECT
1
CLARITY PROJECT
BACKGROUND INFORMATION ON THE CLARITY
PROJECT OF THE INTERNATIONAL AUDITING AND
ASSURANCE STANDARDS BOARD
Clarity and High Quality International Standards
In serving the public interest, the International Auditing and Assurance Standards Board
(IAASB) sets high quality international auditing and other assurance standards. The
IAASB recognizes that standards need to be understandable, clear and capable of
consistent application. These aspects of clarity serve to enhance the quality and
uniformity of practice worldwide.
In seeking to improve its standards, in 2003 the IAASB reviewed the drafting
conventions used in its International Standards. The objective of the review was to
identify ways to improve the clarity, and thereby the consistent application, of
International Standards on Auditing (ISAs).
In 2004, the IAASB began a comprehensive program to enhance the clarity of ISAs.
This program involves the application of new drafting conventions to all ISAs, either as
part of a substantive revision or through a limited redrafting to reflect the new
conventions and matters of clarity generally.
Amended Preface
The IAASB has issued amendments to the Preface to the International Standards on
Quality Control, Auditing, Review, Other Assurance and Related Services (Preface).
The Preface establishes the new conventions to be used in drafting ISAs and the
obligations of auditors who follow those Standards. Improvements arising from the
amended Preface broadly comprise:
• Identifying the auditor’s overall objective when conducting an audit in accordance
with ISAs, setting an objective in each ISA, and establishing an obligation on the

auditor in relation to those objectives;
• Clarifying the obligations imposed on auditors by the requirements of the ISAs and
the language used to communicate such requirements;
• Eliminating any possible ambiguity about the requirements an auditor needs to
fulfill (such possible ambiguity arose from the use of the present tense in the
current ISAs); and
• Improving the overall readability and understandability of the ISAs through
structural and drafting improvements, including presenting the requirements and
application and other explanatory material in separate sections within the ISAs.
Plan for Completing the Project
The IAASB established a plan for completing the project by the end of 2008. This plan
distinguishes revision and redrafting. The IAASB currently has 32 ISAs in issue. Of
these:
BACKGROUND INFORMATION ON THE
CLARITY PROJECT OF THE IAASB
CLARITY PROJECT
2
• 11 are under full revision and will be issued in the clarity form (for purposes of the
handbook, they are referred to as “Revised and Redrafted”);
• Nine have been revised in the last few years and are in no need of further revision,
but will be redrafted in the clarity form (referred to as “Redrafted”); and
• The other 12 have not been recently revised, but are considered acceptable; they
will be redrafted in the clarity form without revision for any other matters (also
referred to as “Redrafted”).
The plan responds to the desire for all ISAs to be consistently drafted, and subject to a
single statement of their authority and effect, while completing the Clarity project within
a reasonable time. It also minimizes the time the IAASB will spend on the clarification
of the older ISAs and ensures that the IAASB can turn its attention to other projects as
soon as practicable. These other projects may include the full revision of some of the
older ISAs if the clarity redrafting exercise, or the IAASB’s consultation on its future

work program, highlights a need for this.
The IAASB’s timetable to 2008, which is updated after each IAASB meeting, is
available at www.ifac.org/IAASB/downloads/Current_IAASB_Project_Timetable.doc.
Effective Date
The redrafted or revised and redrafted ISAs will be effective for audits of financial
statements for periods beginning on or after December 15, 2009.
Implementation Considerations
It is important that all those with responsibility for implementation activities consider
the final ISAs as early as practicable. National standards setters, legislators and others
involved in setting standards have been following the development of the ISAs and
contributing to the process by commenting on exposure drafts. They will, therefore, be
well placed to consider adoption or convergence plans that maximize the
implementation period for auditors. IFAC member bodies and auditors, who have
similarly been following the process, will want to consider what continuing professional
development courses or other training materials need to be developed. Auditors will also
need to consider the extent to which the new requirements within the ISAs call for
amendments to current audit programs and procedures.
The IAASB is releasing the final ISAs as they are approved, and after the Public Interest
Oversight Board has confirmed that due process has been followed in the development
of each Standard. The IAASB believes that publication of the ISAs in this way will
assist in their translation, adoption and implementation. The IAASB accepts that there is
a possibility of conforming amendments being necessary to released ISAs as other ISAs
are redrafted or revised and redrafted, although this process will be completed before
publication of the set of final ISAs in late 2008. Any such amendments are not expected
to change the substance of the ISAs already approved, although they may have a small
effect on their content.
BACKGROUND INFORMATION ON THE
CLARITY PROJECT OF THE IAASB
CLARITY PROJECT
3

