Singapore Standards of Auditing 200 (SSA) Summary

SSA 200 Summary

This SSA concerns the responsibilities and objectives of the external auditor when conducting an FS audit.

The purpose of an audit is to express an opinion on whether FS is presented fairly, in all material aspects, or give a true and fair view in accordance with the financial reporting framework. There is no need to provide assurance on viability of business, efficiency or effectiveness of business processes or effectiveness of internal controls.

The auditor needs to obtain reasonable assurance (high level) about whether the FS as a whole are free from material misstatement, whether due to fraud or error. Audit risk (function of risk of material misstatement and detection risk) should be reduced to an acceptably low level. This is the risk that auditor expresses an inappropriate opinion when the FS is materially misstated. Note that reasonable assurance is not absolute assurance.

The auditor needs to apply the concept of materiality (FS and assertion level for classes of transactions, account balances and disclosures). Auditor is not responsible for detection of misstatements which are not material to the FS.

The SSAs requires the auditor to identify and assess risks of material misstatement (ROMM), obtain sufficient and appropriate audit evidence and form opinion on the FS based on conclusion from audit evidence.

If reasonable assurance cannot be obtained, the auditor should disclaim an opinion or withdraw from the engagement.

The management and those charged with governance are responsible for preparing FS in accordance to financial reporting framework, appropriate internal controls over financial reporting, provide auditor with unrestricted access to information for the audit.

ROMM comprises of two components, the inherent risk component (higher for complex transactions and those requiring accounting estimates) and the control risk (cannot full eliminate ROMM due to inherent limitations such as human errors or mistakes or management override of controls) component.

As per SSA, the auditor needs to comply with relevant ethical requirements (ACRA code related to audit of FS and Integrity, Objectivity, professional competence and due care, confidentiality, professional behaviour), exercise professional scepticism (critical assessment of audit evidence, looking out for fraud risks, looking out for reliability of evidence) and professional judgment (materiality, extent of audit procedures, evaluating management judgments, drawing conclusions based on audit evidence) in planning and performing the audit.

Auditors have to comply with all SSAs that are relevant to the audit. If there is a failure to achieve an objective, there may be a need to modify the auditor’s opinion or withdraw from the engagement.

As part of preparing the FS, management may need to exercise judgment and make accounting estimates which are reasonable in the circumstances.

Management and those charged with governance have to acknowledge and understand a set of responsibilities for accepting the audit engagement.

The auditor must be independent both in mind and in appearance. This is to enhance the auditor’s ability to act with integrity and be objective and to maintain professional scepticism.

Refer to SSA 220 for quality assurance and partner review requirements.

Detection risk relates to the nature, timing and extent of the auditor’s procedures that are determined by the auditor to reduce audit risk to an acceptably low level.

Some of the inherent limitations of the audit include information that is withheld by the management and complicated fraud schemes which is difficult for auditor to detect. Auditor is also not trained to authenticate original documents. The audit must also be performed within a reasonable time and cost. However, despite these limitations, auditor should not accept less than persuasive evidence.  

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