Module 20

Question 1

Directors’ assessment of going concern focusses on (3)

Answer 1

• Preparation and review of forecasts and budgets
• Review of lending facilities
• Review of any pending legal cases

Question 2

Requirement for the auditor to review two statements in relation to going concern

Answer 2

• Director’s statement in the financial statements about the appropriateness of the going concern basis
• Director’s explanation of the prospects of the entity, the period considered and whether that is appropriate

Question 3

If auditor does not consider disclosure to be adequate regarding subsequent event

Answer 3

Constitutes a material misstatement and appropriate audit report must be given

Question 4

Extent of subsequent events review will depend on

Answer 4

Length of time between completion of fieldwork and date of auditors report

Question 5

If subsequent events are identified, should be tested

Answer 5

Substantively

Question 6

Summary of audit misstatements (SAM)

Answer 6

Record of all misstatements identified, excluding those that are clearly trivial

Question 7

Consider when determining of misstatement requires revision of audit procedures performed (3)

Answer 7

• The misstatement is an isolated incident
• There is evidence of a breakdown in internal control
• Inappropriate assumptions or methods have been applied elsewhere

Question 8

Once misstatement corrections have been made, the auditor will

Answer 8

Re-evaluate the risk of material misstatement, focusing on both individual items and the financial statements overall

Question 9

Representation letters are usually provided by management but drafted by

Answer 9

The auditor

Question 10

Internal completion documents (3)

Answer 10

• Points forward schedule
• Audit highlights memorandum
• Accounts disclosure checklist

Question 11

Audit opinion cannot be issued until

Answer 11

EQCR review has been concluded