Q&A: audit

It is evidence, but the auditor cannot accept it as "ready truth". ISA 500 ("Audit Evidence") requires the auditor, when using information produced by the entity, to evaluate whether it is sufficiently reliable for the auditor's purposes. For this, where necessary:

1. Audit evidence is obtained about the completeness and accuracy of the information.
2. The auditor evaluates whether the information is sufficiently precise and detailed for the auditor's purposes.

The reason is simple: who configured the software report, which date was used as the basis, which documents were not entered — none of this is visible in the report itself. If the report is wrong, a conclusion drawn from it is wrong too.

In practice the auditor usually looks for answers to three questions:

Recalculation example (compiled by the author; report date 31 December 2026, age = days elapsed since the invoice date):

All five invoices match the groups in the software. So, as to accuracy, no discrepancy was found in this sample. But as to completeness, the difference of 14 million soums remained open: it may be either invoices that did not get into the report or other entries in the general ledger (for example, an advance or a correcting entry). Until this difference is explained, the report cannot be considered fully reliable for calculating the allowance.

What you can do: - Reconcile the report with the general ledger yourself before the auditor's request and record the difference. - Show the auditor on which date and with which filters the report was produced (software settings, date of generation). - Allow the auditor to regenerate the file from the software in front of them or with their own access. This increases confidence that the file was not edited afterwards.

This is not disrespect towards you on the auditor's part, but a requirement of the standard. With good controls the auditor may reduce the scope of testing; with weak controls the auditor will increase it.

Source: ISA 500 ("Audit Evidence"): the requirement on using information produced by the entity.

This is not an accusation against you but a starting presumption in the standard. Under ISA 240, the auditor proceeds from the presumption that there are risks of material misstatement due to fraud in revenue recognition, and evaluates which types of revenue, transactions or assertions give rise to such risks. This presumption does not depend on whether fraud has been found at the company.

Why revenue in particular? Pressure to overstate or understate revenue — to meet a plan, earn a bonus, keep bank covenants or, conversely, to reduce tax — is common at many companies. And revenue is one of the largest items in almost every set of statements.

Can the presumption be rebutted? It can, but only with grounds. An example of such grounds: the company has a single simple source of revenue. In that case the auditor documents in the working papers why he concluded that there is no risk of fraud in revenue in this situation. A general sentence is not enough.

If this risk is identified, the auditor plans separate audit procedures for revenue that respond to it.

Example (prepared by the author, amounts are illustrative). "Shofirkon pishiriq" LLC does wholesale and retail trade. Management gets a bonus if annual revenue exceeds 5 billion soums. At year-end revenue was 4.96 billion soums, and on 28–31 December wholesale shipments of 70 million soums were recorded, bringing revenue to 5.03 billion soums. The auditor checked the waybills, buyers' signatures and January returns for these shipments: goods worth 45 million soums had been returned in full on 5 January. Excluding them, revenue is 4.985 billion soums and the bonus condition is not met.

Practical tip: prepare in advance a list of shipments, returns and credited invoices at year-end and at the start of the new year — this is exactly what the auditor uses to test cut-off.

Source: ISA 240; Law "On Auditing Activity" (O'RQ-677), Article 9.

No, the absence of a reply is not a confirmation. ISA 505 ("External Confirmations") distinguishes two kinds of request:

That is why the standard allows a negative request to be used as the sole substantive audit procedure only when all four of the following conditions are met together: 1. The risk of material misstatement has been assessed as low and sufficient appropriate evidence has been obtained about the operating effectiveness of the relevant controls. 2. The population consists of a large number of small, homogeneous balances. 3. A very low exception rate is expected. 4. The auditor is not aware of circumstances suggesting that recipients will disregard such requests.

Example (prepared by the author). "Sayxun suv" LLC has 1,200 household customers, each with a debt of 150–400 thousand soums. Settlement controls worked well throughout the year. The auditor sent them negative requests, and sent positive requests to the 5 largest wholesale buyers, because their amounts are large and not homogeneous.

Practical tip: update your database of customer addresses and contact details in advance. A negative request sent to a wrong address proves nothing to the auditor, and he will have to perform additional procedures.

Source: ISA 505 "External Confirmations"; Law "On Auditing Activity" (O'RQ-677), Article 9.

Usually not. Under ISA 570 ("Going Concern"), when evaluating management's assessment of the entity's ability to continue as a going concern, the auditor also considers the period covered by that assessment. The period must be at least twelve months from the date of the financial statements. If management has assessed a shorter period, the auditor asks it to extend it to at least twelve months.

Example (prepared by the author).

The management of "Toshloq mebel" extended the forecast by another 6 months: it prepared a schedule of monthly revenue, salaries, rent and loan payments. It took into account that the loan must be repaid in September 2027, and a cash shortfall appeared in month 9. Management explained in writing that it had started negotiations with the bank on extending the term.

Why does this matter? If there is a material uncertainty related to going concern and it is adequately disclosed in the statements, a separate section appears in the auditor's report; if it is not disclosed, the opinion is modified. The more thorough the assessment, the easier the dialogue with the auditor.

Practical tip: update the 12-month cash flow forecast every December — it is a useful document not only for the auditor but also for the bank and the founders.

Source: ISA 570 "Going Concern"; Law "On Auditing Activity" (O'RQ-677), Article 9.

This section is not a formality. Under ISA 700, it comes in the report directly after the "Opinion" section and contains four statements:

1. That the audit was conducted in accordance with International Standards on Auditing.
2. A reference to the section of the report that describes the auditor's responsibilities under those standards.
3. That the auditor is independent of the entity in accordance with the relevant ethical requirements and has fulfilled his other responsibilities under these requirements.
4. That the auditor believes the evidence obtained is sufficient and appropriate to provide a basis for the opinion.

What can be learned from it:

In Uzbekistan, international standards on auditing are applied as the standards of auditing activity and must be posted on the official website of the authorised body (Law O'RQ-677, Article 9). The texts of ISA 700 and ISA 705 and sample reports are published on the Ministry of Economy and Finance page on gov.uz.

