ISA 700 Audit Report (& its Elements) Flashcards

1
Q

What is the scope of ISA 700?

A

1Audit Report of, 2Complete Set, 3General Purpose, 4Financial Statements.

[Ref. ISA 700]

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2
Q

List the elements of Audit Report?

A
  1. Title
  2. Addressee
  3. Opinion
  4. Basis for Opinion
  5. Material Uncertainty relating to Going Concern (if relevant)
  6. “Emphasis of Matter” (if relevant)
  7. Key Audit Matters
  8. Other Information and Auditor’s Report Thereon
  9. Responsibilities of Management and TCWG for the Financial Statements
  10. Auditor’s Responsibilities for the Audit of the Financial Statements
  11. Other Reporting Responsibilities
  12. “Other Matter” Paragraph (if relevant)
  13. Signature
  14. Name
  15. Date of the Auditor’s Report
  16. Auditor’s Address

[Ref. ISA 700]

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3
Q

What must be title of audit report under ISA 700?

A

“Independent Auditor’s Report”

[Ref. ISA 700]

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4
Q

Who may be addressee of audit report under ISA 700?

A

Normally Shareholders, or TCWG. However, some other parties may also be addressee depending on circumstances.

[Ref. ISA 700]

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5
Q

What information must be included in Opinion Paragraph?

A

Opinion

We have audited the financial statements of ABC Company (the Company), which comprise the statement of financial position as at December 31, 20X1, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at December 31, 20X1, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

[Ref. ISA 700]

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6
Q

What information must be included in Basis for Opinion Paragraph?

A

Basis for Opinion

(If auditor expresses modified opinion, nature of misstatement/scope limitation will be explained here)

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

[Ref. ISA 700]

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7
Q

In addition to responsibility to obtain reasonable assurance, what other responsibilities are discussed in Auditor’s Responsibility section in audit report under ISA 700?

A
  1. Responsibility to communicate TCWG (planned scope and timing of the audit and significant audit findings)
  2. Responsibility in case of Listed Client (to communicate compliance with ethical requirements and Key Audit Matters to TCWG).
  3. Responsibility in case of Group Audit.

[Ref. ISA 700]

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8
Q

How many locations ISA 700 specifies to describe auditor’s responsibilities?

A
  1. Within the body of the auditor’s report, or
  2. As an appendix to the auditor’s report, or
  3. on a website of an appropriate authority, (if expressly permitted by law or regulation).

In case of (b) and (c), reference to the location shall be included in audit report.

[Ref. ISA 700]

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9
Q

How shall auditor draft auditor’s responsibility paragraph if he elects to refer to website of appropriate authority?

A

Auditor’s Responsibilities for the Audit of the Financial Statements:

Our objectives are to obtain reasonable assurance about ……….

A further description of the auditor’s responsibilities for the audit of the financial statements is located at [Organization’s] website at: [website link].This description forms part of our auditor’s report.

[Ref. ISA 700]

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10
Q

Name two sections in which audit report is divided if local laws also require auditor to report on additional matters?

A
  1. “Report on the Audit of the Financial Statements”, and
  2. “Report on Other Legal and Regulatory Requirements”.

[Ref. ISA 700]

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11
Q

In Pakistan, what are the other matters on which “Statutory Auditor” is required to report?

A
  1. Whether proper books of accounts have been kept as required by Companies Act.
  2. Whether financial statements are drawn up conformity with the Companies Act and are in agreement with the books of account and returns.
  3. Whether investments made, expenditure incurred and guarantees extended during the year were for the purpose of the Company’s business.
  4. Whether Zakat deductible at source, was deducted by the company and deposited in the Central Zakat Fund

[Ref. ISA 700]

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12
Q

Whose signature shall be placed on audit report?

A

Audit report shall be signed in the name of audit firm, or in the personal name of auditor or both as appropriate in local jurisdiction.

[Ref. ISA 700]

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13
Q

In which cases, audit report is required to include name of engagement partner?

A

For listed entities (unless there is significant personal security threat).

[Ref. ISA 700]

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14
Q

Which appropriate authority’s approval is required before signing audit report?

A

Approval of Board of Directors.

Shareholders’ approval is not required.

[Ref. ISA 700]

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15
Q

Does ISA 700 requires any ordering of elements?

A

ISAs do not require ordering of elements of audit report, except for Opinion (first) and Basis for Opinion (after opinion) Sections. However, ISAs require use of specific headings.

[Ref. ISA 700]

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16
Q

If audit is conducted in accordance with ISAs and National Standards on Auditing, can auditor state compliance with both?

A

Audit report shall state compliance with both standards only if:

  1. Audit report includes minimum elements required by ISAs.
  2. Both standards reach same opinion,
  3. EOM/OM Paragraph is included in report (if required by ISAs), and
  4. Jurisdiction of national standards is identified.

If there is a conflict in above requirements, auditor shall refer only to one standard (whichever is complied).

[Ref. ISA 700]

17
Q

What is auditor’s responsibility if Supplementary information is clearly differentiated from F/S?

A

It shall not be audited, and shall be treated as “Other Information”

[Ref. ISA 700]

18
Q

What is auditor’s responsibility if Supplementary information is not clearly differentiated from F/S?

A
  1. It shall be audited, or
  2. Auditor shall state in audit report that it is not audited.

[Ref. ISA 700]

19
Q

How Supplementary information can be differentiated from F/S?

A
  1. By Removing cross reference with financial statements, or
  2. By placing it outside financial statements, or
  3. By placing it at end of the required notes and labeling it “unaudited”.

[Ref. ISA 700]

20
Q

Is management/auditor state partial compliance with AFRF? (e.g. stating “Financial statements are in substantial compliance with IFRS”)

A

No. Compliance with an AFRF can only be stated if all requirements of that framework are met.

[Ref. ISA 700]

21
Q

How AFRF is described if financial reporting standards are Supplemented by Law or Regulation?

A

Both are considered part of the AFRF provided they do not conflict, and described as “The financial statements give true and fair view …. in accordance with IFRS and the requirements of Companies Act of Jurisdiction X.”

[Ref. ISA 700]

22
Q

How AFRF is described if two frameworks are used in preparation of F/S? (e.g. IFRS as well as National Framework)

A

In such case, two opinions are expressed in the audit report:

  • Separately or in a single sentence e.g. “The financial statements give true and fair view …. in accordance with IFRS and Accounting Principles generally accepted in Jurisdiction X.”
  • One opinion may be unmodified and other may be modified (e.g. adverse).

Such description is appropriate only if all requirements of each framework are met separately, without any reconciling statement.

[Ref. ISA 700]

23
Q

How AFRF is described if one frameworks is used in preparation of F/S, and other is partially used? (e.g. full compliance with IFRS + partial compliance with Tax basis)

A

Opinion is given on one framework only (which is fully complied).

Disclosure regarding extent of compliance with another framework is considered Supplementary Information.

[Ref. ISA 700]