Process Of Assurance: Evidence And Reporting Flashcards
ISA (UK) 500: Evidence must me…
- Sufficient (quantity)
- Appropriate (quality)
Sufficient evidence depends on factors like…
Risk
Materiality
Level of assurance to be given
Appropriate evidence factors
- Reliability
- Relevance
Reliable evidence two factors
- Source
- Format
Relevant evidence
Proves a FS assertion
Or multiple
ISA (UK) 315 financial statement assertions about classes of transactions and events, and related disclosures, for the period under audit
- Occurrence
- Completeness
- Accuracy
- Cut-off
- Classification
- Presentation
Related to transactions
Occurrence
Transactions that have been recorded:
Have occurred
Pertain to the entity
Completeness
All transactions have been recorded
(That should have been recorded)
Accuracy
Amounts recorded APPROPRIATELY
Cut-off
Recorded in correct accounting period
Classification
Recorded in proper accounts
Presentation
Transactions and events:
1. Appropriately aggregated
2. Clearly described
Related disclosures are:
1. relevant
2. understandable
ISA (UK) 315 assertions about account balances and related disclosures, at the period end
- Existence
- Rights and obligations
- Completeness
- Accuracy, valuation and allocation
- Classification
- Presentation
Related to assets, liabilities and equity
Existence
Assets, liabilities and equity interest exist
Rights and obligations
The entity owns the assets
The liabilities are the entity’s obligations
Audit approach: two types of test
- Tests of control
- Substantive testing
Tests of control
Testing the system that gets the numbers into the financial statements
Tests of control procedures include
Enquiry
Observation
Reperformance
Data analytics
When are Tests of control appropriate
When control risk is low
Tests of control more efficient to gather evidence
Why can’t the auditor just carry out tests of control?
Inherent limitations of controls
Substantive testing
Test the numbers in the financial statements
Substantive procedures include
Analytical procedures
Tests of detail
When must substantive procedures must always be carried out?
On material items
Testing: Step one
Preliminary assessment of internal controls, including walkthrough tests
Preliminary assessment of internal controls, including walkthrough tests: Question
Do you expect controls to be effective?
What to do if controls expected to be effective?
Tests of controls
What to do if controls aren’t expected to be effective?
Substantive testing
What to do if tests of controls found to be effective?
Limited substantive testing
Evaluating results: Basic criteria
- Relevant
- Reliable
E.g. doubts over management integrity
discrepancies between evidence sources - Sufficient
Relevance
Audit evidence supporting all FS assertions for a given account balance
What to do if evidence not sufficient?
Attempt to find further evidence
Consider implications for the audit opinion
Express auditor opinions
- Opinions on FS
- Opinions on other matters prescribed by CA06
Must always be stated
Opinions on FS
- True and fair
- Properly prepared in accordance with CA06/Standards
Opinion on other matters prescribed by CA06
Info in D’s report and strategic report consistent with FS
Implied opinions only required when
Material problem arises
(Though best practice to mention regardless)
Implied opinions matters:
- Returns: Adequate for audit not received from branches not visited
- Accounts: Don’t agree to underlying accounting records
- Proper: (Adequate) accounting records not kept
- Information: And explanations required for audit not received
- Directors’ remuneration: Disclosures required by law not made
Auditor’s report format
Title
Adresse
Auditors opinion on FS
Basis for opinion
Going concern
Key audit matters (listed Cs)
Other information
Management responsibilities
Auditor responsibilities
Explanation of extent audit capable of detecting irregularities (incl fraud)
Opinion on other matters
E.g. whether D’s R and SR consistent with FS
Matters on which the auditor is required to report on by exception under CA
Name and signature of engagement partner
Auditor’s address
Date of report
When will auditor’s report wording need to be modified?
- Material misstatements
- Insufficient appropriate evidence
UK Governance code Key Audit Matters sections
{Rubbish Audit Matters Sections}
- Assessment of RISKS of material misstatement
- APPLICATION of MATERIALITY
- Overview of SCOPE
One benefit of longer-form auditors reports?
Closing expectations gap
Non-audit assurance report (ISAES/ISREs) sections
Title
Addressee
Identification and description of subject matter
Identification of criteria
Inherent limitations
Restrictions upon purpose/user
Identifying responsible party
Work performed in accordance with relevant standards
Summary of work
Conclusion
Date
Name of firm/practitioner
