Audit Report

1. Audit Report

2. Standard Unqualified Report • Common type – compliance with reporting framework • Reporting framework: • CA1965 • Approved stds on auditing • Approved accounting stds • Auditor satisfied – f/s present true and fair view

3. Basic Elements • ISA700 – Guidance on Auditors’ Report • 8 basic elements: • Report title • Addressee • Introductory or opening paragraph • Scope paragraph • Opinion or reporting paragraph • Name and signature of the auditor • Date of the report • Name and address of the audit firm

4. Auditors’ Report • Title • Appropriately titled • Clear to user • Distinguish AR with other reports • Addressee • Appropriately addressed • Addressed to members or shareholders

5. Auditors’ Report • Introductory Paragraph (3 imp stmts) • Audit was conducted & which f/c covered • F/s = management responsibility • Auditor’s resp. = to express opinion • Scope Paragraph • Communicate to users – what audit is all about • Audit was conducted = aprvd std on auditing • Audit – reasonable assurance –f/s no material misstatement

6. Auditors’ Report • Opinion Paragraph • Opinion – f/s true and fair view • Comply with financial reporting framework • Only consider matters that material • F/s comply with statutory requirements • Name and Signature of Auditor • Signed in personal name of audit partner • Approval number of the auditor

7. Auditors’ Report • Date of Report • Should be dated • Date –completed all sig. Audit procedures • Last date – auditor resp. for the review of sig events – after the date of fin stmts • Name and Address of firm • Firm name should be identified • Firm number • Location audit firm (address)

8. CA - Auditors’ Report • Sn 174(2)(a) and (b) • F/s are properly drawn up • To give true & fair view of matters rqd by Sn169 • To give true & fair view of co. state of affairs & results of operations • Accounting records, other records & registers – kept properly • Sn 174(3) – to form an opinion • Has obtained all the info & explanation rqd • Proper actg & other records – kept properly • Etc.

9. Reporting on Consolidated F/S • Holding co. auditor – responsible to report f/s of the holding co & consolidated f/s of the group

10. Holding Co. Audit All Subsidiaries • In express opinion – consolidated f/s where the auditor audits all subs • Whether he satisfied – f/s of the subs that are consolidated with other f/s – appropriate & proper for the purposes of the preparation of consolidated f/s • Whether he has recvd satisfactory info & explanations • Whether audit rpt of any subs was subject to any qualification

11. Holding Co. Not Audit All Subsidiaries • Common for some subs. In a group – audited by other audit firm(s) than parent co. auditor • To report: • The name subs – he has not acted as auditor • Whether he has considered f/s & audit rpt of subs where he not acted as auditor. • To consider professional competence of the other auditor

12. Modified Unqualified Auditors’ Report • Auditor – draw the reader’s attention to important aspects of the f/s • Auditor modifies the std audit rpt • Add explanatory para. – to highlight matters • ISA700 – additional para. do not affect opinion – refer as Emphasis of matter para. • Still unqualified

13. Modified Unqualified Auditors’ Report • Phrase use – “Without qualifying our opinion” • Example ‘Emphasis of Matter’ para. • Going concern uncertainty • Significant uncertainty due to pending litigation • Non-compliance with an approved accounting std but the auditor concur

14. Going Concern Uncertainty • Material uncertainty – doubt on going concern status • Disclosure of nature: • Identify principal conditions that cast doubt • Describe mgt plan to overcome the problem • State clearly – material uncertainty • Unqualified – if satisfied adequate disclosure made

15. Other Significant Uncertainty • Significant uncertainty – emphasis matter • Characteristic = depend on occurrence or non-occurrence of future events that are not directly controllable. • E.g. contingent liability • Proper disclosure of such uncertainty in the financial statements.

16. Auditor Agrees with Non-Compliance - AAS • Compliance with AAS would affect true and fair view – thus should not comply • Disclose in f/s & financial effect • If audit feel that compliance – result in f/s misleading, thus should agree with departure. • Should add paragraph – give reasons

17. Departures from Unqualified Auditors’ Report • 2 conditions – auditor unable to express an unqualified opinion • Scope of limitation • Disagreement • 3 types of report • Qualified • Disclaimer • Adverse

18. Unqualified Unqualified Modified Immaterial Scope limitation Disagreement Qualified Qualified material Scope limitation Disagreement Disclaimer Adverse Material & pervasive

19. Scope Limitation • Occur – inability to obtain sufficient audit evidence about some component of f/s • Auditor unable to apply all the audit procedures. • Client limits the scope of engagement – the client may be trying to prevent auditor from discovering material misstatement.

20. Scope Limitation • Example: client prevent auditor from attend physical inventory count. • Also, auditor unable to take alternative audit procedures. • Qualified = “except for” • If the effect of the scope of limitation = so material & pervasive = disclaimer. • Explain the scope of limitation before the opinion or disclaimer para.

21. Disagreement • Materially affected by an unacceptable departure from an approved accounting std => qualified or adverse opinion. • E.g. client’s use of an accounting std that is not acceptable or inadequate disclosure of material info. • Depend on materiality = qualified or adverse opinion. • Qualifying para – before opinion para. = explain reasons for adverse & the effects of departure. • Opinion para. – modified to state=> the f/s do not give a true and fair view and have not been drawn up in accordance with approve accounting stds.