Auditor's report Flashcards
The following matters should be communicated with those charged with governance
ROLS
ISA 260
- Responsibilities of auditor in relation to the FS’s audit.
- Overview of the planned scope and timing of the audit.
- Significant findings
- [Listed clients], matters relating to auditor independence + respective safeguards
How should the auditor communicate the ROLS matters?
Orally or written.
Discussions documented in WPs
AED
How should sustainability impacts be communicated with those charged with Governance?
Formal communication may be needed where sustainability / climate-related risks require changes to:
Accounting policies
Estimates
Disclosures
Should deficiencies in Internal Controls be communicated?
Yes, Significant deficiencies in ICs that are of sufficient importance to merit attention by client business.
What would a report communicating deficiencies in IC include?
ISA 265
A covering letter
Appendix:
Deficiency / Consequences / Recommendations
What should be included in the Deficiency Appendix table?
Deficiency: statement of fact
Consequences:
1. Risk of non-compliance
2. Cost to the business (losses, adverse impact on cash flow, loss of customer goodwill)
3. Risk of misstatements in FS
Recommendations: who/what/when
Commercially feasible
Unmodified opinion / Unqualified opinion / say the accounts are true and fair
Option 1
When to use:
No MM in FS
No material problem with insufficient evidence
Impact on report:
None
DAD
Modified Reports: Modified Opinion
Qualified ‘except for’ opinion,
Option 2
When to use:
Material not pervasive issue in:
- Double entry
- Accounting policy
- Disclosure in the FS
Impact:
1. Opinion para
2. Basis of qualified opinion para
Modified Reports: Modified Opinion
Adverse opinion:
Option 3
GAS
When to use: Material + Pervasive misstatement:
- GC basis used but inappropriate.
- Adj turns profit > loss.
- Sig sub not consolidated.
Impact:
1. Opinion para
2. Basis of adverse opinion para
Modified Reports: Modified Opinion
Disclaimer of opinion:
Option 4
When to use:
Material + pervasive, insufficient audit evidence:
- All / majority AC / Sales records destroyed, no back up.
- Refusal to sign WRL by directors.
Impact:
1. Disclaimer of opinion
2. Basis of Disclaimer opinion
Modified reports:
Unmodified opinions with material uncertainty relating to GC paragraph.
Option 5
When to use: If all are met:
1. FS follow AC standards, no misstatements.
2. Significant GC issues.
3. Disclosed.
4. Disclosure adequate, in line with IFRS.
Impact:
1. Basis of opinion para
2. Material uncertainty GC para
Modified report: Unmodified opinion: Emphasis of matter
Option 6
When to use:
- FS follow AC standards / no misstatements.
- Significant uncertainty.
- Disclosed.
- Disclosure adequate, in line with IFRS.
Impact:
1. Emphasis of matter para
2. Key audit matters para
Modified report: Unmodified opinion: Other matter paragraph
Option 7
When to use:
Auditors want to explain something, cant reference to the annual report.
- They weren’t auditors last year
- Sub report qualified, group isn’t
Impact:
1. Key audit matters
2. Other matter para
Modified report: Unmodified opinion: Other information paragraph
Option 8
When to use:
Inconsistency in non-audited info
Impact:
1. Other information para
2. Key audit matters para
What is the definition of Material and Pervasive? (3)
Matter:
1. not confined to a particular element of the FS
2. represents a substantial proportion of the FS
3. is fundamental to the users understanding
