Topic 10 - Reporting

Question 1

Duties of the Auditor

Answer 1

Report to shareholders(members) on whether the FS show true and fair view and prepared in accordance with applicable framework.

Question 2

Report Elements

Answer 2

o Title – clearly indicates that it is the report of an independent auditor and is distinguishable.
o Addressee – usually to the shareholders.
o Opinion paragraph – when unmodified: ‘the FS are presented fairly’ or ‘give a true and fair view’.
o Basis of opinion – describes the professional standards applied during the audit.
o Key Audit Matters – highly significant matters (highlights) of the audit (listed only)
o Other information – for management use.
o Management’s responsibility – prep of FS, IC and free from misstatement (fraud and error)
o Auditor’s responsibility – express an opinion on the FS free from misstatement.
o Other reporting responsibilities – such as report on legal and regulatory requirements.
o Name of the engagement partner – person responsible for the audit opinion.
o Signature of the auditor.
o Date of the auditor’s report – date on which the auditor has obtained sufficient appropriate evidence on which to base the auditor’s opinion on the FS.

Question 3

Key Audit Matters (KAM)

Answer 3

ISA 701 - Determine matters which are regarded as KEY

Def: matters in the auditors professional judgement, of most significance in FS - Matters communicated with those charged with governance.

Susceptible to higher risks of material misstatement, significant management judgements/estimates, effect of significant events/transactions

Question 4

Misstatement

Answer 4

Not Material = Unmodified - True and Fair
Material but not pervasive = Modified/Qualified “except for”.
Material and Pervasive = Modified/adverse (not true and fair)

Question 5

Inability to obtain Sufficient appropriate audit evidence.

Answer 5

Not Material = Unmodified True and Fair
Material but not pervasive = modified/qualified “except for”
Material and Pervasive = Disclaimer - Do no express and opinion.

Question 6

Unmodified

Answer 6

True and Fair in all material respects

Question 7

Modified

Answer 7

• Not free from material misstatements
• Unable to obtain sufficient appropriate evidence

Question 8

Pervasive

Answer 8

• Not confined to specific elements
• Substantial proportion of FS
• Unrealiable

Question 9

Qualified

Answer 9

• Material but not pervasive
• Matter is material to a specific area of FS but does not effect the rest
• Opinion states “except for”

Question 10

Adverse Opinion

Answer 10

-Material and Pervasive
- Not true and fair
- Wrong basis
-Material misstatement/substantial

Question 11

Disclaimer of Opinion

Answer 11

• Not obtained sufficient appropriate evidence
  -Pervasive misstatements
• Does not express and opinion
  -Failure to keep records
• Refusal of written representation
• Failure to provide evidence
  “we engaged to audit the FS”

Question 12

Additional Communications

Answer 12

Material uncertainty related to going concern.

Emphasis of matter paragraph - draw readers attention to area included in FS - Uncertainty - not for immaterial misstatements.

Other Paragraph - Anything that has not been covered. Relevant to understanding FS/Audit

Other Info Section
- other that FS
-Chair report
- social environment
- directors report
- 5 year summaries.

Question 13

Exam Approach

Answer 13

1. Material assessment
2. Identify Issue - misstatement/evidence
3. Comment on Issue; standard, evidence, outcome..
4. State issue; material or not
5. Conclude; modified or unmodified
6. State opinion
7. Other reporting implications.