April 2021

INTRODUCTION   1.1 APB Ethical Standards for Auditors require an auditor to be independent from the entity that it is appointed to audit.  There is a substantial degree of similarity between an audit opinion and the nature of assurance provided by accountants reporting for the purposes of an investment circular prepared in accordance with the statutory or regulatory requirements of a recognised stock exchange.  Accordingly, the Auditing Practices Board (APB) believes that users of investment circulars will expect an equivalent standard of independence of reporting accountants to that required of auditors.   1.2 This standard is based on the APB Ethical Standards for Auditors and applies to all engagements: that are subject to the requirements of the Standards for Investment Reporting (SIRs) issued by the APB, and which are in connection with an investment circular in which a report from the reporting accountant is to be published. This standard applies to all public reporting engagements undertaken in accordance with the SIRs.  It also applies to all private reporting engagements that are directly linked to such public reporting engagements.   Where a private reporting engagement is undertaken, but it is not intended that the reporting accountant will issue a public report, the reporting accountant follows the ethical guidance issued by the professional accountancy body of which the reporting accountant is a member. The APB is not aware of any significant instances where the relevant parts of the ethical guidance issued by professional accountancy bodies in the UK and Ireland are more restrictive than this standard.   An investment circular is a document issued by an entity pursuant to statutory or regulatory requirements relating to securities on which it is intended that a third party should make an investment decision, including a prospectus, listing particulars, a circular to shareholders or similar document.   Public confidence in the operation of the capital markets and in the conduct of public interest entities depends, in part, upon the credibility of the opinions and reports issued by reporting accountants in connection with investment circulars. Such credibility depends on beliefs concerning the integrity, objectivity and independence of reporting accountants and the quality of work they perform. The APB establishes quality control, investment reporting1 and ethical standards to provide a framework for the practice of reporting accountants.   Reporting Accountants should conduct an investment circular reporting engagement with integrity, objectivity and independence.   Integrity   1.7 Integrity is a prerequisite for all those who act in the public interest.  It is essential that reporting accountants act, and are seen to act, with integrity, which requires not only honesty but a broad range of related qualities such as fairness, candour, courage, intellectual honesty and confidentiality.   1.8 It is important that the directors and management of an engagement client can rely on the reporting accountant to treat the information obtained during an engagement as confidential, unless they have authorised its disclosure, it is already known to third parties or the reporting accountant has a legal right or duty to disclose it. Without this, there is a danger that the directors and management will fail to disclose such information to the reporting accountant and that the outcome of the engagement will thereby be impaired.   Objectivity   1.9 Objectivity is a state of mind that excludes bias, prejudice and compromise and that gives fair and impartial consideration to all matters that are relevant to the task in hand, disregarding those that are not. Objectivity requires that the reporting accountant’s judgment is not affected by conflicts of interests. Like integrity, objectivity is a fundamental ethical principle.   1.10 The need for reporting accountants to be objective arises from the fact that the important issues involved in an engagement are likely to relate to questions of judgment rather than to questions of fact. For example, in relation to historical financial information included in an investment circular directors have to form a view as to whether it is necessary to make adjustments to previously published financial statements. If the directors, whether deliberately or inadvertently, make a biased judgment or an otherwise inappropriate decision, the financial information may be misstated or misleading.   1.11 It is against this background that reporting accountants are engaged to undertake an investment circular reporting engagement. The reporting accountant’s objectivity requires that it expresses an impartial opinion in the light of all the available information and its professional judgment. Objectivity also requires that the reporting accountant adopts a rigorous                                                                                                                                             1 SIR 1000 paragraph 18 states ‘In the conduct of an engagement involving an investment circular, the reporting accountant should comply with the applicable ethical standards issued by the Auditing Practices Board’.  and robust approach and is prepared to disagree, where necessary, with the directors’ judgments.   Independence   1.12 Independence is freedom from situations and relationships which make it probable that a reasonable and informed third party would conclude that objectivity either is impaired or could be impaired. Independence is related to and underpins objectivity. However, whereas objectivity is a personal behavioural characteristic concerning the reporting accountant’s state of mind, independence relates to the circumstances surrounding the engagement, including the financial, employment, business and personal relationships between the reporting accountant and its engagement client and other parties who are connected with the investment circular.   1.13 The need for independence arises because, in most cases, users of the financial information and other third parties do not have all the information necessary to assess whether reporting accountants are, in fact, objective. Although reporting accountants themselves may be satisfied that their objectivity is not impaired by a particular situation, a third party may reach a different conclusion. For example, if a third party were aware that the reporting accountant had certain financial, employment, business or personal relationships with the engagement client, that individual might reasonably conclude that the reporting accountant could be subject to undue influence from the engagement client or would not be impartial or unbiased. Public confidence in the reporting accountant’s objectivity could therefore suffer as

INTRODUCTION   The APB issues Ethical Standards which set out the standards that auditors are required to comply with in order to discharge their responsibilities in respect of their integrity, objectivity and independence. The Ethical Standards 1 to 5 address such matters as: How audit firms set policies and procedures to ensure that, in relation to each audit, the audit firm and all those who are in a position to influence the conduct and outcome of an audit act with integrity, objectivity and independence; Financial, business, employment and personal relationships; Long association with the audit engagement; Fees, remuneration and evaluation policies, litigation, gifts and hospitality; Non-audit services provided to audited entities.   These Ethical Standards apply to all audit firms and to all audits and must be read in order to understand the alternative provisions and exemptions contained in this Standard.   The APB is aware that a limited number of the requirements in Ethical Standards 1 to 5 are difficult for certain audit firms to comply with, particularly when auditing a small entity. Whilst the APB is clear that those standards are appropriate in the interests of establishing the integrity, objectivity and independence of auditors, it accepts that certain dispensations, as set out in this Standard, are appropriate to facilitate the cost effective audit of the financial statements of Small Entities (as defined below).   This Standard provides alternative provisions for auditors of Small Entities to apply in respect of the threats arising from economic dependence and where tax or accounting services are provided and allows the option of taking advantage of exemptions from certain of the requirements in APB Ethical Standards 1 to 5 for a Small Entity audit engagement. Where an audit firm takes advantage of the exemptions within this Standard, it is required to: take the steps described in this Standard; and disclose in the audit report the fact that the firm has applied APB Ethical Standard – Provisions Available for Small Entities.   