Concluding The Audit Flashcards
General notes on concluding the audit
- “Present fairly in all material respects” looking at reasonable assurance
- A limited assurance is expressed when performing a review
- Do not express an opinion on compilation appointments and agreed-upon procedures
- Litigation and claims (consider going concern)
- Policies and procedures
- Inquiry and discussion with management
- List of legal expenses
- Correspondence with attorneys - Consideration of laws and regulations
🎯 1. Sufficient, appropriate evidence has been obtained to reduce audit risk to an acceptable level. ISA 330
🎯 Uncorrected misstatements which have been identified during the audit, result either individually or in aggregate, in a material misstatement of the financial information.
* In terms of ISA 450
🎯 The financial statements have been prepared in all material respects in accordance with the applicable financial reporting standards. In particular the auditor will evaluate whether:
the financial statements adequately disclose the significant accounting policies selected and
applied
* the accounting policies selected and applied are consistent with the financial reporting
standards/accounting framework and appropriate for the company’s business
* the accounting estimates made by management are reasonable
* the information presented in the financial statements is relevant, reliable, comparable and understandable
* the financial statements provide adequate disclosures to enable users to understand the effect of material transactions and events on the entity’s financial position, financial performance and cash flows (information conveyed in the financial statements)
* the terminology used in the financial statements is appropriate
* the company has complied with the applicable statutory requirements and regulations, e.g.
JSE regulations for listed companies and King IV corporate governance requirements
* the financial statements achieve fair presentation.
🎯 All material events occurring after the reporting date and up to the date of the audit report
If given a schedule
- When did mistake happen
- Is it before or after YE, adjusting or non adjusting
- Fraud/Error?
- Factual, Projected, Judgmental - Qualitative and Quantitative misstatement
- Increase risk (NTE, ISA 265, RI, Audit report)
Critically analyze audit report
- Title of opinion ISA 705.16
- What the basis of opinion should include
- Opinion section ISA 700.24
- s44 APA wording: FS fairly present in all material respects
- ISA 700.28
- ISA 705 states that a clear description of all substantive reasons for any modifications to opinion should be included in the auditor’s report
- Consider if uncorrected misstatements give rise to adverse opinion
- If listed company comply with ISA 701 “KAM”
Did they perform proper audit?
- ISQC1
- ISA 220
- ISA 620
- ISA 220
- ISA 240
- ISA 560
misstatement is in other information: ISA 705
- Request management to correct
- Audit correction
- Modify the report (Add other matter paragraph)
- Withdraw from engagement
Response:
- Risk assessment
- Strategy/plan
Audit opinion
FORMAT OF OPINION:
- Title
- Addressee
23 - 27. Auditor’s opinion (NB! p24) - Basis for opinion
- Going concern (ISA 570)
30 - 31. Key audit matters (ISA 701) - Other information (ISA 720)
37-38. Auditors responsibility
-Reasonable assurance
-Issue opinion
-Identify and assess RoMM
-Obtain understanding of internal control
-Appropriateness of accounting policies
-Conclude on GC
Management’s responsibility
Preparation of the AFS
Internal controls
Going concern
- Emphasis of matter is in your AFS
- If you issue a disclaimer there is no KAM
Materiality of uncorrected misstatements
- Uncorrected misstatement is not individually quantitatively material as it is below the final materiality figure
- Further procedures may indicate otherwise
- Could be qualitatively material if it will influence economic decisions of customers
- —-Qualitatively material if it will impact certain ratios e.g liquidity
-If in isolation it is immaterial and in aggregate it is material, then further adjustments will have to be made before an unmodified audit opinion is issued
- Request management to correct the error, if they do then an unmodified audit opinion will be issued
- If management refuses to correct, then qualified opinion will be issued:
- uncorrected misstatements are material in aggregate
- uncorrected misstatements are not pervasive they are confined to specific elements of AFS that are not considered to be fundamental to the users understanding of the FS
- Include basis for qualified opinion eg attention to applicable requirements of IFRS
Modifications on the audit report
- Start with IAS/ IFRS (what does it require, when should it be recognised/measured
- Factual/projected/judgmental misstatement
- Quantitatively or qualitatively misstated
Audit opinion to be expressed
- Evaluate whatever before concluding on the audit
- If mitigating factor is not effective an adverse opinion is expressed _effect of factual misstatement will be pervasive as misstatement is not confined to specific elements
- Failure to disclose, material uncertainty relating to going concern (IAS 1) issue qualified opinion (affect users of FS)_ consider adding the ‘emphasis matter’ paragraph ISA 706 (AUDIT OPINION modified )
- If material uncertainty on GC ability is removed by an unmodified opinion
Impact on audit opinion regarding the litigation
- Consider a part of IFRS/ IAS that could be applicable
- Consider materiality ( Qualitative/ Quantitative)
- NOCLAR (RI)
- Advise management to correct if they refuse then qualify the audit report
- Additional audit procedures will have to be performed
- Emphasis matter paragraph
