General Auditing Standards and Ethics Rules
Auditor Qualifications and Professional Ethics
First Rule: Professional Competence and Authorization
Auditors must possess the necessary technical training, skills, and professional qualifications. They must be legally authorized to practice, which may involve registration with relevant professional bodies (e.g., ROAC), meeting specific age and nationality requirements, background checks, and obtaining authorization from regulatory bodies (e.g., ICAC).
- Registration: Meet requirements such as age, nationality, and background checks.
- Authorization: Obtain a university degree, complete theoretical and practical training programs, and pass a qualifying exam.
- Practical Experience: A minimum of three years of relevant experience in finance and accounting.
- Qualifying Exam: Assess theoretical knowledge in areas such as auditing, accounting, financial regulations, and legal frameworks.
Second Rule: Independence, Integrity, and Objectivity
Auditors must maintain absolute independence, integrity, and objectivity throughout their professional engagements.
Third Rule: Due Professional Diligence
Auditors must exercise due professional diligence in performing their work and reporting their findings. This includes establishing quality control measures to ensure independence, integrity, objectivity, adequate training, proper client acceptance and continuance procedures, consultations, supervision, and work control.
Fourth Rule: Compliance with Auditing Standards
Auditors are responsible for complying with established auditing standards and ensuring that their audit team members also adhere to these standards.
Fifth Rule: Confidentiality
Auditors must maintain the confidentiality of information obtained during their professional engagements.
Sixth Rule: Fair Fees
Auditors should charge fair fees for their services and avoid accepting commissions or other inducements that could compromise their independence.
Seventh Rule: Advertising Restrictions
Auditors should not engage in advertising practices aimed at soliciting clients.
Basic Rules for Performing Audit Work
First Rule: Planning and Supervision
Audit work must be properly planned and supervised, with adequate oversight of the audit team.
Second Rule: Internal Control Evaluation
A proper study and evaluation of internal controls should be conducted to determine the scope, nature, and timing of audit procedures.
Third Rule: Sufficient and Appropriate Evidence
Sufficient and appropriate audit evidence must be obtained through testing and evaluation to provide a reasonable basis for forming an opinion on the financial statements.
Basic Rules for the Independent Audit Report
The audit report is the final product of the auditor’s work, communicating the results and expressing their professional opinion. It should be clear and understandable, avoiding excessive technical jargon.
First Rule: Sufficient Information and Adherence to Accounting Principles
The auditor should state in the report whether the financial statements contain sufficient information and are prepared in accordance with generally accepted accounting principles.
Second Rule: Consistent Application of Accounting Principles
The report should indicate whether generally accepted accounting principles have been applied consistently.
Third Rule: Accuracy and Representational Faithfulness
The auditor should not express an unqualified opinion unless they believe the financial statements are accurate and representative of the entity’s financial position, results of operations, and cash flows.
Fourth Rule: Overall Opinion
The audit report should express an overall opinion on the financial statements or explain why an opinion cannot be expressed. Reasons for any adverse opinions or qualifications should be provided.
Fifth Rule: Consistency with Management’s Report
The auditor should indicate in the report whether the information in the management report is consistent with the financial statements.