4      (i) In this Standard, for the UK a ‘Small Entity’ is: any company, which is not a UK listed company or an affiliate thereof, that qualifies as a small company under Section 382 of the Companies Act 2006; where group accounts are produced, any group that qualifies as small under Section 383 of the Companies Act 2006; any charity with an income of less than the turnover threshold applicable to small companies as identified in Section 382 of the Companies Act 2006; any pension fund with less than 100 members (including active, deferred and pensioner members)[1]; any firm regulated by the FSA, which is not required to appoint an auditor in accordance with chapter 3 of the FSA Supervision Manual which forms a part of the FSA Handbook[2]; any credit union which is a mutually owned financial cooperative established under the Credit Unions Act 1979 and the Industrial and Provident Societies Act 1965 (or equivalent legislation), which meets the criteria set out in (a) above; any entity registered under the Industrial and Provident Societies Act 1965, incorporated under the Friendly Societies Act 1992 or [1] In cases where a scheme with more than 100 members has been in wind-up over a number of years, such a scheme does not qualify as a Small Entity, even where the remaining number of members falls below 100. [2] This relates to those firms that are not required to appoint an auditor under rule SUP 3.3.2R of the FSA Supervision Manual. registered under the Friendly Societies Act 1974 (or equivalent legislation), which meets the criteria set out in (a) above; any registered social landlord with less than 250 units; and any other entity, such as a club, which would be a Small Entity if it were a company. (ii) In this Standard, for the Republic of Ireland a ‘Small Entity’ is:  (a) any company, which is not an Irish listed company or an affiliate thereof, that meets two or more of the following requirements in both the current financial year and the preceding financial year: not more than €7.3 million turnover; not more than €3.65 million balance sheet total; not more than 50 employees. any charity with an income of less than €7.3 million; any pension fund with less than 1,000 members (including active, deferred and pensioner members)[1]; and any other entity, such as a club or credit union, which would be a Small Entity if it were a company. Where an entity falls into more than one of the above categories, it is only regarded as a ‘Small Entity’ if it meets the criteria of all relevant categories.     ALTERNATIVE PROVISIONS   ECONOMIC DEPENDENCE   When auditing the financial statements of a Small Entity an audit firm is not required to comply with the requirement in APB Ethical Standard 4, paragraph 39 that an external independent quality control review is performed.   [1] In cases where a scheme with more than 1,000 members has been in wind-up over a number of years, such a scheme does not qualify as a Small Entity, even where the remaining number of members falls below 1,000. APB Ethical Standard 4, paragraph 39 provides that, where it is expected that the total fees for both audit and non-audit services receivable from a non-listed audited entity and its subsidiaries audited by the audit firm will regularly exceed 10% of the annual fee income of the audit firm or the part of the firm by reference to which the audit engagement partner’s profit share is calculated, but will not regularly exceed 15% the firm shall arrange an external independent quality control review of the audit engagement to be undertaken before the auditors’ report is finalised. Although an external independent quality control review is not required, nevertheless the audit engagement partner discloses the expectation that fees will amount to between 10% and 15% of the firm’s annual fee income to the Ethics Partner and to those charged with governance of the audited entity.   SELF-REVIEW THREAT – NON-AUDIT SERVICES

INTRODUCTION   APB Ethical Standard 1 requires the audit engagement partner to identify and assess the circumstances which could adversely affect the auditor’s objectivity (‘threats’), including any perceived loss of independence, and to apply procedures (‘safeguards’) which will either: eliminate the threat; or reduce the threat to an acceptable level (that is, a level at which it is not probable that a reasonable and informed third party would conclude that the auditor’s objectivity and independence either is impaired or is likely to be impaired). When considering safeguards, where the audit engagement partner chooses to reduce rather than to eliminate a threat to objectivity and independence, he or she recognises that this judgment may not be shared by users of the financial statements and that he or she may be required to justify the decision.   This Standard provides requirements and guidance on specific circumstances arising from the provision of non-audit services by audit firms to entities audited by them which may create threats to the auditor’s objectivity or perceived loss of independence. It gives examples of safeguards that can, in some circumstances, eliminate the threat or reduce it to an acceptable level. In circumstances where this is not possible, either the non-audit service engagement in question is not undertaken or the auditor either does not accept or withdraws from the audit engagement, as appropriate.   Whenever a possible or actual breach of an APB Ethical Standard is identified, the audit engagement partner, in the first instance, and the Ethics Partner, where appropriate, assess the implications of the breach, determine whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and consider whether there is a need to resign from the audit engagement.   An inadvertent violation of this Standard does not necessarily call into question the audit firm’s ability to give an audit opinion provided that: the audit firm has established policies and procedures that require all partners and staff to report any breach promptly to the audit engagement partner or to the Ethics Partner, as appropriate; the audit engagement partner promptly notifies the partner or member of staff that any matter which has given rise to a breach is to be addressed as soon as possible and ensures that such action is taken; safeguards, if appropriate, are applied (for example, by having another partner review the work done by the relevant partner or member of staff or by removing him or her from the engagement team); and the actions taken and the rationale for them are documented.   GENERAL APPROACH TO NON-AUDIT SERVICES   Paragraphs 6 to 53 of this Standard set out the general approach to be adopted by audit firms and auditors in relation to the provision of nonaudit services to entities audited by them. This approach is applicable irrespective of the nature of the non-audit services, which may be in question in a given case. (Paragraphs 54 to 168 of this Standard illustrate the application of the general approach to a number of common non-audit services.)   An audit is the term used to describe the work that is undertaken by the auditor to enable him or her to express an independent audit opinion on an entity’s financial statements and, where the entity is a parent company, on the group financial statements and/or the separate financial statements of its components[1].   [2] International Standards on Auditing (UK and Ireland) require that the auditor exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit and, among other things: Identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity’s internal control. Obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks. Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained2.   [1] In the public sector the statutory scope of an audit can extend beyond expressing an independent opinion on an entity’s financial statements to include reporting on an entity’s arrangements to ensure the proper conduct of its financial affairs, manage its performance or use of its resources. 2  ISA (UK and Ireland) 200 ‘Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing (UK and Ireland)’ paragraph [2] . Judgments regarding the nature and extent of evidence necessary to support the audit opinion are a matter for the auditor but will include: Identifying, evaluating and testing, where appropriate, those internal control systems the effectiveness of which is necessary for the audit of the financial statements and where, if any control weaknesses are identified, extended testing will be required; and additional work undertaken to respond to risks identified by management or the audit committee that the auditor considers could impact the auditor’s opinion on the financial statements.   Other work undertaken by the engagement team at the request of management or those charged with governance will not be categorised as part of the audit irrespective of whether it forms part of the audit proposal or engagement, unless it is clear that the predominant rationale for the performance of the work in question is to enable a soundly based audit opinion on the financial statements to be expressed. Therefore, an audit of financial statements does not include work where: The objective of that work is not to gather evidence to support the auditor’s opinion on the financial statements; or The nature and extent of testing is not determined by the external auditor, or in the case of a group, the component auditors, in the context of expressing an opinion on the financial statements; or         The principal terms and conditions differ from that of the audit.   If additional work on financial information[1] and/or financial controls is authorised by those charged with governance, but the objective of

