completion Flashcards
what three questions are asked when the partner signs the audit report?
- do the financial statements comply with the provisions of the Companies Act 2006?
- do the financial statements make sense?
- has the auditors report been drafted properly?
what matters should be communicated with those charged with governance?
ISA 260
- the auditor’s responsibilities in relation to the financial statement audit
- planned scope and timing of the audit
- significant findings from the audit
- auditor independence
unmodified opinion
the auditor is satisfied that the evidence obtained is sufficient and appropriate and supports the view presented in the financial statements prepared by the company’s management
why should opening balances be considered?
- opening balances will mean that the profits for the CY may also be misstated
- for first year audits, the risk of unaudited figures being materially misstated needs to be considered
how should opening balances be tested?
ISA 510
- for a first year audit, sufficient audit evidence needs to be obtained about whether OB contain misstatements
- consider whether accounting policies have been consistently applied in the current period’s financial statements
- have the prior year’s closing balances been brought forward correctly.
how can opening balances be verified?
- check receipts from opening receivables
- verify opening payables in the light of payments made during the current period
- reconciling inventory figures
- obtaining confirmations from relevant third parties
- check prior year closing balances have been correctly brought forward or restated
how should any inconsistencies found in the financial statements be dealt with?
- the auditor should seek to resolve them with management first
- if it is a material inconsistency, then the auditor should state and describe it in the auditor’s report
- the auditor may express a qualified or adverse opinion
what is a modified auditor’s report?
when the audit opinion is not affected but there is an emphasis of matter paragraph
qualified opinion
when a misstatement is material but not pervasive
adverse opinion
when misstatements are deemed to be pervasive - they affect the FS as a whole or a substantial part of them
when could an emphasis of matter paragraph be included?
- an uncertainty relating to the future outcome of exceptional litigation or regulatory action
- a significant subsequent event that occurs between the date of the FS and the date of the auditor’s report
- early application of a new accounting standard that has a material effect on the entity’s financial position
- a major catastrophe
how should a going concern uncertainty be disclosed?
- disclosed in its own section in the auditor’s report
- if the disclosures are not appropriate, a qualified/adverse opinion must be expressed
what additional matters should be considered when deciding whether to rely on a written representation?
- the internal controls in place
- an analytical review
- a review of whether this is in line with the rest of in the industry
- integrity of management
- whether audit testing is consistent with representations
what are the auditor’s responsibilities to forming an opinion on the director’s report?
- the auditor complies with ISA 720, Companies Act 2006 and FRC Bulletin
- auditor ensures DR is consistent with FS
- auditor describes their responsibilites relating to the director’s report
when should an emphasis of matter paragraph be used?
- when the auditor’s opinion is not modified
- brings attention to a matter or matters presented or disclosed in the FS
