In order to appreciate the significance of correct interpretation and application of International Standards on Auditing (ISAs), one needs to first set the historical context.

Auditing has been a worldwide profession for hundreds of years. Historically, auditing was concerned with accounting for government activities and reviewing the work done by tax collectors. In the early years of auditing, the keeping and maintaining of accounting records was done primarily to detect fraudulent activity. The industrial revolution in the mid 1700s to the mid 1800s was responsible for the increased demand in auditors because this period saw an increase in responsibility being passed from owners to managers. This led to an increased requirement for auditors who were independent of management and who were engaged not only to be alert for errors within financial records but also errors within the records. In simple terms, deliberate errors in order to achieve personal financial gain were deemed to be fraudulent activity (as is still the case today) whilst error was (and still is) unintentional.

During the early 1700s the concept of ‘sampling’ was introduced. Sampling is where auditors select a sample of items that make up various balances and was used where it is not economically viable to physically examine all the transactions that have taken place. This practice is still pivotal today. This is one of the main areas which this publication looks at in respect of the ...

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