 INTRODUCTION   APB Ethical Standard 1 requires the audit engagement partner to identify and assess the circumstances which could adversely affect the auditor’s objectivity (‘threats’), including any perceived loss of independence, and to apply procedures (‘safeguards’) which will either: eliminate the threat; or reduce the threat to an acceptable level (that is, a level at which it is not probable that a reasonable and informed third party would conclude that the auditor’s objectivity and independence either is impaired or is likely to be impaired). When considering safeguards, where the audit engagement partner chooses to reduce rather than to eliminate a threat to objectivity and independence, he or she recognises that this judgment may not be shared by users of the financial statements and that he or she may be required to justify the decision.   This Standard provides requirements and guidance on specific circumstances arising out of fees, economic dependence, litigation, remuneration and evaluation of partners and staff, and gifts and hospitality, which may create threats to the auditor’s objectivity or perceived loss of independence. It gives examples of safeguards that can, in some situations, eliminate the threat or reduce it to an acceptable level. In circumstances where this is not possible, either the situation is avoided or the auditor either does not accept or withdraws from the audit engagement, as appropriate.   Whenever a possible or actual breach of an APB Ethical Standard is identified, the audit engagement partner, in the first instance, and the Ethics Partner, where appropriate, assesses the implications of the breach, determines whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and considers whether there is a need to resign from the audit engagement.   An inadvertent violation of this Standard does not necessarily call into question the audit firm’s ability to give an audit opinion provided that: the audit firm has established policies and procedures that require all partners and staff to report any breach promptly to the audit engagement partner or to the Ethics Partner, as appropriate; the audit engagement partner or Ethics Partner ensures that any matter which has given rise to a breach is addressed as soon as possible; safeguards, if appropriate, are applied (for example, having another partner review the work done by the relevant partner or member of staff or by removing him or her from the engagement team); and the actions taken and the rationale for them are documented.     FEES   The audit engagement partner shall be satisfied and able to demonstrate that the audit engagement has assigned to it sufficient partners and staff with appropriate time and skill to perform the audit in accordance with all applicable Auditing and Ethical Standards, irrespective of the audit fee to be charged.   Paragraph 5 is not intended to prescribe the approach to be taken by audit firms to the setting of audit fees, but rather to emphasise that there are no circumstances where the amount of the audit fee can justify any lack of appropriate resource or time taken to perform a proper audit in accordance with applicable Auditing and Ethical Standards.   The audit engagement partner shall ensure that audit fees are not influenced or determined by the provision of non-audit services to the audited entity.   The audit fee ordinarily reflects the time spent, the skills and experience of the personnel performing the audit in accordance with all the relevant requirements, and the competitive situation in the audit market. Paragraph 7 is intended to prevent any relationship between the appropriate cost of the audit and the actual or potential provision of nonaudit services.   Paragraph 7 is not intended to prohibit proper cost savings that can be achieved as a result of providing non-audit services in accordance with APB Ethical Standard 5 to the audited entity, for example, where information gained through undertaking a non-audit service is referred to by audit staff when carrying out the audit of the financial statements.   An audit shall not be undertaken on a contingent fee basis.   A contingent fee basis is any arrangement made under which a fee is calculated on a pre-determined basis relating to the outcome or result of a transaction, or other event, or the result of the work performed. A fee that is established by a court or other public authority is not a contingent fee.   Contingent fee arrangements in respect of audit engagements create self-interest threats to the auditor’s objectivity and independence that are so significant that they cannot be eliminated or reduced to an acceptable level by the application of any safeguards.   The audit fee does not depend on whether the auditor’s report on the financial statements is qualified or unqualified. The basis for the calculation of the audit fee is agreed with the audited entity each year before significant audit work is undertaken. Arrangements under which estimated audit fees are agreed with the audited entity on terms where the fees may be varied based on the level of audit work required do not constitute contingent fee arrangements.   Contingent fee arrangements in respect of non-audit services provided by the auditor in respect of an audited entity can create significant selfinterest threats to the auditor’s objectivity and independence as the auditor may have, or may appear to have, an interest in the outcome of the non-audit service.     The audit firm shall not undertake an engagement to provide nonaudit services in respect of an audited entity on a contingent fee basis where: the contingent fee is material to the audit firm, or that part of the firm by reference to which the audit engagement partner’s profit share is calculated; or the outcome of those non-audit services (and, therefore, the amount of the fee) is dependent on a future or contemporary audit judgment relating to a material matter in the financial statements of an audited entity.   Where non-audit services are provided on a

INTRODUCTION   APB Ethical Standard 1 requires the audit engagement partner to identify and assess the circumstances which could adversely affect the auditor’s objectivity (‘threats’), including any perceived loss of independence, and to apply procedures (‘safeguards’) which will either: eliminate the threat; or reduce the threat to an acceptable level (that is, a level at which it is not probable that a reasonable and informed third party would conclude that the auditor’s objectivity and independence either is impaired or is likely to be impaired). When considering safeguards, where the audit engagement partner chooses to reduce rather than to eliminate a threat to objectivity and independence, he or she recognises that this judgment may not be shared by users of the financial statements and that he or she may be required to justify the decision.   This Standard provides requirements and guidance on specific circumstances arising out of long association with the audit engagement, which may create threats to the auditor’s objectivity or perceived loss of independence. It gives examples of safeguards that can, in some circumstances, eliminate the threat or reduce it to an acceptable level. In circumstances where this is not possible, the auditor either does not accept or withdraws from the audit engagement, as appropriate.   Whenever a possible or actual breach of an APB Ethical Standard is identified, the audit engagement partner, in the first instance, and the Ethics Partner, where appropriate, assesses the implications of the breach, determines whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and considers whether there is a need to resign from the audit engagement.   