Audit Completion

Question 1

How can an auditor determine whether disclosures have been properly made?

Answer 1

Use a checklist of disclosures

Question 1

What are the 2 main steps in a financial statements review?

Answer 1

1. Do the FS comply with CA06 and accounting standards?
2. Do the financial statements make sense?

Question 2

How can an auditor check that the FS makes sense?
IIC

Answer 2

Use APs for:
Interpretation - FS reviewed, considering absolute figures and ratios
Investigation - unusual movements / numbers identified as audit risk, answers documented in WPs
Corroboration - can’s find answers? Further work required.

Question 3

The auditor should accumulate misstatements identified during the audit and:
IRDS

Answer 3

Inform management
Reassess materiality
Determine whether uncorrected misstatements are, individually / aggregate
Seek WR from management to confirm the effect of uncorrected misstatements is immaterial

Question 4

Should non-compulsory information be disclosed in the Financial statements E.g. Sustainability

Answer 4

Information important to a user’s understanding should be considered if it contributes to MM

Question 5

What does an ‘Overall FS Review’ consist of? (3)

SDS

Audit Completion
ISA 520

Answer 5

Need to confirm that…
1. Sufficient / appropriate evidence collected.
2. Do the FS make sense, considered effects?
3. Summarise all findings in audit completion memorandum.

Question 6

What does auditing the ‘Summary of unadjusted misstatements’ consist of? (4)

CRIW

Audit Completion
ISA 450

Answer 6

The auditor needs to:
Consider if sum of uncorrected IM are Material.
Reassess materiality if necessary.
Inform management of all errors found unless < trivial.
WR to confirm communicated.

Question 7

What does ‘Auditing Opening Balances’ consist of? (3)

Audit Completion
ISA 510

Answer 7

1. Agree b/f figures to PY FS.
2. Assess AC policies applied to op balances.
3. Perform:
   - Review previous auditor’s WP
   - CY APs provide evidence over op balances?
   - Perform procedures on op balances.

Question 8

What does auditing ‘Comparatives’ (for an existing client) consist of?
CAM

Audit Completion
ISA 710

Answer 8

Confirm the comparative numbers have been b/f correctly.

Auditor must obtain sufficient, appropriate evidence that the comparative numbers are true and fair.

Misstatement in PY FS + matter unresolved = consider modifying CY audit opinion

Question 9

What does auditing ‘Going Concern’ consist of? (2)

Audit Completion
ISA 570
A3 checklist of factors
A16 procedures

Answer 9

Look for factors which indicate the business runs out of cash or not be a viable business.

Audit cash flow forecasts, Inspect receipt / payments, consider reasonableness

Question 10

Why is GC a key audit risk area?

ISA 570
A16, Procedures

Answer 10

Potential GC issues should be disclosed in the FS.
If company is likely not a GC, accounts should be prepared on a BUB

Question 11

What does auditing ‘Subsequent events’ consist of?

DDP

Audit Completion
ISA 560, A8, A9

Answer 11

Subsequent events after audit report signed off, before AGM?
Discuss with management
Determine if amendment needed
Perform AP on change

Amendment required, FS not issued > ask to amend before sending.
Amendment required, FS issued > send out amended version.

Question 12

If management refuse to speak at AGM, what should you do as the auditor?

Subsequent events

Answer 12

Resign and seek legal advice.

Question 13

What does ‘Written Representation’ in Audit Completion consist of?

ISA 580

Answer 13

Finalize WR letter for matters where evidence obtained is persuasive but not conclusive.

E.g. Auditors draft letter listing judgmental issues, directors sign off before audit report is signed.

Question 14

What does ‘Communicate deficiencies in IC’ in Audit Completion consist of? (2)

ISA 265

Answer 14

Control deficiencies found communicated to management in timely manner.

Communication: Clear, understandable, focus on impact of the business.

Question 15

What happens when the auditor has to report on the deficiencies in ICs to those charged with Governance?

Answer 15

Report deficiencies to management in a management letter.

Focus on implications for the business not the audit.

Question 16

What ‘Consequences’ should be included in the management letter?

Answer 16

Explain what could go wrong for the business:
Falling revenue, profits, reputations, poor cash flow.

Question 17

What ‘Recommendations’ should be included in the management letter?

ISA 315, A96

Answer 17

Good control activities:
Physical controls, Authorization, Information processing, Reviews / Reconciliations, Segregation of duties

General control activities:
Training, Discipline, Recommunication of policies

Question 18

What should the Auditor consider / do regarding GC at the ‘Evidence stage’ of the Audit? (2)

Answer 18

Make enquiries of management, management bias.
Procedures: Review:
- future plans, financial forecasts, projections, latest management accounts.
- board minutes / meetings
- borrowing facilities / other finance

Question 19

How can sustainability influence a business’s GC status? (2)

Answer 19

1. Lack of natural resources > supply chain disruption.
2. New legislation > tricky to implement.

Question 20

What is an Adjusting event and what is the effect on the FS?

Subsequent events

Answer 20

An adjusting event provides evidence of conditions that existed at date of FS.
The FS should be adjusted.

Question 21

What is an Non-adjusting event and what is the effect on the FS?

Subsequent events

Answer 21

Non-adjusting events provide evidence that arose after the date of the FS.
If material, event disclosed
(adjust if GC is affected}

Question 22

What is the audit response to subsequent events being between YE and audit report sign-off?

(2)

Answer 22

Active duty:
Perform procedures to identify events that require adjs / disclosures.
WR that all subsequent events adj / disclosed.

Question 23

What is the audit response to subsequent events being AFTER sign-off of audit report?

Answer 23

Passive duty:
No obligation to perform procedures but must discuss with management / take appropriate action if auditor becomes aware of events that require adj / disclosures.