The UK Financial Reporting Council published, in May 2025, some brief guidance, as part of a campaign to support SME Auditors which explains What is an Audit?
The main topics dealt with in the guide include:
- What is an audit?
- What do we mean by ‘materiality’?
- What is the purpose of an audit?
- What value does an audit bring to the audited entity?
- What are the principles common to all audits?
This week we will look at the topic that explains the ‘Principles Common to all Audits’
The guide points out that each audit is different, but there are some principles that are foundational to all audits. The three main ones are:
| Independent | Professional scepticism | Risk Based |
| To fulfil its primary purpose of enhancing confidence in the financial statements, the auditor must be and be perceived to be independent. This gives the intended users confidence that the auditor will have the willingness to challenge management where appropriate, and conduct a robust audit | Professional scepticism is a core part of an auditor’s mindset. It is characterised by a willingness to challenge and inquire, to look for contradictory as well as corroborative evidence to critically assess information. | Audits are fundamentally risk based. This means that the auditor will allocate more time and resources to transactions, balances and disclosures that have a higher risk of material misstatement. This principle is the source of most of the proportionality that is inherent in an audit |
This guide is well worth reading and passing on to your clients to help better explain the valuable service that auditors provide. See What is an Audit? for more detail
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
- Our latest CPD Webinar on The Main Changes in Irish GAAP (recorded July 2024)
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