An inadvertent violation of this Standard does not necessarily call into question the audit firm’s ability to give an audit opinion provided that: the audit firm has established policies and procedures that require all partners and staff to report any breach promptly to the audit engagement partner or to the Ethics Partner, as appropriate; the audit engagement partner or Ethics Partner ensures that any matter which has given rise to a breach is addressed as soon as possible; safeguards, if appropriate, are applied (for example, by having another partner review the work done by the relevant partner or member of staff or by removing him or her from the engagement team): and the actions taken and the rationale for them are documented.   GENERAL PROVISIONS   The audit firm shall establish policies and procedures to monitor the length of time that audit engagement partners, key partners involved in the audit and partners and staff in senior positions, including those from other disciplines, serve as members of the engagement team for each audit.   Where audit engagement partners, key partners involved in the audit, and partners and staff in senior positions have a long association with the audit, the audit firm shall assess the threats to the auditor’s objectivity and independence and shall apply safeguards to reduce the threats to an acceptable level. Where appropriate safeguards cannot be applied, the audit firm shall either resign as auditor or not stand for reappointment, as appropriate.[1]   Where audit engagement partners, key partners involved in the audit, other partners and staff in senior positions have a long association with the audited entity, self-interest, self-review and familiarity threats to the auditor’s objectivity may arise.  Similarly, such circumstances may result [1] In the case of those public sector bodies where the responsibility for the audit is assigned by legislation, the auditor cannot resign from the audit engagement and considers alternative safeguards that can be put in place. in an actual or perceived loss of independence. The significance of such threats depends upon factors such as: the role of the individual in the engagement team; the proportion of time that the audited entity contributes to the individual’s annual billable hours; the length of time that the individual has been associated with that audit engagement.   In order to address such threats, audit firms apply safeguards. Appropriate safeguards may include: removing (‘rotating’) the partners and the other senior members of the engagement team after a pre-determined number of years; involving an additional partner, who is not and has not recently been a member of the engagement team, to review the work done by the partners and the other senior members of the engagement team and to advise as necessary; applying independent internal quality reviews to the engagement in question.   Once an audit engagement partner has held this role for a continuous period of ten years, careful consideration is given as to whether a reasonable and informed third party would consider the audit firm’s objectivity and independence to be impaired. Where the individual concerned is not rotated after ten years, it is important that: safeguards other than rotation, such as those noted in paragraph 8, are applied; or (i) the reasoning as to why the individual continues to participate in the audit engagement without any safeguards is documented; and (ii) the facts are communicated to those charged with governance of the audited entity in accordance with paragraphs 63 – 71 of APB Ethical Standard 1.   The audit firm’s policies and procedures set out whether there are circumstances in which the audit engagement partners, engagement quality control reviewers and key partners involved in the audit of nonlisted entities are subject to accelerated rotation requirements, such as those set out in paragraph 12, as described in paragraph 47 of APB Ethical Standard 1.   Any scheme of rotation of partners and other senior members of the engagement team needs to take into account the factors which affect the quality of the audit work, including the experience and continuity of members of the engagement team and the need to ensure appropriate succession planning.     ADDITIONAL PROVISIONS RELATED TO AUDITS OF LISTED COMPANIES    The audit engagement partner In the case of listed companies, save where the circumstances contemplated in paragraph 15 and 16 apply, the audit firm shall

APB Ethical Standard 1 requires the audit engagement partner to identify and assess the circumstances which could adversely affect the auditor’s objectivity (‘threats’), including any perceived loss of independence, and to apply procedures (‘safeguards’) which will either: eliminate the threat; or reduce the threat to an acceptable level (that is, a level at which it is not probable that a reasonable and informed third party would conclude that the auditor’s objectivity and independence is impaired or is likely to be impaired). When considering safeguards, where the audit engagement partner chooses to reduce rather than to eliminate a threat to objectivity and independence, he or she recognises that this judgment may not be shared by users of the financial statements and that he or she may be required to justify the decision.   This Standard provides requirements and guidance on specific circumstances arising out of financial, business, employment and personal relationships with the audited entity, which may create threats to the auditor’s objectivity or perceived loss of independence. It gives examples of safeguards that can, in some circumstances, eliminate the threat or reduce it to an acceptable level. In circumstances where this is not possible, either the relationship in question is not entered into or the auditor either does not accept or withdraws from the audit engagement, as appropriate.   Whenever a possible or actual breach of an APB Ethical Standard is identified, the audit engagement partner, in the first instance, and the Ethics Partner, where appropriate, assesses the implications of the breach, determines whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and considers whether there is a need to resign from the audit engagement.   An inadvertent violation of this Standard does not necessarily call into question the audit firm’s ability to give an audit opinion provided that: the audit firm has established policies and procedures that require all partners and staff to report any breach promptly to the audit engagement partner or to the Ethics Partner as appropriate; the audit engagement partner or Ethics Partner promptly notifies the partner or member of staff that any matter which has given rise to a breach is to be addressed as soon as possible and ensures that such action is taken; safeguards, if appropriate, are applied (for example, having another partner review the work done by the relevant partner or member of staff or by removing him or her from the engagement team); and the actions taken and the rationale for them are documented.     FINANCIAL RELATIONSHIPS   General considerations A financial interest is an equity or other security, debenture, loan or other debt instrument of an entity, including rights and obligations to acquire such an interest and derivatives directly related to such an interest.   Financial interests may be: owned directly, rather than through intermediaries (a ‘direct financial interest’); or owned through intermediaries, for example, an open ended investment company or a pension scheme (an ‘indirect financial interest’).   Save where the circumstances contemplated in paragraphs 9, 10, 12, 19 or 21 apply, the audit firm, any partner in the audit firm, a person in a position to influence the conduct and outcome of the audit or an immediate family member of such a person shall not hold: any direct financial interest in an audited entity or an affiliate of an audited entity; or any indirect financial interest in an audited entity or an affiliate of an audited entity, where the investment is material to the audit firm or the individual, or to the intermediary; or any indirect financial interest in an audited entity or an affiliate of an audited entity, where the person holding it has both: the ability to influence the investment decisions of the intermediary; and actual knowledge of the existence of the underlying investment in the audited entity.   The threats to the auditor’s objectivity and independence, where a direct financial interest or a material indirect financial interest in the audited entity is held by the audit firm or by one of the individuals specified in paragraph 7, are such that no safeguards can eliminate them or reduce them to an acceptable level.   