Chapter 10

Question 1

examples of areas of the audit analytical procedures must cover at the final review

Answer 1

accounting ratios
related items
wages changes
variances

Question 2

what will the auditors need to review for if misstatements have been identified during the audit

Answer 2

at the final review ensure theyve been corrected

Question 3

how must auditors review immaterial misstatements

Answer 3

cumulatively, as together they may be material

Question 4

3 types of misstatements

Answer 4

factual - clearly misstated
judgemental- incorrect accounting policy used
projected - cannot be quantified

Question 5

what are the objectives of the auditor under ISA 580 Written representations

Answer 5

obtain representations from management and those charged with governance

support other audit evidence relevant to FS by means of written representation

respond appropriately to written representations

Question 6

what happens if the client refuses to provide written representation

Answer 6

constitutes as inappropriate audit evidence

Question 7

contents of a typical letter of rep

Answer 7

responsibilities for preparing FS
related party transactions
confirmation access has been granted to all info

Question 8

what do you do when a subsequent event has happened before signing audit report

Answer 8

amend FS

Modify auditors report

Question 9

what do you do when a subsequent event has happened after signing audit report but before FS Issued

Answer 9

discuss any necessary changes with management

Amend FS and modify audit report or take legal action to prevent reliance on audit report

Question 10

what do you do when a subsequent event has happened after signing audit report and after FS Issued

Answer 10

discuss any necessary changes with management

Revise FS and release audit report including an emphasis of matter or other matter paragraph or take legal action to prevent reliance on audit report

Question 11

management responsibilities on going concern

Answer 11

assess entitys ability to be a going concern over 12 month period

Question 12

auditors responsibilities on going concern

Answer 12

consider appropriateness of the use of going concern accounting policies

consider if their are material uncertainties that need to be disclosed

Question 13

how can the auditors assess the going concern valuation of management

Answer 13

analysing and discussing cash flow
analysing interim FS
reading minutes of meetings with SH’s
determine why sale of NCA’s

Question 14

what are the audit report implications on going concern being appropriate but a material uncertainty exists

Answer 14

unmodified opinion but separate paragraph called material uncertainty related to going concern

Question 15

what are the audit report implications on going concern being inappropriate

Answer 15

the auditor should express an adverse opinion - if break up basis used then emphasis of matter paragraph

Question 16

what are the audit report implications on management being unwilling to make an assessment on going concern

Answer 16

inappropriate audit evidence so a qualified or disclaimer of opinion

Question 17

what do the auditors need evidence for for PY figures

Answer 17

it agrees to signed FS, same accounting policies used

Question 18

what do audit need to do if PY figures were audited by another firm

Answer 18

other matter paragraph - stating FS were audited by a different auditor

Question 19

what do audit need to do if PY figures were not audited

Answer 19

this can be stated in an other matter paragraph

Question 20

what do audit need to do if PY figures were audited by them, but a misstatement is identified in CY

Answer 20

if issue is resolved in CY - audit report can still be unmodified

if issue is unresolved opinion must be modified

Question 21

what is included in other information

Answer 21

directors or managers report
financial summaries, ratios or highlights
employment data
selected quarterly data
an integrated report

Question 22

what must be done if there is inconsistencies with other information and the financial statements

Answer 22

communicate with those charged with governance

Question 23

if the the other information requires an amendment to the FS, what should you do it goes uncorrected

Answer 23

consider further audit procedures

Question 24

if the the other information requires an amendment to the other info, what should you do it goes uncorrected

Answer 24

understand the issue and ask management to revise

if they refuse, amend audit report and or consider withdrawing from engagement