CLARITY PROJECT
Progress to Date
At December 31, 2007, the IAASB has released the following final ISAs:
• ISA 230 (Redrafted), “Audit Documentation”
• ISA 240 (Redrafted), “The Auditor’s Responsibilities Relating to Fraud in an Audit
of Financial Statements”
• ISA 260 (Revised and Redrafted), “Communication with Those Charged with
Governance”
• ISA 300 (Redrafted), “Planning an Audit of Financial Statements”
• ISA 315 (Redrafted), “Identifying and Assessing the Risks of Material
Misstatement Through Understanding the Entity and Its Environment”
• ISA 330 (Redrafted), “The Auditor’s Responses to Assessed Risks”
• ISA 540 (Revised and Redrafted), “Auditing Accounting Estimates, Including Fair
Value Accounting Estimates, and Related Disclosures”
• ISA 600 (Revised and Redrafted), “Special Considerations—Audits of Group
Financial Statements (Including the Work of Component Auditors)”
• ISA 720 (Redrafted), “The Auditor’s Responsibility in Relation to Other
Information in Documents Containing Audited Financial Statements”
At December 31, 2007, the IAASB has approved the following final ISAs. These ISAs
are awaiting confirmation by the Public Interest Oversight Board that due process has
been followed in their development. They will be released after such confirmation has
been received:
• ISA 560 (Redrafted), “Subsequent Events”
• ISA 580 (Revised and Redrafted), “Written Representations”
At December 31, 2007 the following exposure drafts of proposed redrafted or revised
and redrafted ISAs have been issued. These ISAs have not yet been completed as final
Standards:
• ISA 200 (Revised and Redrafted), “Overall Objective of the Independent Auditor,
and the Conduct of an Audit in Accordance with International Standards on
Auditing”

• ISA 210 (Redrafted), “Agreeing the Terms of Audit Engagements”
• ISA 220 (Redrafted), “Quality Control for an Audit of Financial Statements” and
International Standard on Quality Control (ISQC) 1 (Redrafted), “Quality Control
for Firms that Perform Audits and Reviews of Financial Statements, and Other
Assurance and Related Services Engagements”
• ISA 250 (Redrafted), “The Auditor’s Responsibilities Relating to Laws and
Regulations in an Audit of Financial Statements”
• ISA 265, “Communicating Deficiencies in Internal Control”

BACKGROUND INFORMATION ON THE
CLARITY PROJECT OF THE IAASB
CLARITY PROJECT
4
• ISA 320 (Revised and Redrafted), “Materiality in Planning and Performing an
Audit”
• ISA 402 (Revised and Redrafted), “Audit Considerations Relating to an Entity
Using a Third Party Service Organization”
• ISA 450 (Revised and Redrafted), “Evaluation of Misstatements Identified during
the Audit”
• ISA 500 (Redrafted), “Considering the Relevance and Reliability of Audit
Evidence”
• ISA 501 (Redrafted), “Audit Evidence Regarding Specific Financial Statement
Account Balances and Disclosures”
• ISA 505 (Revised and Redrafted), “External Confirmations”
• ISA 510 (Redrafted), “Initial Audit Engagements—Opening Balances”
• ISA 520 (Redrafted), “Analytical Procedures”
• ISA 530 (Redrafted), “Audit Sampling”
• ISA 550 (Revised and Redrafted), “Related Parties”
• ISA 570 (Redrafted), “Going Concern”
• ISA 610 (Redrafted), “The Auditor’s Consideration of the Internal Audit Function”

• ISA 620 (Revised and Redrafted), “Using the Work of an Auditor’s Expert”
• ISA 700 (Redrafted), “The Independent Auditor’s Report on General Purpose
Financial Statements”
• ISA 705 (Revised and Redrafted), “Modifications to the Opinion in the Independent
Auditor’s Report”
• ISA 706 (Revised and Redrafted), “Emphasis of Matter Paragraphs and Other
Matter(s) Paragraphs in the Independent Auditor’s Report”
• ISA 710 (Redrafted), “Comparative Information—Corresponding Figures and
Comparative Financial Statements”
• ISA 800 (Revised and Redrafted), “Special Considerations—Audits of Special
Purpose Financial Statements and Specific Elements, Accounts or Items of a
Financial Statement”
• ISA 805 (Revised and Redrafted), “Engagements to Report on Summary Financial
Statements”
For redrafted or revised and redrafted ISAs released subsequent to December 31, 2007
and exposure drafts, visit the IAASB’s website at .