Where a person joins the audit firm as a partner, he or she or an immediate family member is not required to dispose of financial interests held where: the financial interests were acquired before the new partner joined the audit firm; and the individual is not able to influence the affairs of the audited entity; and either there is no market for such interests, or the individual does not have the power to sell or direct the sale of the interest; and (d) the new partner: is not in a position to influence the conduct and outcome of the audit; does not work in the same part of the firm as the audit engagement partner; and is not involved in the provision of a non-audit service to the audit client. Such a financial interest is disposed of as soon as possible after the individual becomes able to make a disposal.  The audit firm ensures that: such financial interests are approved by the Ethics Partner; a record is maintained of such individuals, including a description of the circumstances; and this information is communicated to the relevant audit engagement partner.   Where an immediate family member of a partner who is not in a position to influence the conduct and outcome of the audit holds a financial interest in an audited entity or an affiliate of an audited entity as a consequence of: their compensation arrangements (for example, a share option scheme, where the shares have not vested); or a decision made, or a transaction undertaken, by an entity with whom that immediate family member has a contractual business or employment arrangement (for example, a partnership agreement); such financial interests are not generally considered to threaten the auditor’s objectivity and independence.  However, where such interests are significant or

INTRODUCTION   The financial statements of an entity may have a number of different users. For example, they may be used by suppliers and customers, joint venture partners, bankers and other suppliers of finance, taxation and regulatory authorities, employees, trades unions and environmental groups. In the case of a listed company, the financial statements are an important source of information to the capital markets. But the primary purpose of the financial statements of an entity is to provide its owners – the shareholders (or those in an equivalent position) – with information on the state of affairs of the entity and its performance and to assist them in assessing the stewardship exercised by the directors (or those in an equivalent position) over the business that has been entrusted to them.   The financial statements of an entity are the responsibility of its board of directors and are prepared by them, or by others on their behalf, for the shareholders or, in some circumstances, for other third parties.   The primary objective of an audit of the financial statements is for the auditor to provide independent assurance to the shareholders that the directors have prepared the financial statements properly. The auditor issues a report that includes an opinion as to whether or not the financial statements give a true and fair view[1]. Thus the auditor assists the shareholders to exercise their proprietary powers as shareholders in the Annual General Meeting.   Public confidence in the operation of the capital markets and in the conduct of public interest entities depends, in part, upon the credibility of the opinions and reports issued by the auditor in connection with the audit of the financial statements. Such credibility depends on beliefs concerning the integrity, objectivity and independence of the auditor and the quality of audit work performed. APB establishes quality control, auditing and ethical standards to provide a framework for audit practice. The Auditors’ Code underlies APB’s standards and sets out the fundamental principles, which APB expects to guide the conduct of auditors.   APB Ethical Standards are concerned with the integrity, objectivity and independence of auditors. Ethical guidance on other matters, together with statements of fundamental ethical principles governing the work of all professional accountants, are issued by professional accountancy bodies.   Auditors shall conduct the audit of the financial statements of an entity with integrity, objectivity and independence.   Integrity Integrity is a prerequisite for all those who act in the public interest. It is essential that auditors act, and are seen to act, with integrity, which requires not only honesty but a broad range of related qualities such as fairness, candour, courage, intellectual honesty and confidentiality.   [1] In the case of certain bodies in the public sector, the auditor expresses an opinion as to whether the financial statements ‘present fairly’ the financial position. Integrity requires that the auditor is not affected, and is not seen to be affected, by conflicts of interest. Conflicts of interest may arise from personal, financial, business, employment, and other relationships which the audit engagement team, the audit firm or its partners or staff have with the audited entity and its connected parties.2   It is important that the directors and management of an audited entity can rely on the auditor to treat the information obtained during an audit as                                                 2 For this purpose an audited entity’s connected parties are: its affiliates; key members of management (including but not limited to directors and those charged with governance) of the audited entity and its significant affiliates; and any person or entity with an ability to influence (other than in their capacity as professional advisor), whether directly or indirectly, key members of management and those charged with governance of the audited entity and its significant affiliates in relation to their responsibility for, or approach to, any matter or judgment that is material to the entity’s financial statements. confidential[1], unless they have authorised its disclosure, unless it is already known to third parties or unless the auditor has a legal right or duty to disclose it. Without this, there is a danger that the directors and management will fail to disclose such information to the auditor and that the effectiveness of the audit will thereby be impaired.   Objectivity Objectivity is a state of mind that excludes bias, prejudice and compromise and that gives fair and impartial consideration to all matters that are relevant to the task in hand, disregarding those that are not. Like integrity, objectivity is a fundamental ethical principle and requires that the auditor’s judgment is not affected by conflicts of interest.   [1] The fundamental principle of confidentiality is addressed in the ethical guidance issued by the auditor’s professional accountancy body.  This principle does not constrain the proper communication between the auditor and shareholders (or equivalent) of the audited entity. The need for auditors to be objective arises from the fact that many of the important issues involved in the preparation of financial statements do not relate to questions of fact but rather to questions of judgment. For example, there are choices to be made by the board of directors in deciding on the accounting policies to be adopted by the entity: the directors have to select the ones that they consider most appropriate and this decision can have a material impact on the financial statements. Furthermore, many items included in the financial statements cannot be measured with absolute precision and certainty. In many cases, estimates have to be made and the directors may have to choose one value from a range of possible outcomes. When exercising discretion in these areas, the directors have regard to the applicable financial reporting framework. If the directors, whether deliberately or inadvertently, make a biased judgment or an otherwise inappropriate decision, the financial statements may be misstated or misleading.   It is against this background that the auditor is required to express an opinion on the financial statements. The audit involves considering the process followed and the choices

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS ACCOUNTS PAYABLE AGREEING THE TERMS OF AUDIT ENGAGEMENTS ASSURANCE ENGAGEMENTS OTHER THAN AUDITS OR REVIEWS OF HISTORICAL FINANCIAL INFORMATION INTERNATIONAL FRAMEWORK FOR ASSURANCE ENGAGEMENTS AUDIT EVIDENCE—ADDITIONAL CONSIDERATIONS FOR SPECIFIC ITEMS MODIFICATIONS TO THE OPINION IN THE INDEPENDENT AUDITOR’S REPORT CODE OF ETHICS EMPHASIS OF MATTER PARAGRAPHS AND OTHER MATTER PARAGRAPHS IN THE INDEPENDENT  AUDITOR’S REPORT TERMS OF AUDIT ENGAGEMENTS FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS FUNDAMENTAL PRINCIPLES OF PUBLIC-SECTOR AUDITING USING THE WORK OF INTERNAL AUDITORS IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT USING THE WORK OF AN AUDITOR’S EXPERT FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS PERFORMANCE AUDIT GUIDELINES – KEY PRINCIPLES NON-ASSURANCE SERVICES PERFORMANCE AUDIT GUIDELINES: FUNDAMENTAL PRINCIPLES OF FINANCIAL AUDITING QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT WRITTEN REPRESENTATIONS   ES1 INTEGRITY, OBJECTIVITY AND INDEPENDENCE  ES2FINANCIAL, BUSINESS, EMPLOYMENT AND PERSONAL RELATIONSHIPS ES3 LONG ASSOCIATION WITH THE AUDIT ENGAGEMENT FEES, REMUNERATION AND EVALUATION POLICIES, LITIGATION, GIFTS AND HOSPITALITY ES5 NON-AUDIT SERVICES PROVIDED TO AUDITED ENTITIES PROVISIONS AVAILABLE FOR SMALL ENTITIES (REVISED) Ethical Standard for Reporting Accountants  

