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CHP2
STATUTORY AUDIT
aka FS audit
determine whether FS are stated in…
CHP2
STATUTORY AUDIT
- aka FS audit
- determine whether FS are stated in accordance with specific criteria (IFRS)
- required by law to perform
Purposes / Reasons
- shareholders appoint directors to run co on their behalf
- due to ownership & control division, directors accountable to shareholders, required to prepare FS (show performance of co under their stewardship
- FS lack credibility
- shareholders need independent auditor - check FS are free of material misstatement
Disadvantages
very high expenditure - however if already hired to carry out non-audit work (acc preparation, advisory work), additional cost maybe fairly small
disruption caused to co's staff - required to support auditors (ans Qs, provide doc & other info, etc.)
Advantages
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improve operational efficiency, accounting & internal control system
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Engagement Letter
- form contract between auditor & client, include all terms of audit engagement
- new client is sent PRIOR TO commencement of 1st audit. usually not sent again unless engagement terms change / client needs to be remind of the terms
- client sign & return a copy to auditor as acknowledge & agreement of the content
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Typical Matters Covered
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practical arrangement (timing, involvement of internal audit)
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Recurring Audits
- access whether terms need to be revised /
remind the entity of existing terms (factors)
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Auditors
Duties
- prepare audit report
- give opinion on FS
- make statement of circumstances when leaving
- make exception report regarding directors remuneration
- receive returns from branches not visited
- obtain explanation from officers of co
- ensure acc records maintain properly & support FS
Rights
- access to books, records & doc of co
- obtain info & explanation in performing audit work
- attend, speak & read at GM
- received notices / written resolutions at GM
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