AMENDED PREFACE
5
AMENDED PREFACE
PREFACE TO THE INTERNATIONAL STANDARDS ON
QUALITY CONTROL, AUDITING, REVIEW, OTHER
ASSURANCE AND RELATED SERVICES
(Approved December 2006)
(Effective as of December 15, 2009)
CONTENTS
Paragraph
Introduction 1-2
The IAASB’s Pronouncements 3

The Authority Attaching to International Standards Issued by the
International Auditing and Assurance Standards Board 4-9
International Standards on Auditing 10-29
The Authority Attaching to Practice Statements Issued by the International
Auditing and Assurance Standards Board 30-31
Other Papers Published by the International Auditing and Assurance
Standards Board 32
Language 33

AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,
AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
6
Introduction
1. This preface to the International Standards on Quality Control, Auditing,
Review, Other Assurance and Related Services (International Standards or
IAASB’s Standards) is issued to facilitate understanding of the scope and
authority of the pronouncements the International Auditing and Assurance
Standards Board (IAASB) issues, as set forth in the IAASB’s Terms of
Reference.
2. The IAASB is committed to the goal of developing a set of International
Standards which are generally accepted worldwide. IAASB members act in the
common interest of the public at large and the worldwide accountancy
profession. This could result in their taking a position on a matter that is not in
accordance with current practice in their country or firm or not in accordance
with the position taken by those who put them forward for membership of the
IAASB.
The IAASB’s Pronouncements
3. The IAASB’s pronouncements govern audit, review, other assurance and

related services engagements that are conducted in accordance with
International Standards. They do not override the local laws or regulations that
govern the audit of historical financial statements or assurance engagements on
other information in a particular country required to be followed in accordance
with that country’s national standards. In the event that local laws or
regulations differ from, or conflict with, the IAASB’s Standards on a particular
subject, an engagement conducted in accordance with local laws or regulations
will not automatically comply with the IAASB’s Standards. A professional
accountant should not represent compliance with the IAASB’s Standards
unless the professional accountant has complied fully with all of those relevant
to the engagement.
The Authority Attaching to International Standards Issued by the
International Auditing and Assurance Standards Board
4. International Standards on Auditing (ISAs) are to be applied in the audit of
historical financial information.
5. International Standards on Review Engagements (ISREs) are to be applied in
the review of historical financial information.
6. International Standards on Assurance Engagements (ISAEs) are to be applied
in assurance engagements dealing with subject matters other than historical
financial information.
7. International Standards on Related Services (ISRSs) are to be applied to
compilation engagements, engagements to apply agreed upon procedures to
AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,
AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
7
AMENDED PREFACE
information and other related services engagements as specified by the
IAASB.

8. ISAs, ISREs, ISAEs and ISRSs are collectively referred to as the IAASB’s
Engagement Standards.
9. International Standards on Quality Control (ISQCs) are to be applied for all
services falling under the IAASB’s Engagement Standards.
International Standards on Auditing
1

10. ISAs are written in the context of an audit of financial statements
2
by an
independent auditor.
3
They are to be adapted as necessary in the circumstances
when applied to audits of other historical financial information.
11. The objective of an audit of financial statements is to enable the auditor to
express an opinion whether the financial statements are prepared, in all
material respects, in accordance with an applicable financial reporting
framework. It is undertaken to enhance the degree of confidence of intended
users in the financial statements. ISAs, taken together, provide the standards
for the auditor’s work in fulfilling this objective.
12. In conducting an audit, the overall objective of the auditor is to obtain
reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to report on the
financial statements in accordance with the auditor’s findings. In all cases
when this overall objective has not been or cannot be achieved, the ISAs
require that the auditor modifies the auditor’s opinion accordingly or
withdraws from the engagement.
13. The auditor applies each ISA relevant to the audit. An ISA is relevant when the
ISA is in effect and the circumstances addressed by the ISA exist.
14. The ISAs deal with the general responsibilities of the auditor, as well as the

auditor’s further considerations relevant to the application of those
responsibilities to specific topics. An ISA contains objectives and requirements
together with related guidance in the form of application and other explanatory
material. It may also contain introductory material that provides context essential
to a proper understanding of the ISAs, and definitions. It is, therefore, necessary
to consider the entire text of an ISA to understand and apply its requirements.

1
The terms and concepts in this Preface are explained further in the ISAs, in particular in [proposed] ISA
200 (Revised and Redrafted), “Overall Objective of the Independent Auditor, and the Conduct of an
Audit in Accordance with International Standards on Auditing.”
2
Unless otherwise stated, “financial statements” mean financial statements comprising historical financial
information.
3
Referred to hereafter as “the auditor.”
AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,
AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
8
ISA Objectives
15. Each ISA contains an objective or objectives, which provide the context in
which the requirements of the ISA are set. The auditor aims to achieve these
objectives, having regard to the interrelationships amongst the ISAs. For this
purpose, the auditor uses the objectives to judge whether, having complied
with the requirements of the ISAs, sufficient appropriate audit evidence has
been obtained in the context of the overall objective of the auditor. Where an
individual objective has not been or cannot be achieved, the auditor considers
whether this prevents the auditor from achieving the auditor’s overall