Example (prepared by the author). Dilnoza, a bank credit officer, reading the report on "Arnasoy agro", saw that the section was titled "Basis for Qualified Opinion". This section revealed that depreciation of fixed assets had been under-calculated and that its effect concerned only this item. When reviewing the loan application, Dilnoza separately checked the carrying amount of the equipment offered as collateral.

Source: ISA 700 and ISA 705; Law "On Auditing Activity" (O'RQ-677), Article 9.

ISA 240 ("The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements") gives a clear answer to this question.

To whom and when it is reported: - If the auditor identifies fraud or obtains information indicating that fraud may exist, he communicates this on a timely basis to the appropriate level of management — the persons responsible for preventing and detecting fraud. - If the fraud involves management, employees with significant roles in internal control, or others where the fraud resulted in a material misstatement of the statements, the auditor also communicates on a timely basis with those charged with governance (in an LLC — the founders or the supervisory board).

How this case can be classified: the standard distinguishes two types of fraud — fraudulent financial reporting and misappropriation of assets. The storekeeper's actions fall into the second type.

Example (prepared by the author, amounts are illustrative). During the audit of "Uchqo'rg'on tekstil", the auditor saw that over 3 months 240 boxes of yarn had left the warehouse but there were no sales documents (450,000 soums per box, total 240 × 450,000 = 108,000,000 soums). Since the storekeeper was a key person in inventory control, the auditor reported this in writing both to the director and to the founders' meeting.

Key concept: the primary responsibility for preventing and detecting fraud rests with management and those charged with governance; the auditor is responsible for obtaining reasonable assurance that the statements are free from material misstatement, whether due to fraud or error.

Practical tip: after the auditor's communication, carry out a stocktaking of the warehouse immediately and record the shortage in the accounts in the established manner — it will also come back as a question at the next audit.

Source: ISA 240; Law "On Auditing Activity" (O'RQ-677), Article 9.

A requirement of the standard. The auditor's communication with those charged with governance (in an LLC, usually the founders or the supervisory board) is governed by ISA 260. The standard treats communication as two-way: the auditor provides information, and they in turn tell the auditor about important matters.

What the auditor must communicate:

Form: if, in the auditor's judgement, oral communication of significant findings is not adequate, it is made in writing.

Example (prepared by the author). At "Navro'z Agro" LLC, the auditor told the founders at the start that this year the main risks were livestock accounting and a large bank loan. One of the founders mentioned a plan to sell a branch the following year — this was new information for the auditor, who extended the work on subsequent events. At the final meeting, the auditor shared observations on the approach management had used to value inventories.

Benefit: these meetings are the best opportunity to avoid surprises in the report. The founders can ask questions too.

Source: ISA 260 (Revised); Law "On Auditing Activity" (ZRU-677), Article 9.

Yes. Handling the prior-year comparative figures in the financial statements is governed by ISA 710. If last year's statements were not audited, the auditor states in an "Other Matter" paragraph of the report that the prior-year figures are unaudited.

What this paragraph means and what it does not:

An important point: this paragraph does not release the auditor from checking the opening balances. The current year's statements rely on the opening balances, so the auditor obtains sufficient evidence for them under ISA 510.

Example (prepared by the author). "Tong Logistika" LLC commissioned an audit for the first time at the bank's request. To check the stock of goods at 1 January, the auditor reviewed January sales and purchases, having not attended the count at the start of the year. In the report, an "Other Matter" paragraph stated that the prior-year figures were unaudited.

Practical tip: before the first audit, prepare the stocktake reports at the end of last year and the reconciliation statements with the bank and counterparties — checking the opening balances starts with these.

Source: ISA 710, ISA 510; Law "On Auditing Activity" (ZRU-677), Article 9.

It is different. If a report is prepared on special principles (a special purpose framework) designed for the needs of specific users (here, the grantor), the auditor applies ISA 800. This standard builds on the standards for general purpose reporting (ISA 700) and adds further requirements to them.

The main differences in the report:

This paragraph does not qualify the opinion: it only reminds users of the basis on which the report was prepared.

Example (prepared by the author). The "Yashil Vodiy" farm bought irrigation equipment with a grant. The grantor asked only for a report on money received and spent. The auditor wrote in the report that it had been prepared under the rules of the grant agreement and therefore might not be suitable for another purpose. When the farm wanted to show this report to a bank for a loan, the bank asked for a separate report on the annual financial statements.

Tip: when agreeing the terms of the engagement with the auditor, state in writing which principles the report is prepared under and to whom the auditor's report is issued.

Source: ISA 800 (Revised), ISA 700; Law "On Auditing Activity" (ZRU-677), Article 9.

Yes. An audit of a single financial statement or of a specific element, account or item of a financial statement is governed by ISA 805. If that element is prepared on special principles, ISA 800 also applies.

Features of such an audit:

Example (prepared by the author). "Oltin Don" LLC wants to obtain a credit line secured by its receivables. The bank asked for a report on the balance of account 4010 at 31 December. The auditor sent confirmation letters to major customers for 4010, matched January cash receipts against December debts and checked how the allowance for doubtful debts had been calculated. The materiality level was also set on the basis of the 4010 balance itself.

Practical tip: in such an engagement, do not assume it is enough to "just confirm the balance" — the auditor also looks at how the balance was built up. Prepare an ageing schedule of customer debts in advance.

Source: ISA 805 (Revised), ISA 800; Law "On Auditing Activity" (ZRU-677), Article 9.

The group auditor. Audits of group financial statements are governed by ISA 600 (Revised). Under it, the group auditor is responsible for the direction, supervision and performance of the group audit and for issuing a report appropriate in the circumstances. The fact that a subsidiary is audited by another auditor (in the standard, a component auditor) does not divide this responsibility.

What this means in practice:

Example (prepared by the author). The subsidiary of the "Bek Invest" holding in Namangan is audited by a local audit firm. The group auditor sent it in writing the materiality level and the risks to focus on, then reviewed the part of its working papers dealing with inventories. Additional information was requested on a significant matter at the subsidiary.

