EXCEL PROFESSIONAL INSTITUTE ADVANCE AUDIT & ASSURANCE PREPARATORY CLASS FOR MAY 2017 SITTINGS

Transcription

1 ADVANCE AUDIT & ASSURANCE PREPARATORY CLASS FOR MAY 2017 SITTINGS BY COBBINAH DICKSON (CA, B.COM, [MBA FINANCE-CANDIDATE])

2 EXCEL PROFESSIONAL INSTITUTE

3 3 Exams Expectation Audit report is based on standard layout, set out in the Audit Standard. There are two (2) ways of audit Report questions in an exams. Case Study-and what is the likely audit report implications in the question. Audit Report itself-and be asked..is it any good? Is it a right report, clear or standard report?

4 4 EXCEL PROFESSIONAL INSTITUTE Contents of a Standard Audit Report 1. Title - Report of Independent Auditors 2. Addressees - To the shareholders of ABC 3. Introduction - A sort of explaining terms of reference, just explaining what it is and what has been actually audited. That other information has been read but not audited. Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flow

5 5 EXCEL PROFESSIONAL INSTITUTE Contents of a Standard Audit Report 4. Auditor Responsibilities and Basis of Opinion How the audit was done (say things like, the audit was done on test basis, or we didn t check every single thing. Will have familiar things like reasonable assurance, sufficient appropriate evidence, free from material misstatement. It will also explain which audit standard that auditor has followed. Typically the auditor would say we planned and performed our audit in order to obtained sufficient appropriate evidence

6 6 Contents of a Standard Audit Report 5. Opinion Section Generally speaking, there are two opinions given but there could be more depending on the country of reporting. I. Whether FS are true and fair II. III. Whether FS were properly prepared Other opinion as required by the country (e.g. In UK, give opinion as the whether the Directors Report are consistent with the FS)

7 7 Contents of a Standard Audit Report 6. Signature and Date I. Name of the audit firm who s done the audit II. III. IV. The date they are signing the report Often the city in which their audit firm s Head office is based. In Ghana now, you don t just sign the name of the firm; you put the name of the engagement partner (and certificate number) who is signing the report. 7. Extra Section after the opinion- Emphasis of matter.

8 8 Outcomes of An Audit Report CAUTION!!! Careful with terminology, there are two words that are very easy to confuse and they don t mean the same thing. Modification - A modification is a change from the standard audit report. There are various types of modification, some of which are called Qualification Qualification -Modification and qualification are not the same thing, qualification is an example of modification (Qualification is part of AUDIT modification) REPORT

9 9 6 Outcomes of Audit Reports

10 10 6 Outcomes of Audit Reports 1. Unmodified Audit Reports This is a report that is the standard of vast majority of companies. In this situation; 1. The auditor believes the FS are True and Fair 2. The auditor believes the FS were properly prepared 3. There is nothing else the auditor wish to report on

11 11 6 Outcomes of Audit Reports 5 Modifications 2. Unqualified Report & Emphasis of Matter or Other Matter There is nothing wrong with the financial statement and no limitation on the scope of audit work.but there is something important that the auditor wish to draw the shareholders attention on.

12 12 6 Outcomes of Audit Reports Disagreement 3. Except For Qualification due to material misstatement (disagreement) in the financial statement. 4.Adverse Opinion: Where the auditor disagree with the truth and fairness of the financial statement overall.

13 13 EXCEL PROFESSIONAL INSTITUTE 6 Outcomes of Audit Reports Limitations on Scope 5. Except For..Might Qualification due to lack of sufficient appropriate evidence during the audit work. 6.Disclaimer of Opinion: : Where the limitation is so large that the auditor is unable to give an opinion at all.

14 14 EXCEL PROFESSIONAL INSTITUTE Modifications and their Implication on the Final Audit Report 1. Emphasis of Matter Standard audit report but. 1. Extra paragraph under opinion section, without qualifying the report. 2. Refers to notes in the financial statements or part of annual report. 3. Use to emphasize matters or draw shareholders attention on certain issues in the financial statement.

15 15 EXCEL PROFESSIONAL INSTITUTE Modifications and their Implication on the Final Audit Report 1. Emphasis of Matter Examples 1. where a company has a going concern threats but they have disclosed them in the account, as such you cannot criticize the account since they have disclosed them. There is a major court case but has been fully disclosed in the notes to the financial statement. 2. In an annual report, there are misleading comments or inconsistencies suggesting FS are wrong but auditor believes the FS are true and fair.

16 16 Modifications and their Implication on the Final Audit Report 2. Disagreement As an auditor, it is possible to disagree with the numbers in the account or disclosures in the financial statements (disagree with numbers or disclosures). With disagreement, whether it is except for (fairly material) or adverse (real pervasive level), it is the opinion section which is qualified.

17 17 EXCEL PROFESSIONAL INSTITUTE Modifications and their Implication on the Final Audit Report OPINION Under Disagreement 1. Heading should make clear that, there is a disagreement 2. Explain the mistake (usually involves mentioning IFRS) that have been breached. 3. Explain the effect- e.g. On profit for correcting this mistake 4. Except For or Do Not give a true and fair view (adverse)

18 18 Modifications and their Implication on the Final Audit Report 3. Limitation on Scope Two parts of the audit report are going to be affected: Audit Responsibilities and Basis of Opinion: We planned our work in order to obtained sufficient appropriate audit evidence in order to form an opinion. However, our evidence was limited because 1. What was missing? Year-end inventory count (IC) 2. Why.? Appointed after year end (IC)

19 19 Modifications and their Implication on the Final Audit Report OPINION Section Under Limitation on Scope 1. Except For Might.be necessary.or 2. Cannot give an opinion (Disclaimer)

20 20 CRITICISING AN 1. Clarity Technical words or normal English words would have made sense 2. Detailed - Is it detailed enough? 3. Consistency Is the report consistent? If one part of the report is suggesting a major problem with the account, it will be odd if the opinion then said the accounts are true and fair. That will confuse people so we want the report to have a consistent message. 4. Everything in right place - is everything in the right place? For example, if emphasis of matter, it should be at the end of the report. 5. The Opinion- Do you think the opinion is appropriate. There are six opinions. 6. Prior Year Figures - Is there any issue with prior year figures or prior year audit opinion that needs to be reported? E.g. Except for adjustment required to prior year figures, the FS give True and Fair vieww.

21 21 Reporting Responsibilities; 1. Tell board of directors (or audit committee) as soon as possible, preferably in writing. 2. May need to report to police, or a regulatory authority (e.g. Anti-money laundering authority) 3. If the breach affects the accuracy of the FS, may need to mention it in the audit opinion.

22 22 Thank You! Questions, Comments. etc.