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Completing and reporting on the audit (Engagement wrap up (Sufficient and…
Completing and reporting on the audit
Engagement wrap up
If multi location audit, obtain documents from other auditors
Consider materiality level used in audit. Is it still appropriate considering factors discovered
Remove all unnecessary documentation, drafts and reviews notes from review file. Remove documents not required to support opinion
Reconsider assessment of internal controls at entity level and risk of fraud given results of tests and misstatements discovered
Revisit audit plan to determine if all matters have been addressed
Perform subsequent events procedures. Identify events occurring between year end and date of audit report for any adjustments
Consider if there are any material inconsistencies between audited financial reports and other information
Revisit to-do notes to resolve incomplete items
Determine all necessary matters appropriately considered
Review planned procedures for proper and completed execution
Sufficient and appropriate evidence
Materiality of misstatements
management responses
results of audit procedures performed
Quality of information obtained
persuasiveness of evidence
Persuasive
Corroborative
Minimal
Evaluating audit evidence
a. the assessment of risk of material misstatement at the assertion level are appropriate
if misstatement found, consider:
reasons
impact of misstatement
need to modify or perform further audit procedures
evaluate materiality level due to:
new client information
change in understanding of the client
new circumstances (significantly lower profit
b. sufficient evidence has been obtained to reduce risk of material misstatement to an acceptably low level
Going concern
Going concern underpins accounting basis that the entity will be able to
realise assets
discharge its liabilities in the normal course of the business
management
must assess going concern:
on a basis of 12 months
Use information available at the time of assessment
Judgments affected by size and complexity of entity, nature and conditions of business
auditors
must assess
reasonableness of management's assessment and whether disclosure if required in financial report
reasonableness of management's procedures in identifying going concern issues and mitigating circumstances
If goign concern is not appropriate, management should prepare financial report on liquidation basis
Subsequent events
Timeline
date of financial report approved by management
date of auditor's report
date of financial report publicly released
Events that occur after year end/ management approval
Type 1 Subsequent events - adjusting events
can affect estimates in financial report, or indicate going concern assumption
ACTION:
adjust financial report
for effect of these events where material
example: bankruptcy of customer after year end which would affect provision for doubtful debts
example: amount received for insurance claim in year end
Procedures used for subsequent events review
Auditor:
considers whether financial report needs changing
Discuss matter with client
Takes action appropriate with circumstance
Gain understanding of and evaluating
reading minutes of meetings
enquiring management
Extending analytical procedures
Type 2 Subsequent events - non - adjusting events
does not result in changes to amounts in financial report
ACTION: change disclosure, or notes
e.g purchase of business, uninsured loss of assets due to fire, flood, subsequent to year end
Misstatements
differences between reported financial item and correct reporting as required by standards
Differences could be due to
item classification, presentation or disclosure
auditor evaluates whether misstatements need to be corrected
unintentional (error) or due to fraud
1. Current year misstatements
auditor prepares schedule of uncorrected differences in order to assess overall effect on financial report
consider effect on future years reports
2. Prior year misstatements
may be immaterial in previous year, could be material this year
Qualitative considerations
Nature of the misstatement is more important than quantitative amount in some circumstances
client's compliance with regulatory requirements or contracts
Management's satisfaction of requirements linked to award bonuses
Affect on key ratios in financial statement
Evaluating the conclusions and forming an opinion
Evaluate audit evidence obtained
Evaluate effects of unrecorded misstatements and qualitative aspects to entity's accounting
Evaluate whether financial report properly prepared according to standards
Evaluate fair presentation of financial report
Modification to audit report
Auditor may need to modify audit opinion to express qualified, adverse or disclaimer of opinioin
Or add emphasis of matter or other matter paragraph
conditions leading to modified report
significant uncertainty exists that should be brought to the readers attention
emphasis of matter: does not affect auditors's opinion . Could be events that could affect the entity which are out of the control of the entity
a limitation of the scope of the engagement exists
auditor may have timing problems or inability to perform procedures, or auditor was restricted
There is a disagreement with those in charge of governance regarding teh application of accounting policies or procedures
accounting policies,