ISA 330 | Objective | Definition | Requirements

ISA 330

ISA 330 – Objective

The objective of the auditor under ISA 330 is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement, through designing and implementing appropriate responses to those risks.

ISA 330 – Definitions:

For purposes of the ISAs, the following terms have the meanings attributed below:

Substantive procedure: An audit procedure designed to detect material misstatements at the assertion level. Substantive procedures comprise:

  1. Tests of details (classes of transactions, account balances, and disclosures); and
  2. 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.

ISA 330 – Requirements:

Overall Responses:

The auditor shall design and implement overall responses to address the assessed risks of material misstatement at the financial statement level.

Audit Procedures Responsive to the Assessed Risks of Material Misstatement at the Assertion Level:

  • The auditor shall design and perform further audit procedures whose nature, timing and extent are based on and are responsive to the assessed risks of material misstatement at the assertion level.
  • In designing the further audit procedures to be performed, the auditor shall:
  1. Consider the reasons for the assessment given to the risk of material misstatement at the assertion level for each class of transactions, account balance, and disclosure, including:
    i. The likelihood of material misstatement due to the particular characteristics of the relevant class of transactions, account balance, or disclosure (that is, the inherent risk); and
    ii. Whether the risk assessment takes account of relevant controls (that is, the control risk), thereby requiring the auditor to obtain audit evidence to determine whether the controls are operating effectively (that is, the auditor intends to rely on the operating effectiveness of controls in determining the nature, timing, and extent of substantive procedures); and
  2. Obtain more persuasive audit evidence the higher the auditor’s assessment of risk.

Tests of Controls

  1. The auditor shall design and perform tests of controls to obtain sufficient appropriate audit evidence as to the operating effectiveness of relevant controls if:
    a. The auditor’s assessment of risks of material misstatement at the assertion level includes an expectation that the controls are operating effectively (that is, the auditor intends to rely on the operating effectiveness of controls in determining the nature, timing, and extent of substantive procedures); or
    b. Substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level.
  2. In designing and performing tests of controls, the auditor shall obtain more persuasive audit evidence the greater the reliance the auditor places on the effectiveness of a control.

 Documentation

1. The auditor shall include in the audit documentation:

  1. The overall responses to address the assessed risks of material misstatement at the financial statement level, and the nature, timing, and extent of the further audit procedures performed;
  2. The linkage of those procedures with the assessed risks at the assertion level; and
  3. The results of the audit procedures, including the conclusions where these are not otherwise clear.

2. If the auditor plans to use audit evidence about the operating effectiveness of controls obtained in previous audits, the auditor shall include in the audit documentation the conclusions reached about relying on such controls that were tested in a previous audit.
3. The auditor’s documentation shall demonstrate that the financial statements agree or reconcile with the underlying accounting records.


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