Week 8 - Completion & Reporting Flashcards
what does the final review of FS consist of?
compliance check and sense check
- compliance with laws & regulations
- does everything in FS make sense
how are misstatements evaluated?
- accumulate misstatements and assess if they’re material
- inform management of misstatements
- seek written representations from management to confirm that the uncorrected misstatements are immaterial
if opening balances are misstated…
the FS for the current year may also be misstated
if the auditor cannot gain certainty over the previous year’s closing balances…
- agree the b/f figures to last year’s FS
- assess accounting policies have been appropriately applied to opening balances
- review previous auditor’s working papers
who’s responsible for determining whether an entity is a going concern?
management
auditor’s responsibility is to assess whether this assumption is reasonable
should going concern be considered at all stages of the audit?
yes
at acceptance, planning and reporting stage
two types of subsequent events?
adjusting events
non adjusting events
adjusting events?
provides evidence of conditions at the date of the FS
FS should be adjusted
non-adjusting events?
provides evidence of conditions arising after the date of the FS
if material, the event should be disclosed
adjust only if going concern is affected
examples of adjusting events?
- resolution of a court case
- inventory write down (NRV ovevalued)
- discovery of fraud/error
- customer goes into liquidation
examples of non-adjusting events?
- destruction of assets
- dividends declared post year end
- plans to close part of the business announcement
auditor duty from y/e to sign off date?
active duty
- perform audit procedures
- ensure subsequent events have been appropriately accounted for
- written reps that subsequent events have been disclosed
auditor responsibilities from sign off date to issuance of FS
passive duty
- no obligation to perform procedures
- discuss w/ management if they become aware of events which require adjustments
when should written representations be signed?
before the audit report is signed
provides assurance that management can attest to the information provided throughout the audit
can you give an unmodified opinion without management written reps?
no
potentially a disclaimer of opinion (opinion cannot be given)
TCWG?
includes directors of a company and audit committee
what does an engagement letter outline for communication w/ TCWG?
- the form which communications w/ TCWG will take
- the appropriate persons to whom such communications will be made
which matters must be communicated to TCWG?
- responsibilities of auditor in relation to FS
- scope & timing of the audit
- significant findings from the audit
- matters relating to auditor independence
effective communication w/ TCWG must be…
- timely
- appropriate form and frequency
- fulfils expectations
- includes mgmg comments
- includes disclaimer
must TCWG conversations be documented?
yes
how are deficiencies in internal controls communicated?
deficiency
consequence
recommendation
which factors determine whether a deficiency is significant?
- likelihood of MM
- susceptibility to loss/fraud
- size of item in FS
- volume of activity
- importance of control
what does a report to TCWG include?
- covering letter
- appendix setting out deficiencies, consequences & recommendations
two types of audit reports?
unmodified and modified report
