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AA - Audit and Assurance > Chapter 12 - Reporting > Flashcards

Chapter 12 - Reporting Flashcards

1
Q

When the audit work is complete, what will the auditor prepare?

A

the auditor’s report containing an opinion on the FS

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2
Q

What are the objectives of an auditor?

A
  • to form an opinion on the FS based upon an evaluation of their conclusions drawn from audit evidence
  • to express clearly that opinion through a written report
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3
Q

The auditor will form an opinion on what?

A

whether the FS are prepared, in all material respects, in accordance with the applicable financial reporting framework

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4
Q

What are the different elements of an independent auditor’s report (16)?

A
  • Title
  • Addressee
  • Auditor’s opinion
  • Basis for opinion
  • Key audit matters (if applicable)
  • Material uncertainty related to going concern (if applicable)
  • Emphasis of matter (if applicable)
  • Other information
  • Responsibilities of management and those charged with governance for the FS
  • Auditors responsibilities for the audit of the FS
  • Report on other legal and regulatory requirements
  • other matter (if applicable)
  • name of the engagement partner
  • signature
  • auditor’s address
  • date
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5
Q

What is the purpose of the title in the independent auditor’s report?

A

to clearly identify the report as an independent auditor’s report

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6
Q

What is the purpose of the addressee in the independent auditor’s report?

A

to identify the intended user of the report

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7
Q

What is the purpose of the auditor’s opinoin in the independent auditor’s report?

A

provides the auditor’s conclusion as to whether the FS give a fair and true value

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8
Q

What is the purpose of the basis for opinion in the independent auditor’s report?

A

provides a description of the professional standards applied during the audit to provide confidence to users that the report can be relied uponWhat is the purpose of the title in the independent auditor’s report?

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9
Q

What is the purpose of the key audit matters in the independent auditor’s report?

A

to draw attention to any other significant matters which the auditor communicated with those charged with governance of which the users should be aware, to aid their understanding of the entity

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10
Q

Which companies would need to include the key audit matters section?

A

listed entities

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11
Q

What is the purpose of the material uncertainty related to going concern in the independent auditor’s report?

A

if there is disclosure of material uncertainties related to going concern that must be brought to the attention of the user

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12
Q

What is the purpose of the emphasis of matter in the independent auditor’s report?

A

To draw attention to any other significant matters disclosed by the entity of which the users should be aware to aid their understanding of the entity

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13
Q

What is the purpose of the other info in the independent auditor’s report?

A

to clarify that management are responsible for the other information such as the chair’s statement.

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14
Q

What is the purpose of the responsibilities of management and those charged with governance for the FS in the independent auditor’s report?

A

to clarify that management are responsible for preparing the FS and for the internal controls. Included to help minimise the expectations gap

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15
Q

What is the purpose of the auditor’s responsibilities for the audit of the FS in the independent auditor’s report?

A
  • clarify the auditor is responsible for expressing reasonable assurance as to whether teh FS give fair and true view and express that opinion in the report
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16
Q

What is the purpose of the report on other legal and regulatory requirements in the independent auditor’s report?

A
  • highlight additional reporting responsibilities, if applicable
  • may include jurisdiction to report on the adequacy of accounting records, internal controls over financial reporting or other info published with the FS
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17
Q

What is the purpose of the other matter in the independent auditor’s report?

A
  • draw attention of the user to any other matters related to the audit, auditor’s responsibilities or auditor’s report of which the user should be aware
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18
Q

What is the purpose of the name of the engagement partner in the independent auditor’s report?

A

identify the person responsible for the audit opinion in case of any queries

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19
Q

What is the purpose of the signature in the independent auditor’s report?

A

shows the engagement partner or firm accountable for the opinion

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20
Q

What is the purpose of the auditor’s address in the independent auditor’s report?

A

to identify the specific office of the engagement partner in case of any queries

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21
Q

What is the purpose of the title in the independent auditor’s report?

A

to identify the date up to which the audit work has been performed

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22
Q

When is the report signed?

A

must be signed and dated after the date the directors approved the FS. often the FGS are approved and the auditor’s report signed on same day

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23
Q

The auditor’s opinion provides what?

A

the auditors conclusion as to whether the financial statements give a true and fair view

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24
Q

The auditor’s opinion can be what?

A

Modified or unmodified

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25
Q

What are the 2 types of issues the auditor needs to consider when forming the audit modified opinion?

A
  • misstatement
  • inability to obtain sufficient appropriate audit evidence
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26
Q

What is misstatement?

A

where the FS have not been prepared in accordance with the financial reporting framework i.e., the client has done something wrong when preparing the FS. Fraud or error

27
Q

What is inability to obtain sufficient appropriate audit evidence?

A

where the auditor has not obtained sufficient and appropriate evidence and therefore cannot say for sure whether the balance(s) in the FS is/are materially misstated

28
Q

If the nature of the issue is not material what will happen to the opinion?

A

unmodified

29
Q

If the nature of the issue is material but not pervasive what will happen to the opinion?

A

a qualified opinion will be issued. This means that ‘except for’ the issues described, the FS give a true and fair view

30
Q

If the nature of the issue is material and pervasive what will happen to the opinion in terms of the misstatement?

A

the FS will not give a true and fair value and the opinion will state this. This is called and adverse opinion

31
Q

If the nature of the issue is material and pervasive what will happen to the opinion in terms of the inability to obtain sufficient and appropriate evidence?

