Chapter 6 Flashcards
Evaluation
What is Audit Documentation?
- Working papers that are prepared/ obtained by the auditor in connection with the performance of the audit.
Documentation prepared/obtained by the auditor in connection with the performance of the audit.
What 3 things should audit documentation enable another auditor to understand?
- The nature, timing and extent of the audit procedures
- The results
- Any significant matters or conclusions reached
This includes planning of the audit and how issues were resolved.
What 5 factors influence the form, content, and extent of audit documentation?
FYI: JERNS
- Nature
- Risk of misstatement
- Judgment
- Significance of evidence
- Exceptions
What is the minimum retention period for working papers?
6 years
This is to support previous judgments.
What does it mean by the Standardisation of working papers?
Using a consistent format for audit documents so that all auditors follow the same structure.
What are Digital Working Papers in auditing?
Audit software that enables standardised, automated, and easily accessible documentation
This reduces manual paperwork.
What is Cloud-Based Collaboration?
Whereby Auditors and clients can share, review, and update documents in real time.
What are 4 benefits of technology on audit?
- Electronic Signatures & Approvals
– Speeds up document authorisation and reduces delays in the audit process - Secure Communication Platforms
– Encrypted emails, portals, and messaging tools ensure confidential audit discussions and document sharing - AI-Powered Reports & Summaries
– Automates report generation, making documentation clearer and reducing human errors - Access more geographically remote areas
What is the purpose of ISA 540?
Audit statement addressing misstatements identified during the audit
The auditor must maintain a record of all identified misstatements except trivial ones.
When must an Auditor consider revision of their audit strategy?
- The nature and circumstances of the misstatements indicate that there may be others hidden that are individually or aggregately material
Who must the auditor communicate in cases of misstatements and what must they request from them?
Where would this acknowledgement come under on the Audit report, and what 3 categories of misstatement are there?
- Auditor to inform those charged with governance on any uncorrected misstatements and their impact
- Request formal knowledge that they accept the misstatements and believe them to be immaterial
- This acknowledgement comes under written presentations
- Categories listed for misstatements:
1. Trivial (fall under auditors threshold)
2. Have been identified and corrected
3. Uncorrected, alongside the auditor’s opinion on materiality
The auditor requests formal acknowledgment from those charged with governance.
What defines a deficiency in control?
When a control is unable to prevent, detect, or correct misstatements in a timely manner, or that a necessary control is missing.
This includes situations where a necessary control is missing.
What 4 factors must the auditor disclaim in relation to deficiencies in control?
- The deficiencies and their potential effects
- Context of the communication and plan taken to discover
- State that the auditors role was to carry out procedures relevant to the circumstances, and not for the purpose of expressing an opinion on the effectiveness of internal controls
- Matters reported are limited to the deficiencies identified during the audit
EXAM QUESTION ON DEFICIENCES LAYOUT
(DCR)
Deficiency
Consequence
Recommendation
What are the 3 types of modified opinions that auditors can take?
- Explain the options in regards to a modified audit (cause and extent)
- Unmodified Opinion
- Modified report but unmodified opinion
- Modified Audit
- Due to either insufficient evidence or material misstatement
- Whether its material but not pervasive or material and pervasive
What is Matters Paragraph?
A section in an auditor’s report that highlights an important issue without affecting the audit opinion
What must auditors assess regarding going concern?
Whether the company can continue operating for the foreseeable future
This includes checking for financial distress or material uncertainties.
What are the 3 types of Modified Opinion
- Qualified opinion
- Adverse opinion
- Disclaimer of opinion (cant give an opinion)
What are the 3 categories listed for misstatements?
- Trivial (immaterial)
- Identified and corrected
- Uncorrected, alongside the auditor’s opinion on materiality
What does ‘Reportedby Exception’ mean?
An auditor only reports something if there is a problem or something does not meet required standards aka. everything is fine unless told otherwise.
Items that are included in the Reportedby Exception?
- Going concern
- Other information
- Directors’ and/ or strategic reports
- Directors remuneration reports
- Other matters in which the auditor is required to report by exception
- Corporate governance statements