objective.
Requirements
16. The requirements of each ISA are contained in a separate section and
expressed using the word “shall.” The auditor applies the requirements in the
context of the other material included in the ISA.
17. The auditor complies with the requirements of an ISA in all cases where they
are relevant in the circumstances of the audit. In exceptional circumstances,
however, the auditor may judge it necessary to depart from a relevant
requirement by performing alternative audit procedures to achieve the aim of
that requirement. The need for the auditor to depart from a relevant
requirement is expected to arise only where the requirement is for a specific
procedure to be performed and, in the specific circumstances of the audit, that
procedure would be ineffective.
18. A requirement is not relevant only in the cases where: the ISA is not relevant;
or the circumstances envisioned do not apply because the requirement is
conditional and the condition does not exist. The auditor is not required to
comply with a requirement that is not relevant in the circumstances of the
audit; this does not constitute a departure from the requirement.
Application and Other Explanatory Material
19. The application and other explanatory material contained in an ISA is an
integral part of the ISA as it provides further explanation of, and guidance for
carrying out, the requirements of an ISA, along with background information
on the matters addressed in the ISA. It may include examples of procedures,
some of which the auditor may judge to be appropriate in the circumstances.
Such guidance is, however, not intended to impose a requirement.
20. Appendices, which form part of the application and other explanatory material,
are an integral part of an ISA. The purpose and intended use of an appendix are
explained in the body of the related ISA or within the title and introduction of
the appendix itself.
AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,

AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
9
AMENDED PREFACE
Introductory Material and Definitions
21. Introductory material may include, as needed, such matters as explanation of:
the purpose and scope of the ISA, including how the ISA relates to other ISAs;
the subject matter of the ISA; specific expectations on the auditor and others;
and the context in which the ISA is set.
22. An ISA may include, in a separate section under the heading “Definitions,” a
description of the meanings attributed to certain terms for purposes of the
ISAs. These are provided to assist in the consistent application and
interpretation of the ISAs, and are not intended to override definitions that may
be established for other purposes, whether in law, regulation or otherwise.
Unless otherwise indicated, those terms will carry the same meanings
throughout the ISAs. The Glossary of Terms in the Handbook contains a
complete listing of terms defined in the ISAs. It also includes descriptions of
other terms found in ISAs to assist in common and consistent interpretation
and translation.
International Standards on Quality Control
23. ISQCs are written to apply to firms in respect of all their services falling under
the IAASB’s Engagement Standards. The authority of ISQCs is set out in the
introduction to the ISQCs.
Other International Standards
24. The International Standards identified in paragraphs 5-7 contain basic
principles and essential procedures (identified in bold type lettering and by the
word “should”) together with related guidance in the form of explanatory and
other material, including appendices. The basic principles and essential
procedures are to be understood and applied in the context of the explanatory

and other material that provides guidance for their application. It is therefore
necessary to consider the entire text of a Standard to understand and apply the
basic principles and essential procedures.
25. The basic principles and essential procedures of a Standard are to be applied in
all cases where they are relevant in the circumstances of the engagement. In
exceptional circumstances, however, a professional accountant may judge it
necessary to depart from a relevant essential procedure in order to achieve the
purpose of that procedure. When such a situation arises, the professional
accountant is required to document how alternative procedures performed
achieve the purpose of the procedure and, unless otherwise clear, the reasons
for the departure. The need for the professional accountant to depart from a
relevant essential procedure is expected to arise only where, in the specific
circumstances of the engagement, that procedure would be ineffective.
26. Appendices, which form part of the application material, are an integral part of
a Standard. The purpose and intended use of an appendix are explained in the
AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,
AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
10
body of the related Standard or within the title and introduction of the
appendix itself.
Professional Judgment
27. The nature of the International Standards requires the professional accountant
to exercise professional judgment in applying them.
Applicability of the International Standards
28. The scope, effective date and any specific limitation of the applicability of a
specific International Standard is made clear in the Standard. Unless otherwise
stated in the International Standard, the professional accountant is permitted to
apply an International Standard before the effective date specified therein.

29. International Standards are relevant to engagements in the public sector. When
appropriate, additional considerations specific to public sector entities are
included:
(a) Within the body of an International Standard in the case of ISAs and
ISQCs; or
(b) In a Public Sector Perspective (PSP) appearing at the end of other
International Standards.
The Authority Attaching to Practice Statements Issued by the
International Auditing and Assurance Standards Board
30. International Auditing Practice Statements (IAPSs) are issued to provide
interpretive guidance and practical assistance to professional accountants in
implementing ISAs and to promote good practice. International Review
Engagement Practice Statements (IREPSs), International Assurance
Engagement Practice Statements (IAEPSs) and International Related Services
Practice Statements (IRSPSs) are issued to serve the same purpose for
implementation of ISREs, ISAEs and ISRSs respectively.
31. Professional accountants should be aware of and consider Practice Statements
applicable to the engagement. A professional accountant who does not
consider and apply the guidance included in a relevant Practice Statement
should be prepared to explain how:
(a) The requirements in the ISAs; or
(b) The basic principles and essential procedures in the IAASB’s other
Engagement Standard(s), addressed by the Practice Statement, have
been complied with.
AMENDED PREFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL,
AUDITING, REVIEW, OTHER ASSURANCE AND RELATED SERVICES

