reporting

Question 1

knowledge checklist

Answer 1

form and contents of audit report
(study hub chap 13)

Question 2

matters to be considered on completion of audit (answering technique)

Answer 2

when we identify a problem in FS, we need to build a case thats what matters to consider is

-comment on materiality (see if given in Qs or calculate it)
-outline relevant acc treatment to be followed
-evaluate the risks/ issues
-discuss impact on FS (under over statement, inadequate disclosure)

Question 3

audit report questions

Answer 3

-audit opinion (unmodified or modified)
-tell which modified opinion and why

Question 4

answering technique: additional paragraphs

Answer 4

MUGC, EOMP, OMP
explain why to add
placement
content

Question 5

PRIMARY OBJECTIVE OF THE AUDIT IS

Answer 5

express opinion on truth and fairness of FS

Question 6

ISA 700 and 701

Answer 6

700- FORMING AN OPINION AND REPORTING ON FS
701- COMMUNICATING KAM IN AUDITORS REPORT

Question 7

FORMAT OF AUDITORS REPORT

Answer 7

-OPINION
-BASIS FOR OPINION
-KAM
-OTHER INFO
-RESPONSIBILITIES OF MANAGEMENT AND TCWG
-AUDITOR RESPONSIBILITIES
-REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
-SIGNED

Question 8

ISA 260- COMMUNICATION WITH TCWG

Answer 8

matters of audit importance must be communicated to TCWG. usually directors, but could be audit committee as well. we must establish to whom we must report, also how and when.

items to communicate:
-any relevant info from audit or any issues arising

this is sometimes referred to as a report to management. includes significant findings, like views on acc policies, difficulties encountered during the audit and any other matters relevant to the oversight of financial reporting purpose.

Question 9

ISA 265- reporting deficiencies in internal control to TCWG and management

Answer 9

-this standard deals with any specific internal control issues identified to ensure they r communicated promptly so action can be taken

-only the issues identified during course of audit and necessary to the creation of FS under review are communicated
-defs are classified as significant if they warrant attention of TCWG
-usually, recommendations and timescale are also presented

Question 10

ISA 701- reporting key audit matters in auditor report. if Audit matters are already reported to TCWG and Mgmnt, why include KAM in auditors report?

Answer 10

-ISA 701 says auditor should determine KAM based on matters reported to TCWG
-and then communicate those matter to shareholders and users of FS. put them in auditors report before reporting to TCWG.
-keep appt documentation of all KAMs

Question 11

what are KAMs

Answer 11

matters that in auditors professional judgement were of the most SIGNIFICANCE in current yr audit.
they are required for all listed entity auditor reports. they are part of unmodified report
they are not like EOM or OM paras and dont lead to modification

Question 12

what type of matters can be KAMa

Answer 12

-material, complex or subjective items, esp any associate misstatements
-matters where we encountered difficulty or extra audit effort
-areas where procedures were difficult to apply or several issues converged.

Question 13

KAM paragraph

Answer 13

-why they were asssessed as KAMs
-how they were addressed during audit
-Note from FS where more detail is given
-some KAMs like money laundering, law stuff may not be communicated

Question 14

if there are no KAMs

Answer 14

highly unlikely but still include para and state there are no KAMs

Question 15

is going concern uncertainty treated as KAM?

Answer 15

no as it would have its own section if required within a modified auditors report

Question 16

types of modifications

Answer 16

1) unmodified report + unmodified opinion: true and fair view

2) modified report + unmodified opinion: (EOM, OM, MURGC): “without modifying our opinion, we draw attention to..”

3) modified audit opinions: due to lack of SAE or MM

SAE:
-if material but not pervasive: qualified opinion (Except for…)
-if material and pervasive: disclaimer (we dont express opinion)

MM:
-material but not pervasive: qualified opinion( except for…)
-material and pervasive: ADVERSE opinion (do not give a true and fair view)

Question 17

what is an EOM paragraoh

Answer 17

-emphasis of matter paragraph
-draws attention to issues adequately disclosed in FS that users need to see in order to understand properly

eg. uncertainties related to future outcomes of litigation, regulatory action etc.
early adoption of new standards , catastrophe, if a new audit report is issued.

Question 18

KAM and EOM difference

Answer 18

matters that didnt require significant audit attention may still be EOMs
KAMs that require user understanding must still be included in KAM section

Question 19

where to put EOM paragraph

Answer 19

after basis of opinion para.
write full details and where further info can be found
EOM can be placed before or after KAM. upto auditors judgement

Question 20

EOM text

Answer 20

“auditors opinion is not modified in respect of this matter” as this para is only used when matter is adequately disclosed and treated

Question 21

what is the OTHER matter paragraph

Answer 21

draws attention to issues outside the scope of FS
anything else outside of FS users need to know
like:
-opening balances
-relating to conduct of audit (unable to withdraw as auditor)
-disclosure of comment required by laws, or local GAAP

Question 22

can other matter para refer to KAM

Answer 22

no as OM are outside scope of FS

Question 23

is other information paragraph same as other matter

Answer 23

no

Question 24

location of other matter paragraph

Answer 24

after basis of opinion, EOM and KAM paragraph.

Question 25

if there is a material uncertainty related to going concern, but the use of going concern assumtpion is appropriate

Answer 25

as long as disclosure is made adequately,
unmodified opinion may be issued but separate disclosure is required in auditor report

-there will be a paragraph called “MATERIAL UNCERTAINTY RELAED TO GOING CONCERN”

Question 26

location of MURGC para

Answer 26

immediately after Basis of opinion

Question 27

MURGC Text

Answer 27

we draw attention to note 6, saying company incurred net loss of XYZ amount, and as of that date, liabilities are more than assets.
these conditions indicate there is a material uncertainty that casts significant doubt on the company’s ability to continue as a going concern. our opinion is not modified in respect of this matter.