Introduction Scope of this ISA This International Standard on Auditing (ISA) deals with the auditor’s responsibility to request written representations, and the auditor’s actions when relevant parties do not provide the requested written representations, or when the auditor concludes that such written representations are not reliable. Appendix 1 lists other ISAs containing requirements and guidance for written representations. Those requirements do not limit the application of this ISA. Effective Date This ISA is effective for audits of financial statements for periods beginning on or after [date].[1] Objective  The objective of the auditor is to corroborate, by means of written representations: The validity of the premises, relating to management’s responsibilities, on which an audit is conducted;[2] and Other audit evidence obtained with regard to specific assertions in the financial statements. Definitions For purposes of the ISAs, the following terms have the meanings attributed below: Written representations – Written statements provided by relevant parties from within the entity to the auditor at the auditor’s request. Written representations are either general or specific. Written representations in the context of this ISA do not include financial statements, the assertions therein, and supporting books and records. General written representations – Written representations regarding the premises, relating to management’s responsibilities, on which an audit is conducted. Specific written representations – Written representations regarding specific assertions in the financial statements. Relevant parties – Parties responsible for preparing and presenting the financial statements and assertions therein. Regarding specific assertions, relevant parties may also include individuals who have specialized knowledge about those specific [1] This effective date will not be earlier than December 15, 2008. [2] The term “management” has been used in this ISA to describe those responsible for preparing and presenting the financial statements. Other terms may be appropriate depending on the legal framework in the particular jurisdiction. assertions and are part of the process followed in preparing and presenting the financial statements and assertions therein. (Ref: Para. A1-A2) The premises, relating to management’s responsibilities, on which an audit is conducted – Those responsibilities of management and, where appropriate, those charged with governance that are fundamental to the conduct of an audit in accordance with the ISAs. They are explained in ISA 200, “Objective and General Principles Governing an Audit of Financial Statements.” Requirements Relevant Parties The auditor shall determine the relevant parties from whom general and specific written representations shall be requested. (Ref: Para. A1-A3) The auditor shall request that relevant parties provide written representations based on relevant parties’ knowledge and belief, having made appropriate inquiries for them to be able to provide such representations. General Written Representations The auditor shall request relevant parties to provide the general written representations about the financial statements, including internal control, and the completeness of information made available to the auditor set out in paragraphs 8-10 for all financial statements and periods covered by the auditor’s report. Such general written representations provide necessary audit evidence about the validity of the premises, relating to management’s responsibilities, on which an audit is conducted. However, by themselves, they do not constitute sufficient appropriate audit evidence about the validity of the premises. Accordingly, they do not relieve the auditor of the responsibility to obtain other audit evidence. (Ref: Para. A4-A11, A16) Financial Statements The auditor shall request relevant parties to provide written representations that they acknowledge and understand their responsibility for preparing and presenting the financial statements, and whether they believe that the financial statements are prepared in accordance with the applicable financial reporting framework (or are fairly presented in accordance with the applicable financial reporting framework, when that framework is a fair presentation framework). The representations shall include: Whether the selection and application of accounting policies are appropriate; Whether all transactions have been recorded; and Whether the following matters, where relevant in view of the applicable financial reporting framework, have been recognized, measured or disclosed in accordance with that framework: o Plans or intentions that may affect the carrying value or classification of assets and liabilities; Liabilities, both actual and contingent; Title to or control over assets, and the liens or encumbrances on assets, and assets pledged as collateral; Aspects of contractual agreements that may affect the financial statements, including noncompliance; and o Events subsequent to the period end. Internal Control The auditor shall request relevant parties to provide a written representation that they acknowledge and understand their responsibility for designing, implementing and maintaining internal control relevant to preparing and presenting financial statements that are free from material misstatement, whether due to fraud or error, and whether they believe that the internal control they have maintained is adequate for that purpose. Completeness of Information The auditor shall request relevant parties to provide a written representation whether they believe that all records, documentation, unusual matters of which they are aware, and other information relevant to the audit have been made available to the auditor. Form and Date of General Written Representations The general written representations shall be in the form of a representation letter addressed to the auditor. The general written representations shall be as of the same date as the auditor’s report on the financial statements. (Ref: Para. A15) Specific Written Representations Other ISAs contain requirements for specific written representations. In addition to those, a specific written representation may be necessary to corroborate other audit evidence, particularly where judgment, intent or completeness is involved. The auditor shall determine whether specific written representations relating to specific assertions in the financial statements are necessary. Such specific written representations do not constitute sufficient appropriate audit evidence by themselves. Accordingly, they do not relieve the auditor of the responsibility to obtain other audit evidence. (Ref: Para. A12-A14, A16) The auditor shall determine whether it is necessary to request relevant parties to provide an updated specific written representation when the specific written representation is as of a date earlier than that of the auditor’s report on the financial statements. (Ref: Para. A15) Evaluating the Reliability of Written Representations Circumstances such as the following may cause the auditor

Introduction The purpose of this International Standard on Auditing (ISA) is to establish standards and to provide guidance on obtaining an understanding of the entity and its environment, including its internal control, and on assessing the risks of material misstatement in a financial statement audit. The importance of the auditor’s risk assessment as a basis for further audit procedures is discussed in the explanation of audit risk in ISA 200, “Objective and General Principles Governing an Audit of Financial Statements.” The auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures. ISA 500, “Audit Evidence,” requires the auditor to use assertions in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance of further audit procedures. This ISA requires the auditor to make risk assessments at the financial statement and assertion levels based on an appropriate understanding of the entity and its environment, including its internal control. ISA 330, “The Auditor’s Procedures in Response to Assessed Risks” discusses the auditor’s responsibility to determine overall responses and to design and perform further audit procedures whose nature, timing, and extent are responsive to the risk assessments. The requirements and guidance of this ISA are to be applied in conjunction with the requirements and guidance provided in other ISAs. In particular, further guidance in relation to the auditor’s