AMENDED PREFACE
11
AMENDED PREFACE

Other Papers Published by the International Auditing and
Assurance Standards Board
32. Other papers, for example Discussion Papers, are published
4
to promote
discussion or debate on auditing, review, other assurance and related services
and quality control issues affecting the accounting profession, present findings,
or describe matters of interest relating to auditing, review, other assurance,
related services and quality control issues affecting the accounting profession.
They do not establish any basic principles or essential procedures to be
followed in audit, review, other assurance or related services engagements.
Language
33. The sole authoritative text of an exposure draft, International Standard,
Practice Statement or other paper is that published by the IAASB in the
English language.


4
The IAASB Chair will appoint a review group of four IAASB members to consider whether a draft
paper has sufficient merit to be added to the IAASB’s literature. The draft paper may come from any
source and the IAASB need not have specifically commissioned it. If the review group believes that the
paper has sufficient merit, it recommends to the IAASB that the paper be published and added to its
literature.
GLOSSARY
12
GLOSSARY OF TERMS
1

This Glossary of Terms brings together the definitions in the redrafted and revised
and redrafted International Standards on Auditing (ISAs) contained in this part of the

handbook. For terms that are not defined here, refer to the Glossary of Terms in the
section on Auditing, Review, Other Assurance, and Related Services in Part I of the
handbook.
Upon completion of the Clarity project, this Glossary of Terms will include all the
terms defined in the redrafted or revised and redrafted ISAs. A complete Glossary of
Terms will be included in the 2009 edition of the handbook.
Accounting estimate—An approximation of a monetary amount in the absence of a
precise means of measurement. This term is used for an amount measured at fair value
where there is estimation uncertainty, as well as for other amounts that require
estimation.
Assertions—Representations by management, explicit or otherwise, that are embodied
in the financial statements, as used by the auditor to consider the different types of
potential misstatements that may occur.
Audit documentation—The record of audit procedures performed, relevant audit
evidence obtained, and conclusions the auditor reached (terms such as “working papers”
or “workpapers” are also sometimes used).
Audit file—One or more folders or other storage media, in physical or electronic form,
containing the records that comprise the audit documentation for a specific engagement.
Auditor’s point estimate or auditor’s range—The amount, or range of amounts,
respectively, derived from audit evidence for use in evaluating management’s point
estimate.
Business risk—A risk resulting from significant conditions, events, circumstances,
actions or inactions that could adversely affect an entity’s ability to achieve its
objectives and execute its strategies, or from the setting of inappropriate objectives and
strategies.
Component—An entity or business activity for which group or component management
prepares financial information that should be included in the group financial statements.
Component auditor—An auditor who, at the request of the group engagement team,
performs work on financial information related to a component for the group audit.

1
In the case of public sector engagements, the terms in this glossary should be read as referring to their
public sector equivalents.
Where accounting terms have not been defined in the pronouncements of the International Auditing and
Assurance Standards Board, reference should be made to the Glossary of Terms published by the
International Accounting Standards Board.
GLOSSARY OF TERMS
GLOSSARY
13
GLOSSARY
Component management—Management responsible for preparing the financial
information of a component.
Component materiality—The materiality level for a component determined by the group
engagement team.
Estimation uncertainty—The susceptibility of an accounting estimate and related
disclosures to an inherent lack of precision in its measurement.
Experienced auditor—An individual (whether internal or external to the firm) who has
practical audit experience, and a reasonable understanding of:
(a) Audit processes;
(b) ISAs and applicable legal and regulatory requirements;
(c) The business environment in which the entity operates; and
(d) Auditing and financial reporting issues relevant to the entity’s industry.
Fraud—An intentional act by one or more individuals among management, those
charged with governance, employees, or third parties, involving the use of deception to
obtain an unjust or illegal advantage.
Fraud risk factors—Events or conditions that indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud.
Group—All the components whose financial information is included in the group
financial statements. A group always has more than one component.

