11: Completion Flashcards
Give four procedures for subsequent events
- Enquire and discuss with management or parties involved
- Review budget, cashflows and forecasts
- Review minutes of meeting for events
- Obtain rep letter saying they have been dealt with appropriately
When is active duty?
Period between year and and signing of the auditors report
When is passive duty?
Period between audit reports being signed and financial statements being issued
If a material even occurs during active duty what happens?
- Discuss with management and ask them to update FS
- If the update then give an unmodified report (True and fair)
- If they don’t update give a modified report
If a material even occurs during passive duty until signing what happens?
- Discuss with management and ask them to update
- If they redraft then give a revised audit opinion of unmodified report (True and fair)
- If they don’t update then seek legal advise, attend the AGM to inform shareholders of situation or resign
If a material even occurs during passive duty until issuing what happens?
- Discuss with management asking to update FS
- Directors have to recall FS
- If directors revise then give a revised opinion unmodified
- If they refuse to recall, seek legal advise, attend the AGM to inform members or resign.
When does break up basis occur
- A business goes into liquidation
- A company ceases to trade
Give four indicators of going concern
- Major customer has ceased trading
- Key staff leaving
- Late payments to suppliers
- Inability to pay dividends or meet short term liabilities
If directors say Going concern
And the auditors think going concern
What is the opinion?
Unmodified true and fair view
If directors say Going concern
And the auditors think break up basis (Material and pervasive)
What is the opinion?
Adverse opinion
If directors say Break up basis
And the auditors think break up basis (Material and pervasive)
What is the opinion?
Unmodified opinion with emphasis of matter
If directors say Going concern
And the auditors think Going concern is uncertain (Material uncertainty)
What is the opinion?
If adequately disclosed:
- Unmodified
- Material uncertainty relating to going concern
If not adequately disclosed:
- Material misstatement
- Except for opinion
If directors say break up basis but period is less than 12 months
And the auditors think want to extend the period assessed and directors refuse
What is the opinion?
Except for / Disclaimer
Are management representation letters a form of audit evidence?
Yes
What do management representation letters say from managements perspective?
Confirms that they believe they have fulfilled their responsibility
What type of decisions do management representation letters help with?
Judgemental decisions
What do management representation letters confirm?
That management have communicated all known deficiencies to the auditor
What three responsibilities do the management representation letter confirm that they have fulfilled?
- Preparing the financial statements in accordance with an applicable financial reporting framework
- Providing the auditor with all relevant information and access to records
- Recording all transactions and reflecting them in the financial statements
Do management rep letters give appropriate evidence?
No
What does managements failure to provide a rep letter do?
Casts doubt over the reliability of other audit evidence received, especially if the company is dominated by the directors.
What are three things the auditor should do if management fail to provide a rep letter
- Discuss with management and try to resolve their concerns
- Explain consequences of not signing and try to avoid a confrontation
- Modify audit opinion due to inability to get evidence. Disclaimer opinion may be necessary.
What are four treatments of misstatement?
- Determine if they are in aggregate or individual
- All should be communicated with those charged with governance on timely basis and request make amendments
- If request refused consider impact on report
- Written rep letter to confirm unadjusted misstatements are immaterial
