Completion and reporting

Question 1

Financial Statement review

Answer 1

Comply with IFRS/UK GAAP/Companies Act; disclosures complete; directors’ report consistent

Analytical Ps to ensure FS consistent with auditor’s understanding

Question 2

Misstatements discovered during audit

Answer 2

Consider changing overall audit plan if misstatements could be material: more procedures
Inform management of all misstatements and request they are corrected
Obtain written representations that all uncorrected misstatements are immaterial
Document misstatements and auditor’s conclusion re: materiality of uncorrected misstatements

Items materials by nature:
o masks a change in trend or ratio
o regulatory compliance
o increasing management compensation

Question 3

Going Concern

Answer 3

FS prepared on basis than business will continue trading for foreseeable future (12m)

Break-up basis if not a going concern: assets reclassified as current and measured at Fair Value

Conclude on appropriateness of management’s use of going concern basis to prepare FS

Review disclosures in FS re: going concern and risk management

Question 4

Subsequent Events

Answer 4

The cut-off date to perform procedures and request amendments is date of auditor’s report

Discuss with management and take advice on withdrawing audit’s report for events after this

Question 5

Adjusting Events (amend FS)

Answer 5

Events that provide evidence of conditions that existed at the reporting date
• settlement of a court case
• bankruptcy of a customer
• decision to cease trading so that company is not a going concern

Question 6

Non-Adjusting Events (do not amend FS – disclose in notes if material)

Answer 6

Events that provide evidence of conditions that arose after the reporting date
• destruction of assets
• decline in the market value of PPE after the reporting date

Question 7

Subsequent events - procedures

Answer 7

Procedures
• Enquire with management
• Inspect board minutes
• Inspect legal correspondence