Group audit—The audit of group financial statements.
Group audit opinion—The audit opinion on the group financial statements.
Group engagement partner—The partner or other person in the firm who is responsible
for the group audit engagement and its performance, and for the auditor’s report on the
group financial statements that is issued on behalf of the firm. Where joint auditors
conduct the group audit, the joint engagement partners and their engagement teams
collectively constitute the group engagement partner and the group engagement team.
Group engagement team—Partners, including the group engagement partner, and staff
who establish the overall group audit strategy, communicate with component auditors,
perform work on the consolidation process, and evaluate the conclusions drawn from the
audit evidence as the basis for forming an opinion on the group financial statements.
Group financial statements—Financial statements that include the financial information
of more than one component. The term “group financial statements” also refers to
combined financial statements aggregating the financial information prepared by
components that have no parent but are under common control.
Group management—Management responsible for preparing and presenting the group
financial statements.
GLOSSARY OF TERMS
GLOSSARY
14
Group-wide controls—Controls designed, implemented and maintained by group
management over group financial reporting.
Inconsistency—Other information that contradicts information contained in the audited
financial statements. A material inconsistency may raise doubt about the audit
conclusions drawn from audit evidence previously obtained and, possibly, about the
basis for the auditor’s opinion on the financial statements.
Internal control—The process designed, implemented and maintained by those charged
with governance, management and other personnel to provide reasonable assurance
about the achievement of an entity’s objectives with regard to reliability of financial
reporting, effectiveness and efficiency of operations, and compliance with applicable

laws and regulations. The term “controls” refers to any aspects of one or more of the
components of internal control.
Management—The person(s) with executive responsibility for the conduct of the
entity’s operations. For some entities in some jurisdictions, management includes some
or all of those charged with governance, for example, executive members of a
governance board, or an owner-manager. Management is responsible for the preparation
of the financial statements, overseen by those charged with governance, and in some
cases management is also responsible for approving
2
the entity’s financial statements (in
other cases those charged with governance have this responsibility).
Management bias—A lack of neutrality by management in the preparation and
presentation of information.
Management’s point estimate—The amount selected by management for recognition or
disclosure in the financial statements as an accounting estimate.
Misstatement of fact—Other information, that is unrelated to matters appearing in the
audited financial statements that is incorrectly stated or presented. A material
misstatement of fact may undermine the credibility of the document containing audited
financial statements.
Other information—Financial and non-financial information (other than the financial
statements and the auditor’s report thereon) which is included, either by law, regulation
or custom, in a document containing audited financial statements and the auditor’s
report thereon.
Outcome of an accounting estimate—The actual monetary amount which results from
the resolution of the underlying transaction(s), event(s) or condition(s) addressed by the
accounting estimate.


2
As described at paragraph [A43] of [proposed] ISA 700, (Redrafted), “The Independent Auditor’s Report

on General Purpose Financial Statements,” having responsibility for approving in this context means
having the authority to conclude that all the statements that comprise the financial statements, including
the related notes, have been prepared.
GLOSSARY OF TERMS
GLOSSARY
15
GLOSSARY
Risk assessment procedures—The audit procedures performed to obtain an understanding
of the entity and its environment, including the entity’s internal control, to identify and
assess the risks of material misstatement, whether due to fraud or error, at the financial
statement and assertion levels.
Significant component—A component identified by the group engagement team (a) that
is of individual financial significance to the group, or (b) that, due to its specific nature
or circumstances, is likely to include significant risks of material misstatement of the
group financial statements.
Significant risk—An identified and assessed risk of material misstatement that, in the
auditor’s judgment, requires special audit consideration.
Substantive procedure—An audit procedure designed to detect material misstatements
at the assertion level. Substantive procedures comprise:
(a) Tests of details (of classes of transactions, account balances, and disclosures);
and
(b) Substantive analytical procedures.
Test of controls—An audit procedure designed to evaluate the operating effectiveness of
controls in preventing, or detecting and correcting, material misstatements at the
assertion level.
Those charged with governance—The person(s) or organization(s) (e.g., a corporate
trustee) with responsibility for overseeing the strategic direction of the entity and
obligations related to the accountability of the entity. This includes overseeing the
financial reporting process. For some entities in some jurisdictions, those charged with
governance may include management personnel, for example, executive members of a

governance board of a private or public sector entity, or an owner-manager. In some
cases, those charged with governance are responsible for approving
3
the entity’s
financial statements (in other cases management has this responsibility).


3
See footnote 2.


16
REDRAFTED AND REVISED AND REDRAFTED
INTERNATIONAL STANDARDS ON AUDITING
CONTENTS
Page
230 Audit Documentation (Redrafted) 17
240 The Auditor’s Responsibilities Relating to Fraud
in an Audit of Financial Statements (Redrafted) 31
260 Communication with Those Charged with Governance (Revised and
Redrafted) 76
300 Planning an Audit of Financial Statements (Redrafted) 101
315 Identifying and Assessing the Risks of Material Misstatement
Through Understanding the Entity and Its Environment
(Redrafted) 115
330 The Auditor’s Responses to Assessed Risks (Redrafted) 167
540 Auditing Accounting Estimates, Including Fair Value Accounting
Estimates, and Related Disclosures (Revised and Redrafted) 190
600 Special Considerations—Audits of Group Financial Statements
(Including the Work of Component Auditors) (Revised and

Redrafted) 236
720 The Auditor’s Responsibility in Relation to Other Information
in Documents Containing Audited Financial Statements
(Redrafted) 289

For information on the Clarity project of the International Auditing and Assurance
Standards Board (IAASB) and to obtain redrafted or revised and redrafted ISAs released
subsequent to December 31, 2007 and exposure drafts, visit the IAASB’s website at
.


