Acca aaa s21 Notes

1.2.
N
eed 
E
vidence for 
A
mount and 
T
reatment 
The requirement to know what the accounting standards stipulate and how evidence about their 
application can be collected is a big change from AA to AAA.
Many of the ways of obtaining evidence that you will mention in AAA answers will be identical to 
those in AA (for example, tracing transactions to original documentation, inspecting assets). However, 
because AAA tends to deal with more difficult audit challenges, often where matters are not clear-cut 
and judgement is required, the following sources of evidence tend to be more important than they 
were in AA questions:
๏
Inspect board minutes: you would expect material and difficult matters to be discussed at board 
meetings.
๏
Ensure that the matter is included in the letter or representation.
๏
Ask to see impairment reviews that have been prepared by management and examine these 
critically.
September 2021 to June 2022 exams
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Raise enquiries with management.
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Inspect correspondence with third parties, such as lawyers.
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Examine post period end events: trading levels, prices, use of assets, resolution of disputes etc.
2. The assertions
Even if we just consider the auditing of the amounts items in the financial statements figure it is 
important to understand what an amount is asserting (saying or proclaiming). Every figure in the 
statement of financial position or in the statement of profit or loss (or other documents making up the 
financial statements) asserts (or says) a number of things. For example, a figure of $4m for machinery 
in non-current assets implies that:
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The amount is accurate
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It does relate to machinery
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The assets exist
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The machinery is owned
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The assets are appropriately valued
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All amounts have been included
The single figure is asserting all of this and evidence is needed for each assertion each figure makes.
ISA 315 states:
“…management…makes assertions regarding the recognition, measurement and presentation of 
classes of transactions and events, account balances and disclosures. Assertions used by the auditor 
to consider the different types of potential misstatements that may occur fall into the following two 
categories: ...”