Chapter 11 - Reporting on an audit engagement (basics) Flashcards
Communication with those charged with governance:
Who are the appropriate persons?
Directors
Members of audit committee
Communication with those charged with governance:
Those charged with governance should have an engagement letter which sets out:
- Form of communications
- Who are the communications going to
- Explanation that only matters that have come to attention will be communicated
Communication with those charged with governance:
What needs to be communicated?
- Auditor responsibilities
- Scope and timing
- Significant findings
Communication with those charged with governance:
What else needs to be communicated if LISTED?
Emphasis auditor independence
- confirm compliance with ethical requirements
- was there a bearing on independence? (non audit fees)
- safeguards
Communication with those charged with governance:
The auditor can communicate either __________or __________
Orally
Writing
Communication with those charged with governance:
Certain matters MUST be communicated in writing, what are they?
- Matters to listed companies about independence
- Significant deficiencies in internal control
Communication with those charged with governance:
What does effective communication involve?
- Timely
- Fulfil expectation of governance
- Appropriate extent (form and frequency)
- Repeat previous year points if unresolved and relevant
- Disclaimer so third parties do not rely on communications
Communication with those charged with governance:
What does it mean by “communication is a two way process”
Client responses documented and responded
Audit reports:
What are Key Audit matters? (KAM)
Matters that had significant impact on audit strategy and the work carried out
Auditor needs to give description of why significant and how it was addressed in audit
Audit reports:
What should the auditor look for in the director report?
and actions?
Check consistent with F/S
inconsistent = ask to make change
no change made = modify opinion
Audit reports:
In what situations should the auditor report by exception?
- Adequate accounting records not kept
- F/S not in agreement with underlying records
- Information not received for audit
- Director remuneration not disclosed
- Corporate governance statement not prepared
- Material misstatement in director report
Audit reports:
What changes came about after Bannerman case?
Paragraph to state they do not accept responsibility to anyone other than the company/shareholders
Audit reports:
What are auditor responsibilities with Corporate Governance Code?
- Report by exception if not included
- Report on compliance if included
Modified audit reports:
What are the two types?
Modified report with unmodified opinion
Modified report with modified opinion
Modified audit reports:
What is a modified report with unmodified opinion?
F/S = true and fair
BUT auditor has significant matter to communicate (in additional paragraph)
