Q&A Chapter 4: concluding and reporting on engagements Flashcards
consequences of not checking plant and equipment register
a) consequences
b) recommendations
- register may not exist
- assets may not exist
- capital allowance implication
- depreciation - appropriate? written down, still in use?
b) reconciliation - pysical-register and register-physical
Opening balances - what do you need to think about
- check brought forward correctly
- perform substantive testing on opening balances
- changes must be disclosed
incorrect classification last year - audit opinion was unmodified… what are auditor’s responsibilities
- if comparatives are not adjusted… should consider implications for report
- if they are, opinion is unmodified
First time auditor - responsibility
disclose that no audit last year
Manager make a disclosure note about going concern - what are auditors responsibiilities?
- happy with it, and disclosures are accurate… unmodified opinioin and draw attention to note in emphasis of matter paragraph
- if note is inadequate and disagrees with basis of preparation (accruals/break-up basis) then modified opinion
Read newspaper and that a major customer goes into liquidation… what actions should you take?
a) post audit
b) during audit
a)
- ‘material subsequent event!’
- no responsibility to detect, but it has been bought to our attention… need to deal with it
- discuss with directors
- because they haven’t yet issued the statements, they could amend the financial statements… they find a true and fair view
- if they refuse to amend - we have a problem… goes out with a material misstatement but we have said true and fair view
- get legal advice
b)
- is there a provision in place?
- going concern risk?
- goods dispatched/ payment made?
Auditor finds out that company is not sticking to control procedures that it has in place
recommendations?
- employees in breach must be listed
- circulate company policy
- reccomend improvements to the control
Customer disagrees with receivables amount
- timing- when was it received
- should we extrapolate?
- is it problem with control? individual? where was the error?
Auditor is prevented by management from carrying out procedures to check amounts - what affect wil lthis have on report if:
a) material
b) not material
a) Qualified opinion - ‘except for’ … limitatiouns of scope, description of circumstances, amount
b) disclaimer of opinion - unable to form opinion of true and fair, description of amounts
a) Going concern - but significant doubts
b) not a going concern
a) disclosure of: statement of facts, nature of concern, assumption made in using going concern, plans and actions to takd
b) prepared on break up basis, assets written down at recoverable amounts, liabiilites reassessed, reclassivfied as long to short term
Purchases are not authorised - issues / recommendations?
ISSUES -duplication - fraud issues - poor quality RECOMMENDATIONS - set a limit -segregation of duties - regular budget comparison
Managing director gives you a written representation RE cash sales
- integrity issue
- check lifestyle of manager relative to income
- internal controls?
- analytical review?
- GP%?
Delay in putting through receipts from customers
- time management? issue here?
- cut off check - right side of the year?
- ## check b/f amount
Chairman’s report is inconsistent with the financial statmeents
1) what is issue? discuss with directors
2) understand why and encourage to change
IF HE DOESNT CHANGE
- big issue, cannot say true and fair
- OTHER MATTER PARA: add a paragraph after opinion “except for this matter the directors report is consistent with FS”
- must explain inconcistency
Emphasis of matter paragraph - explain
- draw users attention to a matter presented or disclosed that if of importance to the fundamental users understanding
