final stage audit

Question 1

what does auditor do at completion stage

Answer 1

overall review
ensure compliance with professional standards, legal, regulatory

ensure that evidence is a suitable basis for the audit opinion.

also check if acc policies are in accordance with ISAs, disclosed adequately, consistent, appropriate

Question 2

What should auditors consider when reviewing accounting policies?

Answer 2

1. Policies commonly adopted in particular industries
2. Policies with substantial authoritative support
3. whether any departures from accounting standards are necessary eg. in case of local laws
4. Whether financial statements reflect the substance of transactions.

Question 3

What is required for audits of listed companies and public interest entities?

Answer 3

An independent engagement quality control review.

Question 4

What do analytical procedures aim to achieve at the completion stage of an audit?

Answer 4

To ensure the consistency of the final financial statements with the collected evidence.

it evaluates significant judgements and conclusions

Question 5

What examples should be covered by analytical procedures at the final stage?

Answer 5

1. Important accounting ratios
2. Related items
3. Changes in products/customers
4. Price and mix changes
5. Wages changes
6. Variances
7. Trends in production and sales
8. Changes in material and labor content
9. Other profit or loss expenditures
10. Variations from industry or economic factors.

Question 6

end of audit- missttaements that are not trivial but client has not agreed to amend

Answer 6

-consider impact on FS
-not just individually, but aggregate
-differentiate bw factual (clearlymisstated), judgemental(policies,estimates) and projected misstatements (cannot be quantified specifically)

if aggregate starts to become material, perform further procedures or request management to adjust FS. IF NOT, then modification. imp to discuss with TCWG

Question 7

What should the summary of uncorrected misstatements include?

Answer 7

Misstatements from the current year and previous years, highlighting reversals (eg. valuation of opening/closing inventory) and cumulative effects.

Question 8

summary of uncorrected misstatements format?

Answer 8

show both bal sheet and PnL (both yrs) to show the effect on both

Question 9

What is the primary objective of the auditor under ISA 580- written representations

Answer 9

-To obtain appropriate representations from management and TCWG regarding their responsibilities for preparing the financial statements and the completeness of the information provided.
-to support other evidence if deemEd necessary by auditor or required by other ISAs
-to respond appropriately to representations provided or not provided

Question 10

What should the auditor do if management or governance does not provide requested written representations?

Answer 10

The auditor must respond appropriately to the lack of written representations, which may lead to insufficient or inappropriate audit evidence. (disclaimer opinion)

Question 11

when would auditor want representations from TCWG

Answer 11

to address possible risk of poor management integrity

Question 12

when are reprsentations appropriate?

Answer 12

-when facts of a matter are confined to management
-when its a matter of opinion or judgement

Question 13

contents of letter of representation

Answer 13

-Responsibilities for preparing financial statements, including significant assumptions
-Related party relationships and transactions
-Events subsequent to the date of the financial statements
-Effects of uncorrected misstatements (confirmation that they are not material)
-Confirmation that access has been granted to all relevant information
-All transactions have been recorded in the accounting records
-Information related to fraud or suspected fraud known to management
-Known instances of non-compliance or suspected non-compliance with laws and regulations.

Question 14

SUBSEQUENT EVENTS

Answer 14

events occurring between the period end and date of audit report
and
facts discovered after the date of auditors report

they may or may not have an impact on FS( adjusting and non adjusting events)

Question 15

event occurs after audit period but before date of authorisation of F/S/ auditors report (initials)

Answer 15

amend F/S
or
modify report

Question 16

event occurs after initials (authorisation) but before FS are issued

Answer 16

-discuss with management, see if any changes required in FS and ask how management are planning to deal

either amend F/S, review evidence, reissue auditors report
-modify if auditors report is not released to entity

-take steps to prevent reliance on auditors report eg: -legal advice, speak at AGM, resign

Question 17

procedures to perform before signing auditors report to identify material subsequent events

Answer 17

-written representation/ inquiry from management
-examine board minutes
-any legal developments
-analytical procedures
-external confirmations

Question 18

event occurs after FS issued but before AGM

Answer 18

–discuss with management, see if any changes required in FS and ask how management are planning to deal

-REVISE F/S , review evidence, issue new auditors report with EOM or OM para
-OR
prevent reliance on auditors report

Question 19

management responsibilities relating to going concern

Answer 19

• Assess entity’s ability to continue as a going concern and present the financial statements accordingly.
• The assessment should cover at least 12 months from the date of the financial statements (the auditor shall request that directors extend their assessment if this period is not covered).

Question 20

auditor responsibilities for going concern

Answer 20

• Consider the appropriateness of management’s use of the going concern basis of accounting (even if the local GAAP does not require it).
• Consider if there are material uncertainties threatening the client’s going concern status that need to be disclosed

Question 21

how to evaluate management assessment of going concern

Answer 21

-analyse and discuss forecasts with management
-Analysing and discussing latest available interim financial statements.
-read loan agreements see if breached
-Readingmeeting minutes for SH, TCWG and relevant committees for reference to financing difficulties
-enquiry from legal advisor
-any financial support from third party? existence, legality, enforceability.as well as financial ability.

