Concluding and reporting on engagements

Question 1

Consequences of purchase orders against policy

Answer 1

duplicate orders
unauthorised suppliers
terms/prices less favourable
purchase of unauthorised non-business goods/services

Question 2

Recommendations for breach in policy on PO

Answer 2

• all sig purchase orders over pre-determined limit to be placed by buying department
• employees in breach to be informed in writing
  -company policy circulated and signed
• all suppliers informed

Question 3

Matters - unaudited client opening balances

Answer 3

Check b/f
review client WP prior year
Check accounting policy
changes disclosed
substantive work on OB where no alternative
ISA UK 710 - state comparative not audited
disclosure of lack of audit
integrity of accounting system?

Question 4

ISA UK 710 - Opening balances when no comparatives requires:

Answer 4

auditor to report comparative figures not audited

Question 5

Further information for disagreement over TR balances

Answer 5

• amount of cheque confirms to balance outstanding
• cheque received, banked and posted after year end
• confirm as acceptable timing difference in conclusion

Question 6

Further information for promised credit note:

Answer 6

• provided for at year end = acceptable timing difference
• not provide = error in in conclusion
• isolated?
• extrapolate?

Question 7

Inability to obtain audit evidence for £250k materiality £200k

Answer 7

-qualified opinion - inability to obtain sufficient audit evidence

Question 8

Qualified opinion - inability to obtain sufficient audit evidence sentence:

Answer 8

“except for possible effects of the matter described in the basis for qualified opinion section of our report, the financial statement give…”

Question 9

Inability to obtain audit evidence for £250k balance but £15k materiality

Answer 9

disclaimer of opinion

Question 10

Disclaimer of opinion sentence

Answer 10

“we do not express an opinion on accompanying financial statements”

Question 11

Going concern - but can continue for foreseeable future

Answer 11

• statement of relevant facts
• nature of concern
• assumptions made in using going concern basis
• plans and actions taken

Question 12

Not considered a going concern:

Answer 12

• not prepared on going concern basis (break up)
• assets written down to recoverable amounts
• liabilities reassessed
  reclassified to short-term

Question 13

Subsequent events review - TR customer went into liquidation

Answer 13

• provision?
• outstanding amount received since since reporting date?
• correspondence with liquidator
• additional goods despatched?
• impact on going concern

Question 14

Going concern adopted but there is a mention that going concern may be considered not appropriate

Answer 14

• unmodified opinion if considered adequate
• material uncertainty related to going concern paragraph
• draws users attention
• statement that opinion not modified in this report
• if inadequate or disagree - modified opinion

Question 15

Whether to rely on written representations of managing director statement for cash when sales conducted on cash basis

Answer 15

internal controls in place
segregation of duties
whether GP% in line with industry sector
Integrity/attitude of MD
Lifestyle of MD in relation to stated income
Whether audit testing is consistent

Question 16

Inconsistency with directors report and audit finding

Answer 16

• discuss with director
• is inconsistency legitimate
• if auditor understanding incomplete does further audit evidence need to be obtained
• if directors refuse, consider whether this raises doubt on integrity
• bring matter to attention of audit partner
• ask directors to seek legal consultation if not resolved
• notify directors in writing of concerns
• obtain own legal advice
• use right to be heard at AGM to notify shareholders
• final resort: consider resignation

Question 17

Implication on auditor report when inconsistency with director report

Answer 17

Describe in “opinion on other matters prescribed by the Companies Act 2006” section
Auditors are also required to include a section headed “matters on which we are required to report by exception”
describe misstatement

Question 18

Matters to included in assurance report to directors of Bilko

Answer 18

responsibility of management
responsibility of practitioner
conclusion

Question 19

what is the responsibility of management in an assurance engagement?

Answer 19

• prepare financial information

Question 20

Responsibilities of practitioner in an assurance engagement

Answer 20

• provide limited assurance
• free from material misstatements
• limited to enquiries and analytical procedures
• do not express audit opinion
• reference to standards

Question 21

What standards do we reference in an assurance engagement

Answer 21

ISRE 2400 Engagement to review historical financial statements

Question 22

What conclusion do we express in an assurance engagement

Answer 22

• negative conclusion
• “nothing has come to our attention that causes us to believe that the accompanying financial statements do not give a true and fair view”