2. The influence of national and
international accounting standards of
auditing
3. • International, Assurance Auditing, Standards Board (IAASB)
• The preface to the International Standards on Quality Control, Auditing,
Assurance and Related Services (International Standards or IAASB’s
Standards) is issued to facilitate understanding of the objectives and
operating procedures of the International Auditing and Assurance Standards
Board (IAASB) and the scope and authority of the pronouncements it issues,
as set forth in the IAASB’s Interim Terms of Reference.
• The mission of the International Federation of Accountants (IFAC), as set out
in its constitution, is “the worldwide development and enhancement of an
accountancy profession with harmonized standards, able to provide services
of consistently high quality in the public interest.”
• In pursuing this mission, the IFAC Board has established the IAASB to develop
and issue, under its own authority, high quality standards on auditing,
assurance and related services engagements (IAASB’s Engagement Standards,
as defined in paragraph 14), related Practice Statements and quality control
standards for use around the world.
4. • The International Auditing and Assurance Standards Board
• The IAASB is a Board established by IFAC.
• The members of the IAASB are appointed by the IFAC Board to serve
on the IAASB. IAASB members act in the common interest of the
public at large and the worldwide accountancy profession.
• Each IAASB member has the right to appoint one technical advisor
who may participate in the discussions at IAASB meetings.
• 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 the basic principles and essential procedures
in the IAASB’s Engagement Standard(s) addressed by the Practice
Statement have been complied with.
5. • IMPACT OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS
• International Financial Reporting Standards are of great importance to an
auditor
• The IAS / IFRS issued to date are as follows:
6. • RELEVANCE OF IAS / IFRS TO AUDITING
• Auditors must include in their report their opinion on whether the
financial statements they report on give a true and fair view.
• It is generally felt that in order for accounts to show a true and fair view
there must be compliance with the IAS / IFRS.
• There may be situations where compliance with IAS / IFRS may result in a
true and fair view not being given but this is rare.
• So effectively, the auditor is being asked to give an opinion on whether
all IAS / IFRS have been complied with in the preparation of the accounts
he is auditing.
7. • The benefits of IAS / IFRS are:
• 1. They lead to a degree of uniformity and comparability among
accounts.
• 2. They assist understanding by providing readers of the accounts greater
information about the preparations of the accounts.
• 3. They assist accountants and auditors by aiding in the process of
determining what is a true and fair view. They therefore help refine the
meaning of true and fair view.
• 4. They describe a method of accounting and or disclosure requirement
approved by the institute.
• 5. Members of the institute are obliged to secure adherence to IAS / IFRS
whenever they are concerned with financial statements be they
directors, accountants, company secretaries, auditors or in any other
role.
8. • PROFESSIONAL RESPONSIBILITY
• For a long time liability to third parties existed only in respect to physical
injury.
• Liability for financial loss is a recent development.
• Examples of occasions when an accountant may run the risk of insuring a
liability to third parties may include the following:
• (a) Preparing financial statements or reports for a client when it is known
or ought to be known that they are intended to be shown to and relied
upon by a third party even if the identity of the third party is not
disclosed.
• (b) Giving references regarding a client's credit worthiness or an
assurance as to his capacity to carry out the terms of a contract or giving
any other reference on behalf of the client.
9. • Liability under statute:
• Determine which sections of the companies act (Rwanda) that
provides for:
• -civil liability
• -criminal liability on the side of the auditor
10. • ILLEGAL ACTS
• Auditors may uncover criminal offences committed by a client or an employee of the
client.
• This puts them in a difficult position, but the auditor should act carefully and
correctly and if necessary, take legal advice.
• The auditor must not commit a criminal offence himself.
• It is felt that he would have committed a criminal offence if:
• (a) He advises his client to commit a criminal offence;
• (b) Aids the client in devising or examining a crime;
• (c) If he agrees with a client to conceal or destroy evidence or mislead the police with
false statements;
• (d) If he knows that his client has committed an arrest able offence and tries to
impede his arrest and prosecution. Impede does not include refusing to answer
questions or refusing to produce documents without the client's consent;
• (e) If he knows that his client has committed an offence and agreed to accept
consideration to withhold information;
• (f) If he knows that the client has committed treason and fails to report the offence
to the proper authority.
11. • Discovery of unlawful acts
• When an auditor discovers unlawful acts, usually he is not expected to
disclose to the police or other authorities unless:
• i. The client authorizes disclosure;
• ii. That disclosure is compelled by process of law for example, a court
order;
• iii. That disclosure is required in the auditor's own defence;
• iv. The circumstances are such that the auditor has a public duty to
disclose, for example, when the client has committed a serious crime or
his act is treasonable
