Flashcards
Audit Reporting
Cards in this deck (13)
- 1What are the CA06 requirements of audit reporting?-Report on all accounts laid before members
-Attach copy of report to accounts
-Report: scope of the audit, true and fair view, compliance with acc standards and CA, consistency of directors report and strategic report
-Report matter by exception - 2What are the concerns with the audit report?-Over long, complex, with standard wording
-Description of audit no longer necessary
-Provisos and caveats: get out clauses e.g. reasonable
-Increased positive statements
-Information on risks and uncertainties - 3What is the structure of an unmodified audit report?-Title
-Introductory paragraph
-Responsibilities of auditors and directors
-Scope of the audit- refer to FRC website
-Opinion
-Opinion on other matters
-Matters to report by exception
-Identity of the auditor and location
-Date - 4Where should an auditor mention modified audit procedures?-If it doesn't impact their audit opinion: emphasis of matter or other matter
-If it does impact their audit opinion: qualified opinion, disclaimer of opinion, adverse opinion - 5What should be included in the emphasis of matter paragraph?-Accounts show a true and fair view
-Highlight specific uncertainties
-Describe the matter and quantify is possible - 6Which two matters would affect the audit opinion?-Limitation of scope
-Disagreement - 7What is a limitation of scope and what can it be caused by?-When the auditor has been unable to obtain all the information and explanations that would normally be available
-Cause by directors or circumstances - 8What can cause disagreements?-Inappropriate accounting policies
-Disagreements to amounts in the financial statements
-Disagreements to matters of content or disclosure
-Non-compliance with legislation - 9Why might auditors be reluctant to qualify?-Auditors assist the directors with accounts so conflicts don't arise
-Directors amend the accounts
-Auditors may be willing to accept true and fair override
-Poor auditing
-Rarity of qualifications make auditors more reluctant to qualify - 10What findings from the audit might you want to include in the audit report?-Qualitative aspects
-Difficulties encountered in the audit
-Draft management representation letter
-Unadjusted misstatements
-Adjusted misstatements (if had been corrected at level lower than senior)
-Expected modifications to the audit report
-Material weaknesses in systems
-Information relevant to CG - 11What is the structure of the management letter?-Addressee (board of directors or chief accountant)
-Introduction
-Major points
-Disclaimer
-Conclusion
-Appendices - 12What could be included in the appendices of the management letter?-Contains less significant points
-Weakness
-Implication
-Recommendation
-Management response - 13What are the advantages and disadvantages of publishing the management letter?-+ves: Shareholders might find it useful, assessment of management, appointment of auditors
--ves: Less frank, lack of understanding, Validity and relevance of points not clear, negotiation over contents