responsibility to assess the risks of material misstatement due to fraud is discussed in ISA 240, “The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements.” The following is an overview of the requirements of this standard: Risk assessment procedures and sources of information about the entity and its environment, including its internal control. This section explains the audit procedures that the auditor is required to perform to obtain the understanding of the entity and its environment, including its internal control (risk assessment procedures). It also requires discussion among the engagement team about the susceptibility of the entity’s financial statements to material misstatement. Understanding the entity and its environment, including its internal control. This section requires the auditor to understand specified aspects of the entity and its environment, and components of its internal control, in order to identify and assess the risks of material misstatement. Assessing the risks of material misstatement. This section requires the auditor to identify and assess the risks of material misstatement at the financial statement and assertion levels. The auditor: ◦ Identifies risks by considering the entity and its environment, including relevant controls, and by considering the classes of transactions, account balances, and disclosures in the financial statements; ◦ Relates the identified risks to what can go wrong at the assertion level; and ◦ Considers the significance and likelihood of the risks. This section also requires the auditor to determine whether any of the assessed risks are significant risks that require special audit consideration or risks for which substantive procedures alone do not provide sufficient appropriate audit evidence. The auditor is required to evaluate the design of the entity’s controls, including relevant control activities, over such risks and determine whether they have been implemented. Communicating with those charged with governance and management. This section deals with matters relating to internal control that the auditor communicates to those charged with governance and management. Documentation. This section establishes related documentation requirements. Obtaining an understanding of the entity and its environment is an essential aspect of performing an audit in accordance with ISAs. In particular, that understanding establishes a frame of reference within which the auditor plans the audit and exercises professional judgment about assessing risks of material misstatement of the financial statements and responding to those risks throughout the audit, for example when: Establishing materiality and evaluating whether the judgment about materiality remains appropriate as the audit progresses; Considering the appropriateness of the selection and application of accounting policies, and the adequacy of financial statement disclosures; Identifying areas where special audit consideration may be necessary, for example, related party transactions, the appropriateness of management’s use of the going concern assumption, or considering the business purpose of transactions; Developing expectations for use when performing analytical procedures; Designing and performing further audit procedures to reduce audit risk to an acceptably low level; and Evaluating the sufficiency and appropriateness of audit evidence obtained, such as the appropriateness of assumptions and of management’s oral and written representations. The auditor uses professional judgment to determine the extent of the understanding required of the entity and its environment, including its internal control. The auditor’s primary consideration is whether the understanding that has been obtained is sufficient to assess the risks of material misstatement of the financial statements and to design and perform further audit procedures. The depth of the overall understanding that is required by the auditor in performing the audit is less than that possessed by management in managing the entity. Risk Assessment Procedures and Sources of Information About the Entity and Its Environment, Including Its Internal Control Obtaining an understanding of the entity and its environment, including its internal control, is a continuous, dynamic process of gathering, updating and analyzing information throughout the audit. As described in ISA 500, audit procedures to obtain an understanding are referred to as “risk assessment procedures” because some of the information obtained by performing such procedures may be used by the auditor as audit evidence to support assessments of the risks of material misstatement. In addition, in performing risk assessment procedures, the auditor may obtain audit evidence about classes of transactions, account balances, or disclosures and related assertions and about the operating effectiveness of controls, even though such audit procedures were not specifically planned as substantive procedures or as tests of controls. The auditor also may choose to perform substantive procedures or tests of controls concurrently with risk assessment procedures because it is efficient to

Introduction Scope of this ISA This International Standard on Auditing (ISA) deals with the specific responsibilities of the auditor regarding quality control procedures for an audit of financial statements. It also addresses, where applicable, the responsibilities of the engagement quality control reviewer. This ISA is to be read in conjunction with relevant ethical requirements. System of Quality Control and Role of Engagement Teams Quality control systems, policies and procedures are the responsibility of the audit firm. Under ISQC 1, the firm has an obligation to establish and maintain a system of quality control to provide it with reasonable assurance that: The firm and its personnel comply with professional standards and applicable legal and regulatory requirements; and Reports issued by the firm or engagement partners are appropriate in the circumstances.[1] This ISA is premised on the basis that the firm is subject to ISQC 1 or to national requirements that are at least as demanding. (Ref: Para. A1) Within the context of the firm’s system of quality control, engagement teams have a responsibility to implement quality control procedures that are applicable to the audit engagement and provide the firm with relevant information to enable the functioning of that part of the firm’s system of quality control relating to independence. Engagement teams are entitled to rely on the firm’s system of quality control, unless information provided by the firm or other parties suggests otherwise. (Ref: Para. A2) Effective Date This ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009. Objective The objective of the auditor is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that: The audit complies with professional standards and applicable legal and regulatory requirements; and [1] ISQC 1, “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements,” paragraph 11. The auditor’s report issued is appropriate in the circumstances. Definitions For purposes of the ISAs, the following terms have the meanings attributed below: Engagement partner[1] – The partner or other person in the firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. Engagement quality control review – A process designed to provide an objective evaluation, on or before the date of the auditor’s report, of the significant judgments the engagement team made and the conclusions it reached in formulating the auditor’s report. The engagement quality control review process is for audits of financial statements of listed entities and those other audit engagements, if any, for which the firm has determined an engagement quality control review is required. Engagement quality control reviewer – A partner, other person in the firm, suitably qualified external person, or a team made up of such individuals, none of whom is part of the engagement team, with sufficient and appropriate experience and authority to objectively evaluate the significant judgments the engagement team made and the conclusions it reached in formulating the auditor’s report. Engagement team – All partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes an auditor’s external expert engaged by the firm or a network firm.