EVALUATION AND REVIEW (I) (1. Revision: Review procedures and evaluation…
EVALUATION AND REVIEW (I)
6. Revision: going concern - ISA 570
Evaluating management's assessment
Analyzing and discussing cash flow
Analyzing and discussing the entity's latest available interim financial statements
Reading the terms of debentures and loan agreements
Reading minutes of the shareholders' meeting, TCWG, etc.
Inquiring of the entity's legal counsel regarding litigation and claims
Confirming the existence, legality and enforce-ability of financial support arrangements
Request written confirmation from third parties on their willingness of support to the entity if any
Timely discussions with management on their plans and resolution of any identified going concern issues
Remain alert throughout the audit
Do not need to carry out detailed procedures if the entity has a history of profitable operations and ready access to financial resources
Auditor shall cover the same period as that used by management to make its assessment or by law if it specifies a longer period
If management's assessment covers a period of less than 12 months, the auditor shall request to extend its assessment period to at least 12 months from the report date
The auditor shall consider whether management's assessment includes all relevant information of which the auditor is aware as a result of the audit
Examples of events causing doubts over going concern
: Net liabilities or net current liability position, adverse key financial ratios, indications of withdrawal of financial support by lenders, etc.
: Management intends to liquidate the entity or to cease operations, loss of key management without replacement, Emergence of highly successful competitor, etc.
: Non-compliance with capital or other statutory requirements, uninsured or under-insured catastrophes when they occur
The management is responsible to assess the entity's ability to continue as a going concern, considering:
The degree of uncertainty about the vents or conditions being assessed increases significantly the further into the future the assessment is made
Judgements are affected by the size and complexity of the entity, the nature and condition of its business and the degree to which it is affected by external factors
Judgements are made on the basis of the information available at the time
5. Revision: subsequent events - ISA 560
Facts discovered after the financial statements have been issued
Similar as above
Facts discovered after the date of the auditor's report but before the financial statements are issued
The situation may arise where the statements are not amended but the auditors feel that they should be.
However, if the fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor's report, may have caused the auditor to amend the auditor's report, the auditor shall:
Discuss the matter with management, and where appropriate, TCWG
Determine whether the FSs need amendment and, if so,
Inquire how management intends to address the matter in the financial statements.
The auditor does
have obligation to perform procedures, or make enquiries regarding the FSs after the date of their report.
Events occurring up to the date of the auditor's report
The auditor shall perform audit procedures (Enquires of management, read minutes of board, review latest accounting records, etc.) designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the FSs and the date of the auditor's report that require adjustment of, or disclosure in, the financial statements have been identified
Events after the reporting period - ISA 10
Events that are indicative of conditions that arose after the reporting period. Some events will require disclosure.
Events that provide further evidence of conditions that existed at the end of the reporting period
4. Revision: other information - ISA 720
Other information is obtained and materially misstated
As described below, we have concluded that such a material misstatement of the other information exists.
Other information is not obtained
The X report is expected to be made available to us after the date of this auditor's report
Other information is obtained and not materially misstated
We have nothing to report in this regard
If necessary perform other procedures to conclude whether:
A material misstatement of the other information exists;
A material misstatement of the financial statements exist; or
The auditor's understanding of the entity and its environment needs to be updated
Reading and considering the other information
The auditor must read the other information, looking for:
Material inconsistencies between the other information and the financial statements
Material inconsistencies between the other information and the auditor's knowledge obtained in the audit.
Access to other information
The auditors must make arrangements with the client to obtain other information prior to the date of their report
is financial or non-financial information (other than financial statements and the auditor's report thereon) included in an entity's annual report
misstatement of the other information
exists when the other information is incorrectly stated or otherwise misleading (including because it omits or obscures information necessary for a proper understanding of a matter disclosed in the other information
3. Revision: Comparatives - ISA 710
Two types of comparative information
Comparative financial statements
are amounts and other disclosures for the prior period included for comparison with the financial statements of the current period but, if audited, are referred to in the auditor's opinion. The level of information included in those comparative financial statements is comparable with that of the financial statements of the current period.
a full set of FSs included within the current year's Annual Report for reference
are amounts and other disclosures for the preceding period included as part of the current period financial statements, which are intended to be read in relation to the amounts and other disclosures relating to the current period. The level of detail presented in the corresponding amounts and disclosures is dictated primarily by its relevance to the current period figures
the set of prior-year figures (the right of current year figures) in FSs
is the amounts and disclosures included in the financial statements in respect of one or more prior periods in accordance with the applicable financial reporting framework.
2. Opening balances - ISA 510
Audit conclusion and reporting
Nature and extent of audit procedures depends on:
The accounting policies followed by the entity
The nature of the account balances, classes of transactions and disclosures and the RoMM in the current period's financial statements
The significance of the opening balances relative to the current period's financial statements
Whether the prior period's financial statements were audited and, if so, whether the predecessor auditor's opinion was modified.
1. Revision: Review procedures and evaluation of findings
Audit clearance meeting
This is not a requirement of ISA but it is a good way of ensuring that there are no misunderstandings about the financial statements or the auditor's report to be issued.
Audit firms frequently use checklists, which must be signed off to ensure that all final procedures have been carried out, all material amounts are supported by sufficient appropriate evidence, etc.
- Evaluating the effect of misstatements - ISA 450
The auditor shall determine whether uncorrected misstatements are material, individually or in aggregate and communicate with TCWG the effect they may have on the opinion in the auditor's report
Materiality of disclosures
including analyze key rations (profitability, debt, shareholders investment ratios)
Review for consistency and reasonableness
The auditors should consider whether the FSs are consistent with their knowledge of the entity's business and with the results of other audit procedures, and the manner of disclosure is fair.
Compliance with accounting regulations
The auditors should consider whether:
The information presented in the FSs is in accordance with local/national statutory requirements
The accounting policies employed are in accordance with accounting standards, properly disclosed, consistently applied and appropriate to the entity