ISA 230 (REDRAFTED)
17
AUDITING
INTERNATIONAL STANDARD ON AUDITING 230
(REDRAFTED)
AUDIT DOCUMENTATION
(Effective for audits of financial statements for periods
beginning on or after December 15, 2009)
CONTENTS
Paragraph
Introduction
Scope of this ISA 1-3
Effective Date 4
Objective 5
Definitions 6
Requirements
Timely Preparation of Audit Documentation 7
Documentation of the Audit Procedures Performed and Audit
Evidence Obtained 8-13

Assembly of the Final Audit File 14-16
Application and Other Explanatory Material
Timely Preparation of Audit Documentation A1
Documentation of the Audit Procedures Performed and Audit
Evidence Obtained A2-A20
Assembly of the Final Audit File A21-A24
Appendix: Specific Audit Documentation Requirements in Other ISAs


International Standard on Auditing (ISA) 230 (Redrafted), “Audit Documentation”
should be read in conjunction with [proposed] ISA 200 (Revised and Redrafted),
“Overall Objective of the Independent Auditor, and the Conduct of an Audit in
Accordance with International Standards on Auditing.”

AUDIT DOCUMENTATION (REDRAFTED)

ISA 230 (REDRAFTED)
18
Introduction
Scope of this ISA
1. This International Standard on Auditing (ISA) deals with the auditor’s
responsibility to prepare audit documentation for an audit of financial
statements. It is to be adapted as necessary in the circumstances when applied
to audits of other historical financial information. The Appendix lists other
ISAs that contain specific documentation requirements and guidance. The
specific documentation requirements of other ISAs do not limit the application
of this ISA. Laws or regulations may establish additional documentation
requirements.
Nature and Purposes of Audit Documentation
2. Audit documentation that meets the requirements of this ISA and the specific

documentation requirements of other relevant ISAs provides:
(a) Evidence of the auditor’s basis for a conclusion about the achievement
of the overall objective of the auditor; and
(b) Evidence that the audit was planned and performed in accordance with
ISAs and applicable legal and regulatory requirements.
3. Audit documentation serves a number of additional purposes, including the
following:
• Assisting the engagement team to plan and perform the audit.
• Assisting members of the engagement team responsible for supervision
to direct and supervise the audit work, and to discharge their review
responsibilities in accordance with [proposed] ISA 220 (Redrafted).
1

• Enabling the engagement team to be accountable for its work.
• Retaining a record of matters of continuing significance to future audits.
• Enabling the conduct of quality control reviews and inspections in
accordance with [proposed] ISQC 1 (Redrafted).
2

• Enabling the conduct of external inspections in accordance with
applicable legal, regulatory or other requirements.

1
[Proposed] ISA 220 (Redrafted), “Quality Control for an Audit of Financial Statements,” paragraphs [14-
17].
2
[Proposed] ISQC 1 (Redrafted), “Quality Control for Firms that Perform Audits and Reviews of
Financial Statements, and Other Assurance and Related Services Engagements,” paragraphs [41, 43-45,
and 55-56].
AUDIT DOCUMENTATION (REDRAFTED)

ISA 230 (REDRAFTED)
19
AUDITING
Effective Date
4. This ISA is effective for audits of financial statements for periods beginning
on or after December 15, 2009.
Objective
5. The objective of the auditor is to prepare documentation that provides:
(a) A sufficient and appropriate record of the basis for the auditor’s report;
and
(b) Evidence that the audit was planned and performed in accordance with
ISAs and applicable legal and regulatory requirements.
Definitions
6. For purposes of the ISAs, the following terms have the meanings attributed
below:
(a) Audit documentation – The record of audit procedures performed,
relevant audit evidence obtained, and conclusions the auditor reached
(terms such as “working papers” or “workpapers” are also sometimes
used).
(b) Audit file – One or more folders or other storage media, in physical or
electronic form, containing the records that comprise the audit
documentation for a specific engagement.
(c) Experienced auditor – An individual (whether internal or external to the
firm) who has practical audit experience, and a reasonable
understanding of:
(i) Audit processes;
(ii) ISAs and applicable legal and regulatory requirements;
(iii) The business environment in which the entity operates; and
(iv) Auditing and financial reporting issues relevant to the entity’s
industry.

