CH 11- Reporting Flashcards
Independent auditors report
Objectives are:
* to form an opinion on fin stmt’s based on evaluation of conclusions drawn from the audit evidence obtained, and
* To express clearly that opinion through a written report (free from material misstatement showing a T+F view?)
Signatories on reports
Listed entities: Engagement partner & name of firm
Non-listed entities: Name of firm (doesn’t require name of individual)
Expectation gap
Auditors report is not:
* A certificate of accuracy of the contents of financial stmt’s
* A guarantee against fraud
* Confirmation that an entity is being run in accordance with principles of good corporate governance
Unmodified opinion (Not material)
(Allows True and Fair view)
Conclude fin stmt’t are prepared, in all material respects, in accordance with applicable financial reporting framework.
- Adequately disclose signifcant acc policies
- Acc policies selected are consistently applied and appropriate
- Accounting estimates made my mgmt are reasonable
- Info is relevant, reliable, comparable and understandable.
- Fin stmt’s provide adequate disclosures to enable users to understand effects of material transactions and events
- Terminology used is appropriate
Modified opinion
- Based on evidence obtained are not free from material misstatement (client has not complied with reporting framework)
- Unable to obtain sufficient appropriate evidence (that these are free from MM)
Actions for modified opinions
1. Discuss with TCWG- May resolve the matter through clients amendments (or evidence to conclude that modification is not necesary)
2. Consider management integrity-If issue can’t be resolved (Casts doubt on mgmt integrity as any representations from mgmt may not be reliable. If representation can’t be relied on, this will lead to a disclaimer of opinion
3. Seek external advice- Auditor may seek legal advice or consult with ACCA about any issues
4. Resign-Where auditor has reason to doubt management integrity, resignation must be considered.
Qualified opinion
Material but not pervasive
-If misstatement of lack of sufficient appropriate evidence is limited to one area (rather than all areas of financial statements)
The auditors opinion will state that ‘Except for’ this matter, the financial statements give a true and fair view
Adverse opinion
Material and pervasive
-Misstatements across fin stmt’s
-Don’t give a true and fair view
Examples include:
* Prep of statements on the wrong basis
* Non-consolidation of material subsidiary
* Material misstatement of a substantial balance (of assets or profits e.g. would change a profit to a loss or vice versa)
Disclaimer of opinion
-Inability to obtain sufficient appropriate evidence
-NO OPINION EXPRESSED
Examples include:
* Failure by client to keep adequate acc records
* Refusal by directors to provide written representation
* Failure by client to provide evidence over a single balance (of substantial proporation of the assets or profits or multiple balances in the fin stmt’s.
Key audit matters
-Listed co’s only-
Unless Auditor feels it would benefits users (of non-listed co’s).
- Significant matters selected from matters communicated to those charged with governance TCWG
Dislocure of KEY AUDIT MATTERS
- Key audit matter-Info on this
- How the matter was addressed- (e.g. testings and analytical procedures)
Emphasis of matter
Matters appropriately presented in the Fin stmt’s (showing fundamental importance to the users)
Examples include:
* Uncertainty relating to outcome of litigation or regulatory action
* Significant subsequent events
* Early application of new acc standard
* Major catastrophes that have had a significant effect on the entity’s financial position
* Where statements have been prepared on break up basis
* Prior year figures have been adjusted
* When fin stmt’s have been recalled or reissued.
“We draw attention to note 12 of the fin stmt’s which describes effects of a fire at the premises of a third-party warehouse provider. Our opinion is not modified in respect of this matter”
Other information section
Examples include:
* Chair’s report
* Operating and financial review
* Social and environmental reports
* Corporate governance statements