A

Unable to form an opinion at all, they will issue a disclaimer of opinion

32
Q

What are pervasive issued?

A

those which make the financial statements unreliable as a whole

33
Q

When will the auditor issue an unmodified opinion in the report?

A

when they conclude that the FS are prepared, in all material respects, in accordance with the applicable financial reporting framework

34
Q

What does an unmodified opinion mean?

A

the FS give a true and fair view

35
Q

If the opinion is unmodified what is the auditor satisfied with?

A
  • accounting policies used
  • accounting estimates made
  • terminology used
  • overall presentation and disclosure
36
Q

Pervasive is a matter of judgement but a matter is more likely to be pervasive if what?

A
  • it affects a lot of balances
  • it represents a substantial proportion of the accounts
  • the matter is fundamental to the users understanding
37
Q

the basis for opinion is used to describe what?

A

to describe how the auditor has been able to form the audit opinion

38
Q

What will be included in a report with a modified opinion?

A
  • professional standards followed
  • explanation of the reason for the modifies opinion
  • quantification of the effect of the issue
39
Q

The key audit matters section was introduced to enable what?

A

the auditor to communicate some of the most important matters that the auditor had to deal with during the audit

40
Q

Who will have the key audit matters section?

A
  • listed companies - mandatory
  • unlisted companies - voluntary
41
Q

What will be included in the key audit matters?

A
  • areas assess as higher risk
  • areas where management exercised significant judgement
  • impact of significant events or transactions
42
Q

What is a qualified opinion?

A
  • If the misstatement or lack of sufficient appropriate evidence is material but not pervasive, the auditor will issue a qualified opinion
43
Q

What does a qualified opinion give?

A
  • the matter is material to the area of the FS affected but does not affect the remainder if the FS
44
Q

When would an adverse opinion be issued?

A
  • when a misstatement is considered material and pervasive. This means the FS do not give a fair and true view
45
Q

What are examples of an adverse opinion where the FS do not give a true and fair view?

A
  • preparation of the financial statements on the wrong basis
  • non-consolidation of a subsidiary
  • material misstatement of a balance which represents a substantial proportion of the assets or profits
46
Q

When is a disclaimer of opinion issued?

A

when the auditor has not obtained sufficient appropriate evidence and the effects of any possible misstatements could be pervasive. The auditor does not express an opinion of the FS.

47
Q

What are some examples of why a disclaimer of opinion would be issued?

A
  • failure by the client to keep adequate accounting records
  • refusal by the directors to provide written representation
  • failure by the client to provide evidence over a single balance which represents a substantial proportion of the assets or profits or over multiple balances in the FS
48
Q

What are specific examples of key audit matters?

A
  • significant fraud risk
  • goodwill
  • fair values
  • revenue recognition
  • material provisions such as restructuring provision
49
Q

If there are no key audit matters to communicate the auditor shall?

A
  • discuss this with the engagement quality reviewer, if one has been appointed
  • communicate this conclusion to those charged with governance
  • explain in the key audit matters section of the auditor’s report that there are no matters to report
50
Q

What are some other types of additional communication required to be included?

A
  • Material uncertainty related to going concern
  • Emphasis of Matter paragraph
  • other matter paragraph
51
Q

Do the additional communications impact the wording of the opinion?

A

no

52
Q

When is a material uncertainty related to going concern included?

A
  • when there is a material uncertainty regarding going concern status which directors have adequately disclose in the FS
53
Q

When is a emphasis of matter paragraph used?

A

to refer to a matter that has been adequately presented or disclosed in the FS by the directors

54
Q

What are examples of when emphasis of matter will be used?

A
  • major catastrophes that have had a significant effect on the entity’s financial position
  • an uncertainty relating to the future outcome of exceptional litigation or regulatory action
  • a significant subsequent event occurs between the date of the FS and the date of the auditor’s report
55
Q

When a KAM section is presented in the auditor’s report and emphasis of matter paragraph may be presented where?

A

either directly before or after the KAM section, based on the auditor’s judgement as to the relative significance of the info included in the EOM.

56
Q

When can a emphasis of matter paragraph be used?

A

only when adequate disclosure has been made of the matters mentioned above

57
Q

What can the auditor emphasise?

A

only something that has already been included.

58
Q

An other matter paragraph would be included when?

A

if the auditor considers it necessary to communicate to the users regarding matters that are not presented or disclosed in the FS, that in the auditor’s judgement, are relevant to understanding the audit

59
Q

What does other information refer to?

A

financial or non-financial information, other than the financial statements and auditor’s report thereon, included in the entity’s annual report that is not necessarily subject to audit

60
Q

What are some examples of other information?

A
  • chair’s report
  • operating and financial review
  • social and environmental reports
  • corporate governance statements
61
Q

What is the content of the other information section?

A
  • identifies the other info obtained by the auditor prior to the date of the auditor report
  • states that the auditor has not audited the other info and accordingly does not express an opinion or conclusion on that info
  • includes a description of the auditor’s responsibilities with respect to the other info
  • states either that the auditor has nothing to report or a description of the material misstatement if applicable
62
Q

What are the objectives of communication?

A
  • to communicate the responsibilities of the auditor and an overview of the scope and timing of the audit
  • obtain info relevant to the audit
  • report matters from the audit on a timely basis
  • to promote effective two-way communication
63
Q

What matters are to be communicated?

A
  • auditor’s responsibilities
  • planned scope and timing of the audit
  • significant findings from the audit
  • auditor independence

AA - Audit and Assurance (11 decks)

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