SOCPA Fellowship Auditing Complete Review Guide 2026–2027

4. To identify litigation and claims the auditor inquires of management and in-house counsel, reviews minutes of those charged with governance, correspondence with external counsel and legal expense accounts, and requests a written representation that they have been disclosed (ISA 501, paras. 9 and 12).
5. The auditor keeps control over confirmation requests: determining the information, selecting the confirming party, designing properly addressed requests with return details to the auditor, and sending and following up (ISA 505, para. 7).
6. Negative confirmation can be the sole substantive procedure only if all four hold: low risk with evidence of control effectiveness, a large population of small homogeneous items, a very low expected exception rate, and no awareness of circumstances that would make recipients disregard requests (ISA 505, para. 15).
7. The auditor reads the most recent financial statements and the predecessor auditor's report, if any, checks balances brought forward and policy appropriateness, and checks consistent application of policies (ISA 510, paras. 5, 6 and 8).
8. If sufficient evidence about opening balances cannot be obtained, the opinion is qualified or a disclaimer; if opening balances contain a material misstatement not properly dealt with, qualified or adverse (ISA 510, paras. 10 and 11).
9. If differences from expectation are significant or inconsistent with other information, the auditor inquires of management, obtains evidence supporting the responses, and performs other procedures as necessary (ISA 520, para. 7).
10. Analytical procedures near the end of the audit help form an overall conclusion on whether the financial statements are consistent with the auditor's understanding of the entity (ISA 520, para. 6).
11. The sampling risk error that worries the auditor most is concluding that controls are more effective than they are, or that no material misstatement exists when it does, because it affects audit effectiveness (ISA 530, para. 5(c)).
12. Tolerable misstatement is performance materiality applied to a particular sampling procedure and may equal or be lower than it (ISA 530, para. A3); the sample size must reduce sampling risk to an acceptably low level (para. 7).
13. The auditor reviews the outcome of previous estimates to help assess current risks, decides whether the team needs specialized skills, and considers estimation uncertainty, complexity and subjectivity (ISA 540, paras. 14–16).
14. When the auditor identifies related parties or significant transactions management has not identified, the auditor promptly informs the team, performs substantive procedures, reconsiders the risk of other related parties, and evaluates the implications if non-disclosure appears intentional (ISA 550, para. 22).
15. For significant related party transactions outside the normal course of business, the auditor inspects the contracts, evaluates business rationale and consistency of terms with management's explanations, and obtains evidence of authorization (ISA 550, para. 23).
16. Subsequent events are events between the date of the financial statements and the date of the auditor's report, and facts that become known after the report date (ISA 560, para. 5(e)); procedures include understanding management's procedures, inquiry, reading minutes and reading the latest interim statements (para. 7).
17. The going concern evaluation covers the same period as management's assessment; if it is less than twelve months from the date of the financial statements the auditor asks management to extend it to at least twelve months (ISA 570, para. 13), and inquires about events beyond that period (para. 15).
18. The auditor requests written representations that management fulfilled its responsibility for preparing the statements, provided all information and recorded all transactions (ISA 580, paras. 10 and 11); if they are not provided, or doubts about integrity make them unreliable, the auditor disclaims an opinion (para. 20).

Common mistakes in this chapter

• ✕ Sufficiency is not appropriateness: sufficiency is quantity, affected by risk assessment and evidence quality; appropriateness is quality (relevance and reliability). More quantity does not make up for poor quality.
• ✕ Inquiry alone ordinarily does not give sufficient evidence of no material misstatement or of control effectiveness (ISA 500, para. A6); written representations alone are not sufficient evidence on a matter (ISA 580, para. 4).
• ✕ Attending the count does not replace procedures over the final inventory records, and if the count is on another date the auditor tests changes between that date and the statements date (ISA 501, paras. 4 and 5).
• ✕ A non-response is not a confirmation: for each non-response the auditor performs alternative procedures (ISA 505, para. 12); if a positive confirmation is necessary and not received, alternatives will not suffice and the effect on the opinion is considered (para. 13).
• ✕ Do not confuse deviation and misstatement: deviations relate to tests of controls, misstatements to tests of details. An anomaly is extremely rare and needs a high degree of certainty that it is not representative (ISA 530, para. 13).
• ✕ Do not confuse sampling risk and non-sampling risk: the first arises because only part of the population is tested; the second has other causes, such as an inappropriate procedure or misinterpreting evidence (ISA 530, para. 5 and para. A1).
• ✕ On subsequent events the auditor has no obligation to perform procedures after the report date, but if a fact becomes known that might change the report, the auditor must discuss it with management, whether before issue (ISA 560, para. 10) or after (para. 14); a new report is not dated earlier than approval of the amended statements (para. 11).
• ✕ A going concern material uncertainty section is not a modified opinion: if disclosure is adequate the opinion is unmodified with a separate section; if not, qualified or adverse; if the going concern basis is inappropriate, adverse (ISA 570, paras. 21–23).