Audit provisions for small entities: PASE explained

The way audits are conducted by firms of professional auditors has become more regulated over the years, with the overarching objective of this regulation being to ensure that audits are conducted, not only to the highest standards befitting a professional firm, but also in accordance with strict ethical guidelines, explains Steve Collings.

The Ethical Standards (ESs) issued by the Auditing Practices Board (APB) are compulsory for firms that undertake audit work for their clients. Specifically, the ESs outline matters such as:

  • How audit firms set policies and procedures to ensure that all those in the firm that carry out audit work do so with integrity, objectivity and independence
  • Financial, business, employment and personal relationships
  • Long association with the audit client
  • Fees, remuneration and evaluation policies, litigation, gifts and hospitality
  • Non-audit services provided to the audit client

It is worth mentioning that the ESs are as vital as the International Standards on Auditing (ISAs) themselves and must be fully understood and implemented within the firm.

Smaller audits

Continued...

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Comments

Am I right in thinking...

deltaforceaccountant | | Permalink

that the "PASE paragraph" referred to  in either the audit report or in the notes to the accounts is frequently incorrectly used by auditors, in that it is only required with reference to accounts and taxation work undertaken by auditors where there is no "informed management" and that to include the paragraph in a set of accounts implies the absence of "informed management".

Steve Collings's picture

Yes

Steve Collings | | Permalink

Where an exemption has been taken advantage of in respect of paras 12, 15 or 20 with respect to a lack of informed management, the audit firm should make brief reference to the fact that the firm's compliance with Ethical Standards also include the PASE together with a general reference to the nature of the exemption in either the accounts themselves or in the auditor's report.

I think the link supplied in the article above takes you directly to the ES-PASE itself (the 2010 revised version) where you can find some suggested wording if this applies to you.

Regards

Steve