7 December 2007 — Publication
The assurance obtainable by auditors to support their opinions is subject to inherent limitations that prevent certainty and, because shareholders will not wait indefinitely for the audit report, nor pay an exorbitant amount for it, that limit the level of assurance that would be achievable with unlimited time and resources. Auditors are required by ISAs to obtain reasonable assurance as the basis for their opinions. Such assurance cannot be specified in any quantitative sense by standards, but is a matter of professional judgement. While the inherent limitations of an audit provide limits to that assurance, ISAs set out requirements designed to support the auditor’s professional judgement, conduct and recording of the audit. These requirements promote sound, consistent judgements the basis for which are recorded in audit documentation. The purpose of such documentation is to contribute to high quality audits, and in particular the extent of compliance with standards and the validity of judgements in a way that is demonstrable to others, including regulatory authorities.
Professional judgement is one of the strengths of the audit process as it allows the auditor to tailor their approach to the entity being audited. It is not a “black box” incapable of challenge by regulators. Rather, it is governed by reference to what informed professional opinion would regard as being reasonable in the circumstances which can be challenged, and cannot be advanced to support positions that other professionals would regard as unreasonable. Accordingly, audit quality can be measured against ISAs and hence effectively regulated by individuals with the required knowledge, training and experience in accounting and auditing.