Practical tip: at year end, reconcile intra-group sales and debt balances with the subsidiaries in advance — when eliminating intra-group transactions on consolidation, the group auditor asks for exactly these schedules.

Source: ISA 600 (Revised); Law "On Auditing Activity" (ZRU-677), Article 9.

This is the normal procedure. International Standard on Auditing ISA 501 requires the auditor to perform specific procedures on litigation and claims, because claims directly affect liabilities and disclosures in the financial statements. Under Article 9 of the Law "On Auditing Activity" (O'RQ-677), international standards on auditing are the standards of auditing activity in Uzbekistan.

What the auditor does:

What happens if you do not agree? If management does not allow contact with the lawyer, or the lawyer refuses to respond appropriately, and the auditor cannot obtain sufficient evidence by other means, the auditor modifies the audit opinion in accordance with ISA 705.

Example (prepared by the author). A customer has filed a claim against "Bahor Qurilish" LLC for poor-quality work, but there is nothing about it in the accounts. The auditor noticed a payment to a law firm in the records of legal service expenses and asked management for an explanation. A letter was then sent to the lawyer; based on the reply, the company added a note about the claim to the financial statements.

Tip: warn your lawyer in advance — a quick and precise reply to the auditor's letter is in the company's own interest.

Source: ISA 501 (requirements on litigation and claims), ISA 705; Law "On Auditing Activity" (O'RQ-677), Article 9.

These are two different specialists, and the standards treat them differently.

Why does the auditor bring in an expert of their own? Valuing real estate requires expertise in a field other than accounting and auditing. If this valuation is material to the financial statements and the auditor cannot obtain sufficient evidence alone, ISA 620 allows the auditor to use a specialist in that field. Your valuer was hired by the company, so the auditor approaches the valuer's conclusion critically.

Important point: using an auditor's expert does not reduce the auditor's responsibility; the auditor is solely responsible for the audit opinion. That is why, in an unmodified report, the auditor does not refer to the expert (except where the legislation requires it).

Example (prepared by the author). "Samarqand Savdo Markazi" LLC revalued its building; an independent valuer doubled its value. The auditor's expert reviewed the prices of comparable properties and showed that the valuer had taken an overly optimistic expected rental income. Management asked the valuer to recalculate.

Source: ISA 500, ISA 620; Law "On Auditing Activity" (O'RQ-677), Article 9.

Yes. If another organisation processes transactions that are material to your financial statements, from an audit point of view it is a "service organisation", and this situation is governed by ISA 402. Payroll directly affects wage expenses and the balance of 6710.

What the auditor (in the standard, the "user auditor") does:

1. Obtains an understanding of the nature of the service: which transactions the outside firm performs, how data is transferred, which of the company's controls check its work.
2. If unable to obtain a sufficient understanding from the company itself, uses one or more of the following: obtains the service auditor's report (if available); contacts the service organisation through the company; visits its office and performs procedures; has another auditor perform those procedures.
3. If using the service auditor's report, evaluates its adequacy. Such reports come in two types: Type 1 — on the description of controls and their design; Type 2 — in addition, on whether the controls operated effectively throughout the period.

In an unmodified report, the auditor does not refer to the work of the service auditor (except where the legislation requires it); the responsibility remains with the auditor anyway.

Example (prepared by the author). "Navro'z Tikuv" LLC has the payroll for its 140 employees calculated by the outsourcing firm "Hisob Pro". The auditor asked who has access to the "Hisob Pro" software and how timesheet data is sent, then compared the payroll for several months with the timesheets and employment contracts.

Tip: write into the outsourcing contract the service firm's obligation to provide information to the auditor.

Source: ISA 402; Law "On Auditing Activity" (O'RQ-677), Article 9.

It is his job. ISA 250 requires the auditor to consider compliance with laws and regulations in terms of their effect on the financial statements. The standard divides laws into two groups, and the auditor's work differs for each:

At the same time, the standard sets a clear limit: ensuring compliance with laws is the responsibility of management and those charged with governance; the auditor is not expected to detect all breaches.

If the auditor finds a breach or signs of one, the auditor investigates the situation, discusses it with management, assesses the effect on the financial statements and communicates it to those charged with governance. Where the legislation requires it, the auditor also considers reporting to the competent authorities.

Example (prepared by the author). The fact that one of the pharmacies of "Sog'lom Dori" LLC had not met one of the licence conditions came to light from a regulator's letter after the auditor's inquiry. The auditor discussed with management how a possible fine would affect the financial statements and asked them to consider whether a note on it is needed in the financial statements.

Source: ISA 250; Law "On Auditing Activity" (O'RQ-677), Article 9.

This situation is covered by ISA 560. After the date of the report, the auditor is not obliged to perform further audit procedures on the financial statements. But if the auditor becomes aware of a fact that, had it been known at the date of the report, might have caused the auditor to change the report, the auditor must act.

If the financial statements have already been issued, the sequence is as follows:

1. The auditor discusses the matter with management and, where necessary, with those charged with governance.
2. Determines whether the financial statements need amendment; if so, asks how management intends to address the matter.
3. If management amends the financial statements, the auditor performs the necessary procedures, reviews the steps taken by management to ensure that everyone who received the previous financial statements is informed, and issues a new report on the amended financial statements. The new report refers, in an "Emphasis of Matter" or "Other Matter" paragraph, to the note explaining why the financial statements were revised.
4. If management does not take the necessary steps, the auditor notifies management and those charged with governance that the auditor will seek to prevent future reliance on the previous report, and takes appropriate action.

Example (prepared by the author). After the report was issued, it emerged that the finished goods balance in the warehouse had been counted twice in the financial statements of "Oqsaroy Qandolat" LLC. Management prepared amended financial statements and informed the founders and the bank that had received the previous ones. The auditor checked the amendment and issued a newly dated report referring to the note explaining why the financial statements were revised.

