Chapter 10 - Audit Completion

Question 1

what happens at the end of an audit?

Answer 1

the engagement partner will sign the audit report

therefore, the audit partner must review the final version of the FS

Question 2

FS review constitutes which two aspects?

Answer 2

compliance check

sense check

Question 3

compliance check?
sense check?

Answer 3

compliance = compliance with companies act 2006 and accounting standards

sense = do the FS make sense?

Question 4

ISA450?

Answer 4

requires the auditor to accumulate misstatements identified during the audit unless the misstatements are trivial

Question 5

the auditor should accumulate misstatements identified during the audit and…

Answer 5

• inform management
• reassess materiality
• determine whether uncorrected misstatements are material
• seek written representations from management to confirm whether a misstatement is material or not

Question 6

if opening balances are misstated…

Answer 6

the FS for the current year may also be misstated

Question 7

ISA510?

Answer 7

sets out the procedures that the auditor should perform in relation to opening balances in a new audit engagement

Question 8

if an auditor didn’t audit the previous year’s FS, what procedures should be used to gain confidence in this year’s opening balances?

Answer 8

• agree the B/F numbers to last year’s FS
• assess accounting policies have been appropriately applied to opening balances
• review previous auditor’s working papers OR perform specific procedures on opening balances

Question 9

ISA710?

Answer 9

requires the auditor to obtain sufficient appropriate evidence that comparative figures in FS are true & fair

Question 10

going concern?

Answer 10

companies prepare FS on the going concern basis unless they intend to liquidate

Question 11

ISA570?

Answer 11

sets out requirements for auditor in relation to going concern

Question 12

sustainability impact on going concern?

Answer 12

a climate-related risk could lead to an event that may cast doubt over the business’ ability to continue as a going concern

e.g., new legislation, ban on resource used, adverse weather, climate-related litigation

Question 13

two types of subsequent events?

Answer 13

adjusting and non-adjusting

Question 14

adjusting/non-adjusting?

Answer 14

adjusting = provides evidence of conditions existing at the date of the FS (e.g., NRV write down, fraud, T/R write down)

non-adjusting = provides evidence of conditions arising after the FS date e.g., destruction of asset, dividends declared after y/e

Question 15

ISA580?

Answer 15

sets out auditors’ responses to subsequent events

Question 16

auditor duty from y/e date to audit sign off date?

Answer 16

active duty

perform procedures to ensure subsequent events have been appropriately accounted for (e.g., written reps)

Question 17

auditor duty from audit sign off date to FS issuance date?

Answer 17

passive duty

no obligation to perform procedures but must discuss w/ management or take action if they become aware of events which require adjustment

e.g., inform stakeholders

Question 18

ISA580?

Answer 18

requires auditors to obtain written representations from management