Module 8: Audit Completion and Reporting Flashcards
Why is quality management important?
ensure that the audit is completed efficiently and in line with auditing standards and other relevant laws and regulations and audit engagement risk is reduced to an acceptable level
What are the key elements of a firm’s quality management system?
- The firm’s **risk assessment **process
- Governance and leadership
- Relevant ethical requirements
- Acceptance and continuance of client relationships and specific engagements
- Engagement performance
- Resources
- Information and communication
- The monitoring and remediation process
What is audit documentation and why is it important?
record of audit procedures performed, relevant audit evidence obtained and the conclusions the auditor reached
Important as:
* Provides evidence for conclusion
* Provides evidence of audit planning
* Assists in planning and performing audit
* Assists engagement quality reviews
* Enables engagement team to be accountable
* Retains a record for future audits
What information needs to be communicated to those charged with governance?
NEED:
* Auditor’s responsibilities
* Planned cope and timing
* Significant findings
* Auditor independance
SHOULD
* Significant difficulties
* Views of qualataive aspects
* Significant audit matters
What are the key elements of a firm’s quality management system?
Additional requirements for listed companies
separate engagement quality reviewer (EQR) to be appointed for each listed company audit
EQR is responsible for completing an engagement quality review, and the engagement partner is not able to issue the audit report until the engagement quality review has been completed.
What needs to be included in audit documentation?
- Name of client
- Year-end date
- Subject
- Working paper reference
- Preparer
- Reviewer
- Date of review
- Objective of work/test
- Details of work performed
- Results of work performed
- Conclusion
What are subsequent events?
events occurring after the year-end date
What are the responsibilities of directors in relation to subsequent events?
Undertake the subsequent events review and reflect any necessary adjustments or disclosures as part of their preparation of the financial statements.
What are the responsibilities of auditors in relation to subsequent events?
- Obtain **undertsanding of procedures **management have to identify SE
- Enquiry with management and governance of impact of SE
- Review post year-end minutes
- Request details of** pending litigation**
- Obtain written representation from mangement of SE
SE = subsequent events
What is meant by a company being a ‘going concern’?
Going concern = company is expected to continue for the foreseeable future
If not going concern, company’s value is limikted to resake or salvage value of its assets
What are the responsibilities of directors in relation to going concern?
- making an assessment of if company is a going concern
- Disclosing material uncertainties around going concern
- Disclosing if company has not prepared FS on going concern basis
What is the impact of the going concern issues on the financial statements?
applied going concern = true and fair view
NOT applying going concern coorectly = NOT a true and fair view
Uncertainty = disclosure required
What are the responsibilities of auditors in relation to going concern?
- Obtaining sufficent, appropriate evidence and conluding n appropriateness of going concern
- Concluding on if material misstatements exist
- Evaluate director’s assessment on if company is going concern
What are the key audit procedures performed in conducting an overall review of the financial statements?
- ADA
- A final analysis before audit report is signed
How is the effect of uncorrected misstatements evaluated at the completion stage of audit?
All material misstatements should be adjusted for by the entity, otherwise the financial statements will not give a true and fair view and the audit opinion may need to be modified.
How are uncorrected misstatements communicated to those charged with governance?
- Must tell management and governance of individual or aggregate material misstatement
- request this be corrected
- if not, then ask for written representation from management that they believe it is immaterial
What are the main areas which require representation from the management and those charged with governance?
Timing too
- Those charged with governance aknowledge responsibility for preparing FS
- Required representations by other ISAs (Going conern, fraud, misstatement)
- representations to support other audit evidence obtained during the audit of the financial statements
management representation letter should be dated as at the date of the audit report and obtained immediately before the audit report is signed
How reliable are written representations as evidence?
written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own
* comapre with other evidence
* not substitute for audit evidence
What are the two types of audit opinion?
- Unmodified - true and fair view
- modified - not true and fair so opinion cannot be formed
What is the impact of the incorrect use of going concern basis on the audit opinion?
Modified audit opinions
Material but not pervasive = qualified opinion
Misstatement in FS and pervasive = adverse opinion
lack of sufficent appropriate evidence and pervasive = disclaimer of opinion
What are the contents of the audit report?
- Title
- Addressee
- Opinion
- Basis for opinion
- Conclusions related to going concern
- Other information
- Reporting on other legal and regulatory requirements
- Matters on which auditors are required to report by exception
- Responsibilities of auditors
- Signature of engagement partner
- Adress
- Date of the audit report
What are the additional elements that need to be included in the audit reports of listed and public interest entities?
- Key audit matters
- Summary of audit approach
- Reporting on other legal and regulatory requirements
- Name of the engagement partner
What is the impact of modified opinion on the audit report?
Auditor should:
* Ammend the heading of the opinion and basis for opinion paragraph
* Give reasons for modification
* Quantify the effecr on the accounts if possible
Matters reported by exception
- Returns not recieved by branches visited
- Accounts do not agree with underlying records
- Proper accounting records are not kept
- Information and explanations necessary for the purposes of the audit have not been received
- Directors’ emoluments and other benefirs disclosures soecified by law are not complete
What are the additional responsibilities of auditors in relation to additional information in the annual report and other reporting documents?
read all other information and request management to solve discrepencies.
If material discrepency found, auditor must determine whether:
* FS need ammending
* Other info needs ammending
* Auditor’s understanding of entity needs updating
Material inconsistency = modification
