Chapters 18-20

Question 1

5 examples of non profit organisations

Answer 1

charities
schools
clubs
housing associations
local councils

Question 2

3 risks that may be involved in the audit for non profit organisations

Answer 2

internal control deficiencys
lack of segregation of duties
lack of qualified staff

Question 3

what is a subsequent event

Answer 3

events ocurring between the dates of the FS and the date of the auditors report, and the facts that the auditors become aware of after the date of the auditors report.

Question 4

when are the auditors on ‘ active duty’

Answer 4

between YE and signing the audit report

Question 5

when are the auditors on passive duty

Answer 5

after the audit report is signed and the FS being signed, and the AGM that follows

Question 6

what should auditors do if they become aware of a subsequent event after the audit report is signed, but before the FS are issued

Answer 6

discuss with management if FS need amending

issue a new unmodified audit report, if amendment is made

Question 7

what do the auditors do if the client refuses to make any amendment to the FS

Answer 7

Reissue a modified report if the audit report was not released
if the audit report was released the auditors need to seek legal advise

Question 8

what should auditors do if they become aware of a subsequent event after the audit report is signed, and the FS are released

Answer 8

issue a new audit report, including an emphasis of matter paragraph or other matter paragraph

Question 9

what does going concern mean

Answer 9

that the entity will continue its operations for the forseeable future

Question 10

what basis is accounting done on, if an entity is not a going concern

Answer 10

break up basis

Question 11

4 financial examples of going concern indicators

Answer 11

inability to pay creditors when payment is due
negative cash flows
net liability position
adverse key financial ratios

Question 12

4 examples of operational going concern indicators

Answer 12

management intentions to liquidate the entity
loss of key management without replacement
shortages of important supplies
emergence of successful competitor

Question 13

what do the managers need to do regarding going concern

Answer 13

they need to complete a management assessment

Question 14

how long does the management assessment need to cover

Answer 14

12 months from the FS

Question 15

what additional audit procedures can audit do if there is doubts that the entity is not a going concern anymore

Answer 15

evaluate magaments plans for future action

evaluating accuracy of underlying data such as cash flow

Question 16

what specific audit procedures can be done to look into doubts of going concern

Answer 16

analysing and discussing cash flow with management
reading minutes of meetings with SH’s
analysing and discussing recent management accounts with management

Question 17

definition of written representations

Answer 17

written statements by management provided to the auditor to confirm certain matters or to support other audit evidence

Question 18

3 reasons you would need a written representation

Answer 18

confirm management has fulfilled its responsibilties
A number ofISAs require written representation
support other audit evidence relevant to FS

Question 19

4 steps to obtain written representations

Answer 19

agree procedures at early stage
discuss contents of the letter with management
print on clients headed paper and mgment signature
dated as close to audit report signature date but not after

Question 20

definition of unmodified opinion

Answer 20

the opinion express by the auditor when the auditor concludes that the FS are prepared in all respects in accordance with the applicable FR framework

Question 21

definition of key audit matters

Answer 21

those matters that in the auditors professional judgement, were of most significance in the audit of the FS

Question 22

when does an auditor give a modified audit opinion

Answer 22

FS are not free from material misstatement

auditor is not able to obtain sufficient appropriate audit evidence

Question 23

2 levels of modified opinion

Answer 23

material but not pervasive

material and pervasive

Question 24

what does material but not pervasive mean

Answer 24

circumstances prompting the misstatement are material

Question 25

what does material and pervasive mean

Answer 25

where the FS could be misleading