Requirements
Timely Preparation of Audit Documentation
7. The auditor shall prepare audit documentation on a timely basis. (Ref: Para.
A1)
AUDIT DOCUMENTATION (REDRAFTED)
ISA 230 (REDRAFTED)
20
Documentation of the Audit Procedures Performed and Audit Evidence
Obtained
Form, Content and Extent of Audit Documentation
8. The auditor shall prepare audit documentation that is sufficient to enable an
experienced auditor, having no previous connection with the audit, to
understand: (Ref: Para. A2-A5, A16-A17)
(a) The nature, timing and extent of the audit procedures performed to
comply with the ISAs and applicable legal and regulatory requirements;
(Ref: Para. A6-A7)
(b) The results of the audit procedures performed, and the audit evidence
obtained; and
(c) Significant matters arising during the audit, the conclusions reached
thereon, and significant professional judgments made in reaching those
conclusions. (Ref: Para. A8-A11)
9. In documenting the nature, timing and extent of audit procedures performed,
the auditor shall record:
(a) The identifying characteristics of the specific items or matters tested;
(Ref: Para. A12)
(b) Who performed the audit work and the date such work was completed;
and
(c) Who reviewed the audit work performed and the date and extent of such
review. (Ref: Para. A13)
10. The auditor shall document discussions of significant matters with

management, those charged with governance, and others, including the nature
of the significant matters discussed and when and with whom the discussions
took place. (Ref: Para. A14)
11. If the auditor identified information that is inconsistent with the auditor’s final
conclusion regarding a significant matter, the auditor shall document how the
auditor addressed the inconsistency. (Ref: Para. A15)
Departure from a Relevant Requirement
12. If, in exceptional circumstances, the auditor judges it necessary to depart from
a relevant requirement in an ISA, the auditor shall document how the
alternative audit procedures performed achieve the aim of that requirement,
and the reasons for the departure. (Ref: Para. A18-A19)
AUDIT DOCUMENTATION (REDRAFTED)
ISA 230 (REDRAFTED)
21
AUDITING
Matters Arising after the Date of the Auditor’s Report
13. If, in exceptional circumstances, the auditor performs new or additional audit
procedures or draws new conclusions after the date of the auditor’s report, the
auditor shall document: (Ref: Para. A20)
(a) The circumstances encountered;
(b) The new or additional audit procedures performed, audit evidence
obtained, and conclusions reached, and their effect on the auditor’s
report; and
(c) When and by whom the resulting changes to audit documentation were
made and reviewed.
Assembly of the Final Audit File
14. The auditor shall assemble the audit documentation in an audit file and
complete the administrative process of assembling the final audit file on a
timely basis after the date of the auditor’s report. (Ref: Para. A21-A22)
15. After the assembly of the final audit file has been completed, the auditor shall

not delete or discard audit documentation of any nature before the end of its
retention period. (Ref: Para. A23)
16. In circumstances other than those envisaged in paragraph 13 where the auditor
finds it necessary to modify existing audit documentation or add new audit
documentation after the assembly of the final audit file has been completed, the
auditor shall, regardless of the nature of the modifications or additions,
document: (Ref: Para. A24)
(a) The specific reasons for making them; and
(b) When and by whom they were made and reviewed.
***
Application and Other Explanatory Material
Timely Preparation of Audit Documentation (Ref: Para. 7)
A1. Preparing sufficient and appropriate audit documentation on a timely basis
helps to enhance the quality of the audit and facilitates the effective review
and evaluation of the audit evidence obtained and conclusions reached
before the auditor’s report is finalized. Documentation prepared after the
audit work has been performed is likely to be less accurate than
documentation prepared at the time such work is performed.
AUDIT DOCUMENTATION (REDRAFTED)
ISA 230 (REDRAFTED)
22
Documentation of the Audit Procedures Performed and Audit Evidence
Obtained
Form, Content and Extent of Audit Documentation (Ref: Para. 8)
A2. The form, content and extent of audit documentation depend on factors such
as:
• The size and complexity of the entity.
• The nature of the audit procedures to be performed.
• The identified risks of material misstatement.
• The significance of the audit evidence obtained.

• The nature and extent of exceptions identified.
• The need to document a conclusion or the basis for a conclusion not
readily determinable from the documentation of the work performed
or audit evidence obtained.
• The audit methodology and tools used.
A3. Audit documentation may be recorded on paper or on electronic or other
media. Examples of audit documentation include:
• Audit programs.
• Analyses.
• Issues memoranda.
• Summaries of significant matters.
• Letters of confirmation and representation.
• Checklists.
• Correspondence (including e-mail) concerning significant matters.
The auditor may include abstracts or copies of the entity’s records (for
example, significant and specific contracts and agreements) as part of audit
documentation. Audit documentation, however, is not a substitute for the
entity’s accounting records.
A4. The auditor need not include in audit documentation superseded drafts of
working papers and financial statements, notes that reflect incomplete or
preliminary thinking, previous copies of documents corrected for
typographical or other errors, and duplicates of documents.
A5. Oral explanations by the auditor, on their own, do not represent adequate
support for the work the auditor performed or conclusions the auditor