Understanding of audit

Professional conceptions

What is Audit ?
Audit is an independent inspection of information reflected in the financial statements of the entity subjected to audit, as a result of which the auditor’s report is presented.
What is auditor’s report
Auditor’s report is a document prepared by auditor (audit organisation); it reflects opinion concerning financial statements of the person to be audited.
Auditor’s report is non-confidential document, and the person to be audited decides whether to publish it, unless the law (in cases of obligatory audit) defines nothing else.
What is the objective of an audit
The objective of audit of financial statements is to enable an auditor to express opinion whether the financial statements are prepared, in all material respects, in accordance with the Legislation of the Republic of Armenia.
Who is the entity to be audited
The entity to be audited is the person, company or self-entrepreneur, who is the subject of auditing.
What is a financial statement?
Financial statements are systemized financial presentation of events affecting on the entity and transactions implemented by the entity.
Financial statements include:
- Balance Sheet
Characterises the financial position of the entity for the reported period.
The elements of balance sheet are:
1. assets
2. equity and
3. liabilities.
- Income statement
Characterises financial results of the entity during the accounting period reported. Elements directly related to it are incomes and expenses.
- Statement of changes in shareholders’ equity
Characterises the balance of equity items of the entity as of the date reported and its flow during the accounting period.
- Cash flow statement
Characterises the cash balance at the date of reporting and their movement during the accounting period
- Notes to financial statements
Describe the entity’s accounting policies and other information required by the accounting standards.
Which is the objective of financial statements
The objective of financial statements is to provide the users with impartial information about financial position, financial results of activities and changes of financial position of the entity that assists to make economic judgements.
Who are the users of financial statements
- Owners(founders, shareholders)
- Present and potential investors
- Management and employees
- State bodies
- Suppliers
- Lenders
- Public and other users of financial statements
What is auditing review
The auditing review are procedures that enable the auditor to find out whether exist any evidence, which can identify that financial statements, in all material respects, are prepared in accordance with the legislation of the Republic of Armenia.

Unlike audit review does not ordinarily involve an assessment of accounting and internal control system, test of records and of responses to inquiries by obtaining corroborating evidence through inspection, observation, confirmation and computation, which are procedures ordinarily performed during an audit.

What is agreed-upon procedure
In an engagement to perform agreed-upon procedures, an auditor is engaged to carry out those procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings. The recipients of the report must form their own conclusions from the report by the auditor.

What is the Compilation (collection of information)
Compilation is the collection, classification, and summarization of financial information, to make it more understandable and convenient for use.

Legal field

Currently the terms related to auditing in RA are regulated by the following legal acts:111
- The “RA law on auditing”, that was accepted by the National Assembly on 26 December 2002,
- The decision No 509-N issued by the RA Government on 21 April 2005
- The decision No 122-N issued by the RA Government on 3 February 2005 “About asserting the form and conduction order for the register of signed contracts by the persons implementing the audit”
- The decision No 201-N issued by the RA Government on 24 February 2005 “About asserting the forms of statements submitted on quarter and annual basis by the persons implementing the audit and the order of filling in and presentation”
- The decision No 499-N issued by the RA Government on 18 May 2005

Audit Standards

The list of Standards on Auditing

NAudit StandardsArmenian No.International No.
1Framework of audit standards120120
2Objective and general principles governing an audit of financial statements200200
3Terms of audit engagement    210210
4Quality Control for Audit Work220220
6Fraud and errors240240
7Consideration of Laws and Regulations in an Audit of Financial Statements250250
9Knowledge of the Business310310
10Audit Materiality320320
11Risk assessment and internal control400400
12Auditing in a Computer Information Systems Environment401401
13Audit Considerations Relating to Entities Using Service Organizations402402
14Audit Evidence500500
15Audit Evidence—Additional Considerations for Specific Items501501
16External Confirmations505505
17Initial Engagements—Opening Balances510510
18Analytical Procedures520520
19Audit Sampling and Other Means of Testing530530
20An audit of accounting estimates540540
21Related parties550550
22Subsequent events560560
23Going Concern570570
24Management Representations580580
25Using the Work of Another Auditor600600
26Considering the Work of Internal Auditing610610
27Using the Work of an Expert620620
28The Auditor’s Report on Financial Statements700700
30Other Information in Documents Containing Audited Financial Statements720720
31The Auditor’s Report on Special Purpose Audit Engagements800800
32The examination of prospective financial information810810
33Engagements to review financial information910910
34Engagements to perform agreed-upon procedures regarding financial information920920
35ՖEngagements to compile of financial information930930

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