authority of ISAs

The overall authority of ISAs and how ISAs are applied in

individual countries

ISAs are designed to be applied in the audit of financial statements and

may be applied to the audit of other historical financial information. Each

ISA contains the basic principles and procedures to apply to that ISA

(identified by bold type in the ISA itself). Other text in the ISA provides

guidance on the implementation of the principles. In other words, to

apply the ISA, the whole of the text, not simply the parts in bold type,

must be read and understood.

ISAs are not designed to override the requirements for the audit of

entities in individual countries. So if our country did not require an audit

of specific entities, then the ISAs would not overrule that requirement.

Regarding the detailed requirements of an audit, such as the nature of

testing or the issuing of an engagement letter, where our country

requirements meet those of the ISA, then the ISA will be used. It is

therefore unlikely that our country would issue a separate auditing

standard; the ISA would be sufficient.

Where our local codes on audit differ from the ISA, then the local

requirements are used. However, we are encouraged to introduce

changes in our country so that the requirements of the ISA are met. For

example, our country may require an engagement letter to be signed

every five years, but the ISA requires one every year. In this case, local

change is needed to comply with the ISA.

The extent to which an auditor must follow ISAs

An auditor should follow the ISAs wherever possible. However, in some

situations an auditor may consider it necessary to depart from the ISA

so that the objectives of the audit can be achieved more efficiently. In this

situation, the auditor can depart from the ISA, but he or she must be

prepared to justify the departure. It is expected that departure from any

ISA will be the exception rather than the rule.

The extent to which ISAs apply to small entities

To be clear, ISAs are meant to be applicable to the audit of any entity, no

matter what its size. However, in small entities, the auditor may have to

amend the audit approach to fit the circumstances of that business. For

example, there will be greater reliance on substantive testing and

management representations. However, the appropriate ISAs should be

followed.