• evaluate plans to deal with unfilled customer orders

-subsequent events procedures

Question 22

indicators of going concern (financial)

Answer 22

net liability position
negative cashflow
inability to pay debts on due dates
dividends discontinued
no renewal of financing
adverse ratios
cant comply with loan agreements

Question 23

operational indicators going concern

Answer 23

-management intention to liquidate
-loss of key staff
-labor/ material shortages
-loss of major supplier
-highly successful competitor

Question 24

other indicators of going concern

Answer 24

-legal proceeding
-changes in legislation
-non compliance with capital or statutory requirements
-uninsured or underinsured catastrophes occur.

Question 25

going concern assumption appropriate, but material uncertainty exists, report implications?

Answer 25

if MU is adequately disclosed, then unmodified opinion, but separate paragraph called “material uncertainty related to going concern”
also state in para that auditor opinion is not modified in this aspect

if inadequate disclosure, then qualified or adverse opinion

Question 26

if going concern assumption is inappropriate

Answer 26

-adverse opinion
if alternative accounting treatment (such as breakup basis) then an EOM para can be used to draw attention to the

Question 27

management unwilling to make or extend assessment

Answer 27

insufficient audit evidence
qualified or disclaimer opinion

Question 28

two types of corresponding info

Answer 28

1-Corresponding figures: Where amounts and disclosures for the preceding period are included as part of current period financial statements

2- Comparative financial statements: Where amounts and disclosures for the preceding period are included separately as an entire statement for comparison purposes

Question 29

what is auditors responsibility in respect of comparative info?

Answer 29

-obtain SAE that accounting policies are consistent
-amounts agree to those presented in prior period
-extent of additional audit procedures and the impact on auditors report will depend on whether prior FS were audited and by whom

Question 30

preceding period FS were not audited at all

Answer 30

state in other matter paragraph

Question 31

preceding period FS were audited by another firm

Answer 31

if there is no prohibition from using an other matter para, then we can state in it:
-FS were issued by another auditor
-the type of opinion issued
-date of report

Question 32

preceding FS were audited by our firm but no modification in last yr FS,
but
A material misstatement was identified this year in last yr figures

Answer 32

-if issue is resolved in current yr corresponding figures, then audit opinion will be unmodified

-if issue remains unresolved in the corresp figures , the auditors opinion is modified in line with issue’s nature and extent

Question 33

there was modification in prior FS (audited by us)

Answer 33

if issue is now resolved in current yr corresponding figures, then auditor opinion will be unmodified
-if issue still remains unresolved in corresp figures, auditors opinion is modified in line with issue’s nature and extent

Question 34

ISA 720- auditor responsibility relating to other information. what is other information?

Answer 34

-director/management report
-financial summaries/ratios/highlights
-employment data
-quarterly data
-integrated report

auditor may be required to report on other info as a separate engagement

Question 35

what should the auditor do in regards to other info

Answer 35

-read other info and be alert for material inconsistencies between other info and (FS and auditor understanding)

Question 36

what to do if theres a material inconsistency between other info and auditor

Answer 36

discuss with management and conclude whether misstatement is in other info or in FS, or if auditors understanding needs to be updated

always communicate inconsistincies with TCWG

Question 37

after discussing with management about discrepancy in other info, turns out amendment must be made in audited FS

Answer 37

consider further audit procedures and effect on audit report, evaluate misstatement in line with ISA 450.

Question 38

after discussing with management about discrepancy in other info, turns out amendment must be made in OTHER INFO

Answer 38

understand the issue
ask management to revise other info, if they refuse ask TCWG
if not resolved, consider impact on auditors report, or withdraw from engagement

Question 39

how is reporting on other information done in auditors report?

Answer 39

there will be a paragraph titled other information.
stating:
-management is responsible for other info
-other info includes XYZ report but not the FS and auditor report
-our opinion does not include other info
-our responsibility is to read other info, consider if there is any material inconsistency with FS or our knowledge.
if there is a material misstatement in other info, we are required to report that.

Question 40

if there is no material misstatement in other information

Answer 40

we will write in other info that “we have nothing to report in this regard” in last line

Question 41

if other info is not made available to auditor

Answer 41

Other info includes XYZ report but it is expected to be made available to us after the date of auditors report

our responsiblity is to read other info when it becomes available and consider if consistent with FS and our understanding.

Question 42

material misstatement in other info, not corrected by management, audit report impact?

Answer 42

we have concluded that material misstatement of other information exists
(describe the material misstatement)

Question 43

3 types of modified opinion

Answer 43

qualified
adverse
disclaimer

Question 44

what does pervasive mean

Answer 44

-not confined to specific elements in FS
-represent a substantial portion of FS
-in relation to disclosures, are substantial to users understanding of FS.

Question 45

in what instances could it be said that FS are materially misstated

Answer 45

-appropriateness of selected accounting policies
-application of selected accounting policies (inconsistency or error)
-appropriateness or adequacy of disclosures in FS

Question 46

what circumstances could lead to inability to obtain SAE?

Answer 46

-circumstances beyond the control of entity
-nature or timing of auditors work (like auditor appointed after stock counts)
-limitations on scope of audit imposed by management (eg. denied access to third parties)

Question 47

what is the impact on report when audit opinion is modified

Answer 47

the opinion and basis for opinion paras titles will be adjusted
- “basis for qualified/adverse/disclaimer opinion”

basis of opinion para should describe details of matter, corrections required, or remaining uncertainty.

Question 48

what are the implications to be considered when opinion is likely to be modified?

Answer 48

-inform TCWG, so they have opportunity to respond
-external consultation with regulators or others may be required
-management integrity in question, EQCR required
-possible withdrawal from engagement and legal advice.