Meaning: Audit scope describes the coverage of the audit, including the financial statements, reporting period and work needed to support the audit opinion.
An auditor obtains sufficient appropriate evidence to reduce audit risk to an acceptably low level. The work focuses on matters that could materially affect the financial statements. mia.org.my
For a retail company, illustrative audit work may include:
| Area | Example of audit work | Purpose |
|---|---|---|
| Sales | Examine invoices and delivery records. | Assess whether recorded sales actually occurred. |
| Inventory | Attend the physical inventory count and perform test counts. | Obtain evidence about inventory quantities and condition. |
| Bank balances | Obtain bank confirmations and examine bank reconciliations. | Obtain evidence about recorded bank balances. |
| Trade payables | Examine subsequent payments and supplier documents. | Identify liabilities that may have been omitted. |
| Financial statement disclosures | Review the notes accompanying the financial statements. | Assess whether relevant information is adequately presented and disclosed. |
Example of a scope limitation: Management refuses access to inventory records. The auditor must consider the effect on obtaining evidence and the audit report. Management cannot simply exclude an important area while expecting an opinion on the complete financial statements.
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