Chapters 18-20 Flashcards
5 examples of non profit organisations
charities schools clubs housing associations local councils
3 risks that may be involved in the audit for non profit organisations
internal control deficiencys
lack of segregation of duties
lack of qualified staff
what is a subsequent event
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.
when are the auditors on ‘ active duty’
between YE and signing the audit report
when are the auditors on passive duty
after the audit report is signed and the FS being signed, and the AGM that follows
what should auditors do if they become aware of a subsequent event after the audit report is signed, but before the FS are issued
discuss with management if FS need amending
issue a new unmodified audit report, if amendment is made
what do the auditors do if the client refuses to make any amendment to the FS
Reissue a modified report if the audit report was not released
if the audit report was released the auditors need to seek legal advise
what should auditors do if they become aware of a subsequent event after the audit report is signed, and the FS are released
issue a new audit report, including an emphasis of matter paragraph or other matter paragraph
what does going concern mean
that the entity will continue its operations for the forseeable future
what basis is accounting done on, if an entity is not a going concern
break up basis
4 financial examples of going concern indicators
inability to pay creditors when payment is due
negative cash flows
net liability position
adverse key financial ratios
4 examples of operational going concern indicators
management intentions to liquidate the entity
loss of key management without replacement
shortages of important supplies
emergence of successful competitor
what do the managers need to do regarding going concern
they need to complete a management assessment
how long does the management assessment need to cover
12 months from the FS
what additional audit procedures can audit do if there is doubts that the entity is not a going concern anymore
evaluate magaments plans for future action
evaluating accuracy of underlying data such as cash flow
what specific audit procedures can be done to look into doubts of going concern
analysing and discussing cash flow with management
reading minutes of meetings with SH’s
analysing and discussing recent management accounts with management
definition of written representations
written statements by management provided to the auditor to confirm certain matters or to support other audit evidence
3 reasons you would need a written representation
confirm management has fulfilled its responsibilties
A number ofISAs require written representation
support other audit evidence relevant to FS
4 steps to obtain written representations
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
definition of unmodified opinion
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
definition of key audit matters
those matters that in the auditors professional judgement, were of most significance in the audit of the FS
when does an auditor give a modified audit opinion
FS are not free from material misstatement
auditor is not able to obtain sufficient appropriate audit evidence
2 levels of modified opinion
material but not pervasive
material and pervasive
what does material but not pervasive mean
circumstances prompting the misstatement are material
what does material and pervasive mean
where the FS could be misleading
