10. Audit Completion Flashcards
Completion: 2 checks during (partner) FS review
- Compliance check
- Sense check
Completion: FS review: Compliance check: Compliance with what?
With CA
Checklist should be used
Completion: FS review: Sense check
Do the FS make sense?
Completion: FS review: Sense check: What should be used?
Analytical procedures
Completion: FS review: Sense check: What APs shold be used?
-
Interpretation
Review the financial statements considering absolute figures and ratios -
Investigation
Unusual movements or numbers should have been identified as audit risks so the answers to questions should be in the audit working papers -
Corroboration
If answers cannot be found in the working papers then further work is required.
OBT: How are misstatements dealt with as a whole?
Accumulated
What should the auditor do with the misstatements?
- Inform management
- Reassess materiality
- Determine whether uncorrected misstatements are material, individually or in aggregate
- Seek written management representations to confirm that the effect of uncorrected misstatements is immaterial.
Can non-compulsory information contribute to material misstatement? (e.g. climate)
Yes (by nature)
OBT: Procedures if auditor didn’t audit prior year FS
- Agree brought forward figures to last year’s financial statements
- Assess accounting policies have been appropriately applied to opening balances
- Perform at least one of the following:
a. review the previous auditor’s working papers
b. consider whether this year’s audit tests provide evidence over opening balances
c. perform specific procedures on opening balances.
What to do if last year’s financial statements contained a misstatement and the matter was unresolved?
Consider the need to modify this year’s audit opinion
When are FS not prepared on going concern basis?
Management intends to liquidate the company or to cease operations, or has no realistic alternative but to do so
Going concern: What should Ado if less then one year has been considered by mgmgt?
Ask to be extended
Should the A consider going concern at all stages of audit?
Yes
Going concern issues: Acceptance
Clients who are unlikely to continue in business will be classed as high risk and the firm must consider carefully if they wish to commit to such work
Climate issues affecting going concern examples
Bans on types of technology or energy used
An adverse weather event
Climate-related litigation changes.
Do auditors sign off the audit report some time after the accounting date?
Yes
So subsequent events should be considered
The 2 types of subsequent event
- Adjusting
- Non-adjusting
Going concern: Process for: Adjusting events
E.g.
Resolution of a court case
Major customer enters liquidation
Evidence of the NRV of inventory
Discovery of fraud or error
- Provide evidence of conditions existing at the date of the financial statements
- Adjust FS
Going concern: Process for: Non-adjusting events
E.g.
Destruction of an asset by fire
Dividends declared after the year end
Announcement of plan to close part of the business
- Provide evidence of conditions arising after the date of the financial statements
- If material, disclose event
(ONLY if going concern status
affected)
Does the auditor have an active duty to carry out audit procedures to identify events that require adjustment or disclosure in the financial statements?
Yes
Mgmnt representations all subsequent events adjusted/disclosed
Does the A have to react to an event after sign-off?
Yes
If requires adjustment/disclosure
Should discuss with mgmnt and they should adjust if necessary
Post sign-off events not amended by management?
Consider withdrawing audit report
A wants to withdraw audit report and mgmnt continue distributing FS: What to do?
Take action. E.g.
- Seeking legal advice
- Using the right to speak at the AGM
- Considering resignation and calling an EGM
When should the letter of rep be signed by directors?
BEFORE audit rpeort signed
