Auditors Report Flashcards
Which statements are included within the auditors report
The statement of financial position
Statement of profit and loss another comprehensive income
Statement of changes in equity
Cash flow statement
Notes to the financial statements including significant accounting policies
What are the parts of the audit report
The title and address is: independent auditors report
Audit opinion and identification of what’s been audited
The basis of opinion
Material uncertainty relating to go and concern(If one)
Key all that matters
Emphasis of matter paragraph (if one)
Other matter paragraph (if one)
Other information paragraph (If one)
Responsibilities of management and those charged with governance for the financial statements
Auditors responsibilities for the audit of the financial statements
Name of the engagement partner, Address of the auditing firm, states the auditors report was signed and the auditors signature
Elaborate on “the orders opinion and identification of what’s been audited”
The opinion paragraph comes right at the top of the report
An on modified opinion will states that the financial statements give a true and fair view. Also that they have been prepared in accordance with international financial reporting standards.
As appropriate depending on the type of opinion given this paragraph can be named:
Opinion
Qualified opinion
Adverse opinion
Disclaimer of opinion
The opinion paragraph must:
Identify the entity whose financial statements have been audited
State of financial statements have been audited
Identify the title of each element of the financial statements of the period audited
Elaborate on “basis for opinion”
This will refer to compliance with ISA and will refer to the auditors responsibility section of the report. It must include an assertion of the auditors independence and that other ethical matters have been complied with.
If the orders opinion has been modified, the explanation would be here too.
As appropriate, this paragraph will be called:
Basis for opinion
Basis for qualified opinion
Basis for adverse opinion
Basis for disclaimer of opinion
Elaborate on “Material uncertainty relating to going concern”
A separate paragraph is required if there is a material uncertainty relating to going concern of the company.
This paragraph is not a modification of the audit report. Provided the incessancy has been adequately disclosed by the directors in the notes to the financial statements
Elaborate on “key audit matters”
Okay all that matters of those matters that were of no significance during the audit
Elaborate on “emphasis of matter paragraph”
This paragraph is used to draw users attention to a matter already properly disclose in the financial statements. For example a note stating there had been a fight at the companies premises.
An emphasis of matter paragraph is not a modification of the audience opinion and it will state that the audit opinion is not modified in this respect. If the auditors report also includes a key audit matter section the emphasis of mass of paragraph will be presented before that section depending on their relative importance.
Elaborate on “other matter paragraph”
This paragraph is use if necessary to communicate a matter that is not presented or disclose in the financial statements. But which is relevant to the users understanding of the audit, the auditors responsibility or the auditors report.
Circumstances in which and other matters paragraph may be necessary:
Where the auditor reports on two sets of financial statements prepared difference general-purpose frameworks
Where the financial statements have been prepared for a specific purpose, to state that the auditors report is solely for the intended user
In the rare circumstances where the author is unable to withdraw from an engagement even though a Management impose limitation on the audits may be pervasive
Elaborate on “other information paragraph”
For example the audit covers the financial statements but does not cover the directors report nor the chairman statements. So what is the directors report contained something that conflicts with the financial statements? The audience opinion cannot be modified because it does not cover the directors report perhaps shareholders need to be alerted to this this can be done in a paragraph headed “other information“
This is not a modification of the order to opinion
Elaborate on “responsibilities of management and those charged with covenants for the financial statements”
This section is very important and points out that it is management responsibility to prepare the financial statements in accordance with the international financial reporting standards to maintain the system of internal controls and to consider the growing concern position of the company
Elaborate on “auditors responsibilities for the orders of the financial statements”
The auditors responsibilities are to Obtain reasonable assurance that was the financial statements as a whole of free from material misstatement, whether due to fraud or error, and to issue an auditors report of include their opinion.
Reasonable assurance is a high level of assurance, but does not guarantee that and all this conducted in accordance with ISA will always detect material misstatement when they exist. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregates, they could reasonably be expected to influence economic decisions of users taking on the basis of these financial statements
Elaborate on “Name of the engagement partner, Address of the auditing firm, take the auditors report was signed and the order to signature”
Finally the auditors must sign the report and must give their address and the date on which it is signed. The date of the report is very important because before that date the auditor has an active duty
What should we be replacing “true and fair” with
Presents fairly, in all Material respects
What is included within other information
It is a mandatory paragraph which includes:
Statement that management is responsible for other info
Identification of other info (examples of other info like social or environmental etc)
Statement that the audit opinion does not cover the other information
Statement of audit responsibility relating to other info
Statement that audit has either
1. Nothing to report
2. Describing inconsistency of material impact if there is one in other info