Tip: if you find an error, be the first to contact the auditor — fixing the problem is much cheaper than hiding it.

Source: ISA 560; Law "On Auditing Activity" (O'RQ-677), Article 9.

No, in itself it is not an adverse opinion. In Uzbekistan, the International Standards on Auditing are the auditing standards (Law O'RQ-677, Article 9). The going concern issue is governed by ISA 570. Under its logic there are three possible outcomes:

Example (compiled by the author). A large bank loan of "Shoshtepa tekstil" LLC must be repaid a few months after the reporting date. The bank has not yet said whether it will extend it. Management wrote about this openly in the notes and showed a repayment plan. The auditor did not modify the opinion but used a separate section to direct users to that note. Had management hidden this risk, the opinion would have been qualified or adverse.

Tip: if the auditor mentions that such a section may be included, do not hide the risk. State clearly in the note the reason for the uncertainty and management's plan — that is exactly the condition for the opinion not being modified.

About the new version: the IAASB has adopted ISA 570 (Revised 2024), which applies to audits of periods beginning on or after 15 December 2026. Under it, the auditor gives an explicit conclusion in the report on two matters: whether the use of the going concern basis is appropriate and whether a material uncertainty exists.

Sources: Law O'RQ-677 "On Auditing Activity", Article 9; IAASB, questions and answers on ISA 570 (Revised 2024) (English version): https://incp.org.co/wp-content/uploads/2025/05/Preguntas-frecuentes-NIA-570-Revisada-2024-ingles.pdf; AUASB, going concern decision flowchart: https://www.auasb.gov.au/admin/file/content102/c3/May_20_5.2_flowchart.pdf

Because transactions with related parties are governed separately by ISA 550. In such transactions the price may differ from market terms, or management's interests may get mixed in.

The standard gives the auditor the following tasks:

• To understand the entity's related party relationships and transactions, whether or not the applicable financial reporting framework establishes related party requirements (ISA 550, objectives of the auditor).
• To treat identified significant related party transactions outside the entity's normal course of business as giving rise to significant risks (IAASB project page).
• To evaluate whether such transactions have been authorised and approved by management or those charged with governance, as well as the business rationale for the transaction (ACCA overview).

Example (compiled by the author). "Yashil vodiy agro" LLC bought a packaging line for 900 million soums from a firm owned by its founder. The company normally obtains such equipment from leasing companies, so the transaction is unusual. The auditor asked for: the decision of the founders' meeting, price offers from other suppliers, the contract and payment documents. He also checked whether the transaction was disclosed in the notes to the statements.

Tip: maintain a list of related parties throughout the year, and for each large transaction prepare a written answer in advance to the question "why this partner, why this price".

Sources: Law O'RQ-677, Article 9; IAASB, ISA 550 project: https://www.iaasb.org/consultations-projects/related-parties-isa-550; text of ISA 550 (UK version): https://media.frc.org.uk/documents/ISA_UK_550_Updated_September_2025.pdf; ACCA article: https://accaglobal.com/an/en/member/discover/cpd-articles/audit-assurance/related-parties.html

No, he did not. Reporting key audit matters is governed by ISA 701. This standard applies above all to audits of complete sets of general purpose financial statements of listed entities (whose shares or debt securities are quoted on a stock exchange). For other entities, the section appears in two cases: if the law requires it or if the auditor decides to include it voluntarily.

Key audit matters are selected from the matters the auditor discussed with those charged with governance. They are the matters that, in the auditor's professional judgement, were of most significance in the audit of the current period.

Another important limitation: this section is not a substitute for modifying the opinion. If the statements contain a material misstatement, the auditor cannot simply describe it as a "key matter" — he must modify the opinion under ISA 705.

Example (compiled by the author). The report on listed "Qizilqum sement" JSC describes two matters: revenue recognition on long-term contracts and the valuation of obsolete inventories. For each, the auditor wrote why he considered the matter significant and how he tested it. For the small "Sadaf servis" LLC, the report has the standard structure — without such a section.

Sources: Law O'RQ-677, Article 9; IAASB, ISA 701: https://iaasb.org/publications/international-standard-auditing-isa-701-new-communicating-key-audit-matters-independent-auditors; text of ISA 701: https://www.iaasb.org/system/files/publications/files/ISA-701_2.pdf

The auditor reads this text but does not express an opinion on it. ISA 720 (Revised) calls such information "other information": financial or non-financial information included in the annual report, other than the financial statements and the auditor's report.

What the auditor does:

• Reads the other information and considers whether there is a material inconsistency between it and the financial statements or the knowledge obtained in the audit.
• If an inconsistency is found, determines what needs to be corrected: the financial statements or the other information.
• The report includes an "Other information" section. It states that the auditor's opinion on the financial statements does not cover the other information. A material inconsistency not corrected by management is described in this section.

Example (compiled by the author). In the statement of financial results of "Charxpalak savdo" LLC, net revenue rose from 800 million soums to 944 million soums: 944 / 800 = 1.18, i.e. 18% growth. The manager's text, however, says "revenue grew by 25%". The auditor flagged this as an inconsistency. If management does not correct the text, this will be stated in the "Other information" section of the report.

Tip: before publication, check every figure in management's text against the lines of the financial statements.

Sources: Law O'RQ-677, Article 9; text of ISA 720 (Revised): https://www.ifac.org/system/files/publications/files/ISA-720-(Revised).pdf; IFAC overview: https://www.ifac.org/system/files/publications/files/ISA-720-(Revised)-At-A-Glance.pdf

Partly, yes, but there are conditions. This is governed by ISA 610 (Revised 2013).

1. Evaluation first. The external auditor evaluates three features of the internal audit function: its objectivity, competence, and systematic and disciplined approach. If any one of them is lacking, the internal audit work is not used.

1. Extent. The more professional judgement the work requires, the higher the risk of material misstatement, and the lower the function's objectivity and competence, the less the external auditor uses its work and the more he does himself.

1. Responsibility. The external auditor has sole responsibility for the audit opinion. Using the internal audit work does not reduce that responsibility.

