Achieving the ISA mindset

Jun 30, 2020
The FAE audit examiner shares some thoughts on where candidates struggle with the audit elective and a key weakness in candidate scripts.

In almost every examiner report on the FAE audit elective, I have commented on a recurring issue being noted in relation to the application of the International Standards on Auditing (ISA) standards. The approach of rewriting the ISA standards directly and generically from the auditing standards book has not, and will not, yield any credit at this level, yet this issue continues to arise. An important competency appears to be missing – the ISA mindset!

The ISA standards are effectively the tools of our trade but are really only an enabler for our audits and the important rules to which we adhere. The ability to apply the ISA standards and, ultimately, achieve the ISA mindset is the challenge you must learn to overcome. This mindset is critical for success in this exam but also in your future careers in auditing. 

The ISA standards which we know today have a long history. The groundwork for an international set of standards began in the late 1960s. Since then, there have been many developments, with the international framework being adopted as national standards here in Ireland and in the UK. 

The ISAs are written in a very technical language and I appreciate that they are not the easiest rules to navigate, often resulting in candidates providing generic blocks of ISA text as an exam answer. 

Achieving an ISA mindset

To achieve the ISA mindset, you need to understand the ISAs in basic English and be smart in your learning approach. Otherwise, you will struggle. Your lectures will have helped you attain this skill but to complement that learning, here are some further tips to aid your studies:

ISA structure- you need to learn the structure of an ISA and how it can be broken down
Every ISA standard is effectively split into two parts: the core ISA text with the objective and requirements and the application material. You should never underestimate/ignore the application material – this will break down the core requirements with further guidance and explanations. When reading any ISA, you should always read the referenced application material for that requirement.

Split your ISAs into the audit timeline

You will see from the list of ISAs that they fall into the three distinct phases of an audit: planning, audit fieldwork and concluding and audit reporting. The groundwork that we complete at the planning stage, in terms of understanding the entity and its environment, drives the audit risk assessment process and the audit activities that follow. Understanding the key activities that happen at each stage is fundamental, and it may help you apply the ISAs if you view them in this phased and logical manner.

Not all ISAs are created equal

Within the ISA framework, you will soon learn that there are certain ISAs that are fundamental to what we do and are vital for you to understand. These include ISA 240 Fraud, a standard that outlines the auditor’s responsibilities in respect of fraud as part of a financial statement audit; ISA 315 deals with our audit risk assessment process – a continuous activity throughout the audit; and the concluding ISAs such as ISA 560 Subsequent Events, ISA 570 Going Concern and, finally, the Audit Report standards.

Common sense approach

I often comment that common sense will get you a long way. There are certain ISAs that are easy to follow – ISA 210 that deals with agreeing on the terms of engagement is one example. To answer an exam question on what should be in an audit engagement letter, you should not need to read an ISA for the information. Many of you have already performed this task in your audit training contracts. However, when examined, I see blocks of ISA 210 rewritten which highlights the lack of an ISA mindset.

I would encourage you to reflect on your current approach to studying the ISAs, take note of the tips above and think about the experience you are gaining in your training contracts. Best of luck with your studies.