[2] Firm – A sole practitioner, partnership or corporation or other entity of professional accountants. Inspection – In relation to completed audit engagements, procedures designed to provide evidence of compliance by engagement teams with the firm’s quality control policies and procedures. Listed entity – An entity whose shares, stock or debt are quoted or listed on a recognized stock exchange, or are marketed under the regulations of a recognized stock exchange or other equivalent body. [1] “Engagement partner,” “partner,” and “firm” should be read as referring to their public sector equivalents where relevant. [2] ISA 620, “Using the Work of an Auditor’s Expert,” paragraph 6(a), defines the term “auditor’s expert.” Monitoring – A process comprising an ongoing consideration and evaluation of the firm’s system of quality control, including a periodic inspection of a selection of completed engagements, designed to provide the firm with reasonable assurance that its system of quality control is operating effectively. Network firm – A firm or entity that belongs to a network. Network – A larger structure: That is aimed at cooperation, and That is clearly aimed at profit or cost-sharing or shares common ownership, control or management, common quality control policies and procedures, common business strategy, the use of a common brand name, or a significant part of professional resources. Partner – Any individual with authority to bind the firm with respect to the performance of a professional services engagement. Personnel – Partners and staff. Professional standards – International Standards on Auditing (ISAs) and relevant ethical requirements. Relevant ethical requirements – Ethical requirements to which the engagement team and engagement quality control reviewer are subject, which ordinarily comprise Parts A and B of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) related to an audit of financial statements together with national requirements that are more restrictive. Staff – Professionals, other than partners, including any experts the firm employs. Suitably qualified external person – An individual outside the firm with the competence and capabilities to act as an engagement partner, for example, a partner of another firm, or an employee (with appropriate experience) of either a professional accountancy body whose members may perform audits of historical financial information or of an organization that provides relevant quality control services. Requirements Leadership Responsibilities for Quality on Audits The engagement partner shall take responsibility for the overall quality on each audit engagement to which that partner is assigned. (Ref: Para. A3) Relevant Ethical Requirements Throughout the audit engagement, the engagement partner shall remain alert, through observation and making inquiries as necessary, for evidence of non-compliance with relevant

INTRODUCTION   Professional standards and guidelines are essential for the credibility, quality and professionalism of public-sector auditing. The International Standards of Supreme Audit Institutions (ISSAIs) developed by the International Organisation of Supreme Audit Institutions (INTOSAI) aim to promote independent and effective auditing and support the members of INTOSAI in the development of their own professional approach in accordance with their mandates and with national laws and regulations.   ISSAI 100 – Fundamental Principles of Public-Sector Auditing provides the fundamental principles for public-sector auditing in general and defines the authority of the ISSAIs. ISSAI 200 – Fundamental Principles of Financial Auditing has been developed to address the key principles related to an audit of financial statements in the public sector. It builds on and further develops the fundamental principles of ISSAI 100 to suit the specific context of audits of financial statements, and constitutes the basis for auditing standards related to audits of financial statements. ISSAI 200 should be read and understood in conjunction with ISSAI 100.   The main purpose of the ISSAIs on financial audit is to provide INTOSAI members with a comprehensive set of principles, standards and guidelines for the audit of financial statements of public-sector entities. In addition to ISSAI 200, the ISSAIs on financial audit comprise the Financial Audit Guidelines (ISSAIs 1000-2999) at level 4 of the ISSAI Framework. A general introduction to these guidelines is given in ISSAI 1000, while ISSAIs 1200 to 1810 each contain Practice Notes issued by INTOSAI to provide guidance on the application of the International Standards on Auditing (ISAs 200 to 810) developed by the International Auditing and Assurance Standards Board (IAASB). Each Practice Note and the corresponding ISA together constitute a guideline in the ISSAI Framework.   Financial audit focuses on determining whether an entity’s financial information is presented in accordance with the applicable financial reporting and regulatory framework. The scope of financial audits in the public sector may be defined by the SAI’s mandate as a range of audit objectives in addition to the objectives of an audit of financial statements prepared in accordance with a financial reporting framework. These objectives may include the auditing of:   states’ or entities’ accounts or other financial reports, not necessarily prepared in accordance with a general-purpose financial reporting framework; budgets, budget sections, appropriations and other decisions on the allocation of resources, and the implementation thereof; policies, programmes or activities defined by their legal basis or source of financing;  legally-defined areas of responsibility, such as the responsibilities of ministers; and  categories of income or payments or assets or liabilities.   When the SAI’s mandate defines such additional audit objectives, the SAI may also need to consider developing or adopting standards based on the general fundamental principles of public-sector auditing in ISSAI 100 and the fundamental principles of compliance and performance auditing. The guidance of the Financial Audit Guidelines on special-purpose frameworks[1], audits of single financial statements and specific elements, accounts or items of a financial statement[2], and reports on summary financial statements[3], may also be relevant for such purposes.   This ISSAI provides detailed information on the following:   The purpose and authority of the Fundamental Principles of Financial Auditing The framework for auditing financial statements in the public sector  The elements of an audit of financial statements  The principles of an audit of financial statements.   PURPOSE AND AUTHORITY OF THE FUNDAMENTAL PRINCIPLES OF FINANCIAL AUDITING   ISSAI 200 provides the fundamental principles for an audit of financial statements prepared in accordance with a financial reporting framework. The principles also apply when an SAI is engaged or has responsibility to audit single financial statements and specific elements, accounts or items of a financial statement, or financial statements prepared in accordance with special-purpose financial frameworks, or summary financial statements. Where reference is made in ISSAI 200 to audits of financial statements, this includes responsibilities of this nature.   ISSAIs 1000 to 1810 on financial audits may be applied as appropriate to these responsibilities. However, auditors are prohibited from making reference to the use of the ISSAIs if:   the preconditions for an audit in accordance with the ISSAIs on financial audit are not in place[4]; or the auditor is not able to comply with the authority attached to the ISAs5 and ISSAIs.   The Fundamental Principles of Financial Auditing apply to all public-sector audits of financial statements, whether for the whole of government, parts of government or single entities.   ISSAI 200 – Fundamental Principles of Financial Auditing represents the core of the detailed auditing standards provided by ISSAIs 1000 to 1810 at level 4 of the ISSAI Framework. The principles in ISSAI 200 can be used in three ways:   as a basis on which to develop standards, as a basis on which to adopt consistent national standards, as a basis for adoption of the Financial Audit Guidelines as the authoritative standards.   Reference to ISSAI 200 in reports should only be made if auditing standards have been developed or adopted that fully comply with all relevant principles of ISSAI 200. A principle is considered relevant when it deals with the type of audit or combinations of audit types and the [1] ISSAI 1800 – Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks. [2] ISSAI 1805 – Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement. [3] ISSAI 1810 – Engagements to Report on Summary Financial Statements. [4] ISSAI 1210 – Agreeing the Terms of Audit Engagements, paragraphs 6-8. 5 ISSAI 1000, paragraphs 37-43. circumstances or procedures are applicable. The principles in no way override national laws, regulations or mandates.   When adopting or developing audit standards based on the Fundamental Auditing Principles, reference to these in reports may be made by stating:   …We conducted our audit in accordance with [standards], which are based on [or consistent with] the Fundamental Auditing Principles (ISSAIs 100-999) of the International Standards of Supreme