1. Testing and documentation. The external auditor evaluates the work he plans to use, performs audit procedures on it himself, and then records his conclusions on that work in the working papers.

Example (compiled by the author). The internal audit of "Mehrigiyo farm" LLC reports to the supervisory board and carries out warehouse counts under a written programme. Having evaluated this work, the external auditor reduced his own counts at low-risk warehouses. The cash desk, being a high-risk area, he tested in full himself.

Tip: keep the internal audit programme, working papers and reports in good order — the more the external auditor can rely on them, the faster the audit goes.

Sources: Law O'RQ-677, Article 9; IAASB, ISA 610 (Revised 2013): https://www.iaasb.org/publications/isa-610-revised-2013-using-work-internal-auditors-0; text of the standard: https://www.ifac.org/system/files/publications/files/ISA-610-%28Revised-2013%29.pdf

It has a very large effect. Audit risk is the probability that the auditor expresses an inappropriate opinion when the statements contain a material misstatement. In audit practice it is assessed by splitting it into three components:

The logic is simple: the auditor must keep overall audit risk at a low level. If the first two risks are high, he reduces the third, i.e. performs more and more reliable substantive procedures.

Example (prepared by the author). "Guliston savdo" LLC:

Note: control risk is assessed as "low" only after tests of controls have shown that it actually works. A procedure on paper is not enough.

Conclusion for the company: segregation of duties and documenting every control can shorten the auditor's work. The application of international standards on auditing in auditing activity is established by Article 9 of the Law "On Auditing Activity" (O'RQ-677).

Because each direction answers a different question and finds a different type of error:

Key point: the first direction alone will never find an unrecorded transaction, because it is not in the register at all. To find it, you have to start from a source outside the register — waybills, the warehouse log.

Example (prepared by the author, hypothetical figures). At "Nurafshon un" LLC the auditor compared several entries in 9020 with their documents — all matched. Then he looked for the waybills from the warehouse issue log among the sales entries and found that one shipment of 8,400,000 soums had not been recorded: the goods had gone to the buyer, but no invoice had been issued.

Correction (NAS No. 21): revenue Dt 4010 – Ct 9020 (paragraph 174, line 1), VAT Dt 4010 – Ct 6410 (paragraph 275, line 2), cost of goods sold Dt 9120 – Ct 2910 (paragraph 154, line 13).

Tip for the company: number waybills consecutively and reconcile warehouse issues with sales entries at the end of every month. A "gap" in the sequence or a waybill not linked to a sale will be visible to you before the auditor sees it.

Yes, they can. The auditor collects the errors found and not corrected in one table and compares their combined effect on the statements with the materiality level. A user of the statements sees not an individual error but the sum of all of them.

Example (prepared by the author, hypothetical figures). In the audit of "Qorasuv metall" LLC the auditor set materiality at 20,000,000 soums (this is the auditor's professional judgement).

Each is less than 20,000,000 soums, but the total of 24,000,000 soums exceeds materiality. In addition, all three errors go in the same direction — towards overstating profit — which is also a sign the auditor pays attention to.

Depending on management's decision, the opinion may be as follows:

Note: if only the 9,000,000-soum error is corrected, the remaining 15,000,000 soums, although below materiality, is quite close to it. The auditor also takes into account the probability that next to such an amount there may be an undetected error. So the closer the amount is to materiality, the more cautious he is.

Tip: ask the auditor for the schedule of uncorrected misstatements and correct the easy ones before the statements are submitted.

No, this is a normal part of an audit. Entries that come in automatically from an invoice or a bank statement are linked to a document. A manually entered journal entry, however, depends on someone's decision and is the most convenient way to artificially alter the statements. The risk of management overriding controls exists in every company, so the auditor examines such entries separately.

The auditor usually looks at the following signs:

Example (prepared by the author, hypothetical figures). At "Oqqo'rg'on savdo" LLC, on the evening of 31 December, a journal entry Dt 4010 – Ct 9020 for 30,000,000 soums was entered manually with the description "correction", with no supporting document. On 10 January exactly the same amount was reversed. The auditor asks whether there was a shipment behind this entry. If there is no waybill, the year's sales and profit are overstated by 30,000,000 soums, and this must be corrected within the reporting year itself.

Tip for the company: attach a supporting document or an accounting memo to every manually entered journal entry. Let the software show who entered it and who approved it.

Cash is the asset most easily lost. If a count is announced in advance, any shortage could be temporarily made up from other money. A surprise count shows the real situation in the cash desk.

A count usually goes like this: the cashier counts the money in front of the auditor; the result is compared with the balance in the cash book; it is checked whether all receipt and disbursement orders up to the time of the count have been recorded. If the company has several cash desks, they are counted at the same time — otherwise a shortage could be hidden by moving money from one cash desk to another.

Example (prepared by the author, hypothetical figures). "Bahor dorixonasi" LLC:

Calculation: 3,200,000 + 1,450,000 − 600,000 = 4,050,000; 4,050,000 − 3,850,000 = 200,000 soums.

The cashier explained the difference as 200,000 soums given to an employee without an order; there is only an IOU in the cash desk. The auditor records this as an internal control deficiency: cash was paid out without a cash disbursement voucher. If the amount is not returned and the cashier is found to be at fault, the shortage is recorded with Dt 4730 – Ct 5010 (NAS No. 21, paragraph 206, line 10).

To be ready: close the cash book every day, document every receipt and disbursement with an order, and do not keep in the cash desk money that does not belong to the company or IOUs that have not been turned into orders.

Both are modified opinions, and they are governed by ISA 705. Under Article 9 of the Law "On Auditing Activity" (ZRU-677), international standards on auditing are the standards of auditing activity, so an auditor in Uzbekistan also relies on this logic.

The choice depends on two questions:

• Is the misstatement material? If it is not material, the opinion is not modified.
• Is the material misstatement pervasive? That is, is it not confined to one or two items, but affects a large part of the statements, or does it touch information that is fundamental to users' understanding of the statements?

Example (compiled by the author, hypothetical figures). The auditor set materiality for "Bog'ishamol tekstil" at 20,000,000 soums. Obsolete fabric in the warehouse is overstated by 60,000,000 soums; other items are correct. The misstatement is material (60 million > 20 million), but it only affects inventory and profit, so the opinion is qualified. If at another company a large part of revenue from core activities was recognised in the wrong period, and this distorted almost every figure — revenue, receivables, profit, tax — it would be a pervasive misstatement and would lead to an adverse opinion.

In both cases, the basis for the modification is explained in a separate section after the opinion section of the report. The best course, however, is not to let it reach that section: correct the misstatement found by the auditor in the statements before the report is signed.

When management restricts the auditor's work, this is called a limitation on the scope of the audit. Under the logic of ISA 705, the auditor first asks management to remove the limitation. If management does not agree, the auditor informs those charged with governance (for example, the supervisory board) and tries to obtain the evidence by alternative means.

If the alternative means also fail, there is no sufficient appropriate evidence. The report is then chosen depending on how large the effect could be:

Note the difference: in an adverse opinion the auditor has gathered evidence and seen the misstatement; in a disclaimer of opinion, he does not have sufficient evidence to reach a conclusion at all.

Example (compiled by the author, hypothetical figures). In the audit of "Oltin kalit qurilish", the director did not provide the settlement documents with one contractor; the payable to this contractor is 45,000,000 soums, and materiality is 30,000,000 soums. The effect could be material but is confined to one item: a qualified opinion. In another case, if the director did not provide any bank statements or main contracts, cash, receivables, payables and revenue would all remain unchecked: this could lead to a disclaimer of opinion.

Practical conclusion: hiding documents costs the company dearly. When a user of the statements (a bank, investor, founder) sees that no opinion was expressed in the report, they cannot make decisions relying on the statements. If you think a document should not be provided, it is better to discuss it openly with the auditor in advance.

No. Both are additional paragraphs set out in ISA 706, and neither changes the auditor's opinion, but they draw attention to different things.

Example (compiled by the author). This year "Charxpalak mebel" changed auditors. Last year's statements were audited by another auditor. In the "Other Matter" paragraph of his report, the new auditor writes that the comparative figures were audited by another auditor and what opinion that auditor expressed. This information is not in the statements themselves, but it helps the user understand the limits of the audit.

If a fire broke out in the same company's warehouse and the company disclosed the loss in detail in the notes, the auditor may add an "Emphasis of Matter" paragraph to draw the reader's attention to that very note.

Remember: something in the statements — emphasis of matter; something not in the statements but worth knowing about the audit — other matter.

Under the logic of ISA 700, the auditor's report is not dated earlier than the date on which the auditor obtained sufficient appropriate evidence on which to base his opinion. This evidence includes two things:

• that all the forms making up the statements, including the notes, have been fully prepared;
• that the authorised persons (management) have confirmed that they take responsibility for the statements.

In other words, the day the auditor's work at the office ends is not yet the report date. Until management finalises and approves the statements, the statements on which the auditor is expressing an opinion are not yet ready.

Example (compiled by the author, hypothetical dates).

Why does the date matter? The report date shows up to which day the auditor has taken events into account. For example, if a major customer of "Sharq nur savdo" goes bankrupt on 3 March, this happened before 12 March, so the auditor must examine it and see that it is properly reflected in the statements.

Practical tip: do not delay giving the auditor the final statements and notes. The longer the report date is pushed back, the longer the period the auditor has to monitor.

An auditor often checks a sample rather than every document. The logic of drawing conclusions from a sample is that a misstatement found in the sample may exist in a similar proportion in the whole population. So the auditor evaluates not the misstatement found as such, but its amount projected (extrapolated) to the whole population.

One simple method: find the misstatement's share of the sample amount and multiply it by the population amount.

Example (compiled by the author, hypothetical figures). The sales invoices of "Zilol suv" LLC for the year total 900,000,000 soums. The auditor selected 40 of them worth 80,000,000 soums and found overstated revenue totalling 1,200,000 soums in 2 of them.

The misstatement found is only 1.2 million soums, but the projection is 13.5 million soums, which exceeds materiality. In such a case the auditor usually extends the testing, identifies the cause of the misstatement (for example, whether it relates to one manager or one month), or asks management to check the whole population and make corrections.

Important point: if the misstatement is not random but has a single cause (for example, only in December documents), the auditor may confine the analysis to that part. That is why being able to explain the cause quickly when a misstatement is found serves the company's interests.

If an uncorrected misstatement remains material, the auditor may modify the opinion (issue a qualified or adverse opinion).

Under Article 9 of the Law "On Auditing Activity" (25 February 2021, O'RQ-677), international standards on auditing are the standards of auditing activity. They must be posted on the official website of the authorised body. The procedure for recognising and applying them is set by Cabinet of Ministers Resolution No. 171 of 11 April 2022.

In practice, the page of the Ministry of Economy and Finance on gov.uz (gov.uz/oz/imv/sections/view/111620) contains standards No. 700 and No. 705, which relate to the auditor's report, as well as model auditor's reports. You can ask the auditor to clarify which standard the report is based on.

Example: the director of "Zamin agro" saw the phrase "modified opinion" in the auditor's report and wanted to know what it meant. The accountant found standard No. 705 and the model reports on the ministry's page and went through them together with the director.

For an auditor, not all evidence carries the same weight. The general rule: evidence obtained directly from an independent source outside the company is more reliable than a document the company prepared itself; an original document is more reliable than a copy; and what the auditor has observed or recalculated personally is more reliable than an oral explanation.

That is why the auditor may confirm the bank balance not only from the bank statement but with the bank itself, and accounts receivable with the customers. An oral answer from the director or the accountant alone (an inquiry) is usually not sufficient evidence on its own; it is corroborated by other procedures.

Example: the balance sheet of "Pista bog'" shows accounts receivable of 40 000 000 soum from "Kamalak savdo". A copy of the reconciliation statement prepared by the company shows the same amount. The auditor, however, sends a letter directly to "Kamalak savdo" asking it to confirm the balance: if the reply matches, this is the strongest evidence.

This is a test of the correct separation of periods (cut-off). At year-end the risk of a transaction being recorded in the wrong year is highest: if goods shipped in January are added to December revenue, the previous year's income is overstated; if a December purchase is shifted to January, expenses and liabilities look smaller.

The auditor selects documents from both sides of the year boundary and, for each one, compares the actual date of shipment or receipt with the date of the accounting entry. If the dates do not match, it is an error, and depending on materiality a correction is proposed.

Example: on 30 December "Andijon g'isht" issued an invoice for bricks worth 120 000 000 soum, but according to the waybill and the warehouse document the truck left on 3 January. The auditor establishes that this amount is January income and that December revenue was overstated by 120 000 000 soum.

It looks convenient, but the audit loses its meaning. The value of an audit lies in the auditor's independence: the auditor looks at the statements with an outsider's eye. If the statements were prepared by the same firm, the auditor is in effect checking its own work and has no interest in finding its own mistakes. This is called the "self-review" threat.

That is why, in the auditing profession, providing both bookkeeping and audit services to the same client is regarded as a serious threat to independence. Before agreeing to such an arrangement, ask the audit organisation in writing how this issue is resolved under the current standards and rules of auditing activity. For users of the statements (banks, investors, founders), the auditor's independence is also the basis of trust in the report.

Example: "Mustahkam beton" submitted an auditor's report for a bank loan. If the bank learns that the firm that issued the report also keeps the company's books, its trust in the report falls and it may demand an additional review. It is better to entrust bookkeeping and the audit to different firms.

This is the written agreement of the terms of the audit engagement: an answer in advance to the question of who is responsible for what. It sets out beforehand what the audit will cover and what each party is responsible for.

The most important point: management is responsible for preparing the financial statements and for internal control, while the auditor only expresses an opinion on the statements. If this is not written down in advance, a misunderstanding arises later along the lines of "the auditor did not find the error, so the auditor is to blame".

Example: the director of "Oltin vodiy" expected the auditor to carry out the inventory count as part of the audit. Because the terms of the engagement stated that the count would be carried out by the company's committee and that the auditor would attend it as an observer, the parties reached agreement before work began.

NAS No. 16 defines events after the balance sheet date as events, favourable and unfavourable to the company, that occur between the balance sheet date and the date on which the statements are authorised for publication (paragraph 4). They are divided into two types (paragraph 5): events that existed at the balance sheet date and occur in the future, and events that did not exist at the balance sheet date and occur in the future.

A customer's bankruptcy often shows that its financial position was already poor at the balance sheet date; if so, it is assessed as belonging to the first type and affects the measurement of accounts receivable. During this period the auditor asks about new information and reviews meeting minutes and transactions at the start of the new year.

Example: the 31 December balance sheet of "Sharq oyna" shows a receivable of 70 000 000 soum from "Yorqin uy". In February "Yorqin uy" was declared bankrupt, and it emerged that its payments had stopped back in November. The auditor points out that the receivable may be overstated on the balance sheet and asks for the allowance for doubtful debts to be reconsidered.

Yes. The first is a test of controls: the auditor checks that a control in the company (for example, the director signing every payment) actually operated throughout the year. The second is a substantive procedure: it checks that the amount itself is correct, supported by a document and recorded in the right account.

The two are linked. If controls work well, the auditor can test fewer amounts. If controls do not work or do not exist at all, the extent of substantive procedures increases. However, substantive procedures for material amounts are performed anyway, however good the controls are.

Example: at "Bog'bon agro" every payment order goes out with two signatures, the director's and the chief accountant's. The auditor checked that both signatures were present on 25 randomly selected payments (test of controls). Then the auditor compared the 10 largest payments with the contracts and acceptance certificates (substantive procedure).

The opening balances of the current year are the closing balances of the previous year. If they are wrong, the current year's result is also distorted: for example, if the opening warehouse balance is overstated, the current year's cost of sales also comes out overstated. That is why the new auditor must obtain assurance that these balances do not materially misstate the current year's statements.

To do this, the auditor reads last year's report and statements, may, with the client's permission, review the previous auditor's working papers, and tests the opening balances through current-year transactions (for example, by checking that the opening accounts receivable were collected in January–February).

Example: the opening balance of 4010 at "Toshkent qog'oz" was 90 000 000 soum. The new auditor saw that 85 000 000 soum of this amount was received in the bank in the first quarter, and requested confirmation from the customer for the remaining 5 000 000 soum.

Amounts such as allowances, useful lives and warranty costs are not exact calculations but management estimates. Such estimates carry a high risk of error or deliberate "adjustment", so the auditor tests them with particular attention.

The auditor checks what method and data management used to arrive at the estimate, recalculates it independently if necessary and compares the result, looks at events after the balance sheet date (for example, whether a debt was paid at the start of the year), and also reviews how accurate last year's estimates turned out to be. You will need a written description of the method, an ageing schedule of receivables and a note on each major debtor.

Example: "Ko'kcha savdo" created an allowance of 12 000 000 soum. The auditor broke down the receivables by age: debts overdue by more than 180 days amounted to 30 000 000 soum, and for one of them the customer had ceased operations. Also taking into account that almost all of the allowance created last year had been used, the auditor discussed with management that the allowance was insufficient.

No, this is professional scepticism: the auditor approaches every piece of evidence with a questioning mind and pays attention to contradictory information and to the reliability of documents. The auditor does not assume that management is dishonest, but neither does the auditor conclude, on the basis of past experience, that "everything here is probably fine".

Professional scepticism is heightened especially for unusual transactions, large year-end entries and management estimates. This is also in the client's interest: the more thorough the audit, the greater the trust that banks and investors place in the report.

Example: the chief accountant of "Ravon transport" said that services worth 200 000 000 soum had been provided to a new customer on 31 December. The auditor did not look only at the invoice but also asked for the service acceptance certificate, the contract and whether payment had been received from the customer. In January it emerged that this transaction had been cancelled.

Under Article 9 of the Law "On Auditing Activity" (25 February 2021, No. O'RQ-677), International Standards on Auditing are the standards of auditing activity. They must be posted on the official website of the authorized body.

The procedure for recognizing and applying the standards is set by Resolution No. 171 of the Cabinet of Ministers dated 11 April 2022. The page of the Ministry of Economy and Finance on gov.uz contains ISA 700 and ISA 705 as well as model auditor's reports.

Practical tip: a manager choosing an audit firm should have the contract state which standards the audit will be conducted under. For example, when the director of "Chorsu tekstil" receives the text of the report, they can compare it with the structure of the model report on the ministry's page.

Audit risk is the risk that the auditor expresses a clean opinion even though the statements contain a material misstatement. In the classic audit model it is broken down into three components:

1. Inherent risk: the susceptibility of the statement item itself to error. For example, where a lot of cash circulates, the likelihood of errors and theft is high.
2. Control risk: the risk that the company's internal control will not catch this error in time.
3. Detection risk: the risk that the auditor's own procedures will fail to find the error.

The auditor cannot influence the first two, only assess them. The third is managed by changing the extent of testing. Example: at "Gulzor restoran", cash controls are weak (control risk is high), so the auditor tests revenue against more documents and more days, that is, lowers detection risk.

Materiality is the threshold above which a misstatement or omission in the statements could influence users' decisions. The auditor sets this threshold using professional judgment, taking into account the size of the company and the users of the statements.

Materiality is used in two places. In planning: to choose which items to examine in more depth. At completion: to accumulate the misstatements found and assess whether their combined effect is material. Even if each small misstatement is not material on its own, together they may turn out to be material.

Example: in the audit of "Yashil vodiy", the auditor set materiality at 40 000 000 soum. The auditor found 3 misstatements: 6, 9 and 30 mln soum. Individually none exceeds the threshold, but together they total 45 mln soum. Therefore the auditor asks management to correct them.

These are analytical procedures. The auditor looks at the relationships between financial indicators, with each other and over periods: comparing them with last year, with the budget or with the auditor's own expectation. If an unexpected difference appears, that area is examined in more depth.

The method is cheap and fast: before opening hundreds of documents, it gives a map of "where problems might be". But it does not fully replace evidence: the cause of a difference must still be confirmed with documents.

Example: at the "Mevazor" shop, gross profit was 25 percent of revenue last year and 38 percent this year, while prices hardly changed. The auditor asks: has the cost of goods sold been recorded in full? The testing reveals that the cost of one batch at the end of the month was not written off.

Working papers are the "back side" of the auditor's report. They record what was tested, what sample was taken, what evidence was gathered and what conclusion was reached. Every opinion in the report relies on these papers.

They serve three purposes: the work is reviewed by a supervisor (the engagement leader); next year's audit can be planned faster; and if a question arises about the report, the auditor can prove the work done. A test that is not documented is, in practice, regarded as a test that was not performed.

Example: in the audit of "Shodlik qurilish", the assistant auditor Zarina examined 25 waybills but did not record which ones she selected. The engagement leader does not accept the work: the sample list, the differences found and the conclusion must be written up on a sheet.

No. The auditor obtains "reasonable assurance" that the financial statements are free of material misstatement (including misstatement due to fraud), not an absolute guarantee. This is stated clearly in the International Standards on Auditing, in particular ISA 240, which deals with fraud.

The primary responsibility for preventing and detecting fraud lies with the company's management and those charged with governance. The auditor tests on a sample basis, and collusion or forged documents can sometimes escape even the most careful audit.

So do not leave internal control to the auditor: split duties involving money between different employees and take stock regularly.

This is the management representation letter (written representations). In it, management acknowledges its responsibility for preparing the financial statements and confirms that the auditor has been given all the necessary information and documents. This requirement is set out in ISA 580.

The letter is one piece of audit evidence, but it does not replace other evidence. For example, even if the director writes that "the goods in the warehouse are complete", the auditor will still check the results of the stocktake.

If management refuses to provide such a letter, this is a serious matter and may affect the audit opinion.

No. Such a paragraph does not change the auditor's opinion. The auditor simply draws attention to an important matter that is properly disclosed in the financial statements but that the reader really needs to know about. This is governed by ISA 706.

Example: there was a fire in the warehouse of "Oqsoy tekstil", and it is fully described in the notes. The auditor gives an unmodified opinion but, in a separate paragraph, asks readers to note the information about the fire in the notes.

A qualified opinion is different: in it, the auditor states that the statements contain a material misstatement or that sufficient evidence could not be obtained. You can tell the difference from the wording in the "Opinion" section.

Legal basis: under Article 9 of the Law "On Auditing Activity" (25 February 2021, No. ZRU-677), the International Standards on Auditing are the auditing standards in Uzbekistan. ISA 700 and ISA 705 on forming an opinion and reporting, together with model auditor's reports, are published on the official page of the Ministry of Economy and Finance.

Yes, if inventories are material to the financial statements. Under ISA 501, the auditor attends the physical inventory count in person, unless it is impracticable. The auditor does not count everything but observes how the count team works and recounts a few items selected on a test basis.

The auditor checks in two directions: whether items on the count list really are in the warehouse, and whether items in the warehouse are included in the list. Damaged or obsolete goods also get attention.

Example: at the "Yashil vodiy" trading house, the auditor picked 15 items from the list and counted them on the shelves, then took 15 items from the shelves and looked for them in the list. So agree the stocktake date with the auditor in advance.

No. The financial statements are prepared by the company, and management is responsible for them. The auditor is an independent examiner: if the auditor corrected the statements, they would be auditing their own work.

Under ISA 450, the auditor accumulates the misstatements identified, communicates them to management and requests that they be corrected. The accountant posts correcting entries and the statements are updated.

If management refuses to correct a material misstatement, the auditor takes this into account in the report: the result may be a qualified or adverse opinion.