Module 21 Audit Process: Completion Flashcards
Materiality
An expression of the relative significance or importance of a particular matter in the context of the financial statment as a whole
Reporting materiality
Final overall materiality level calculated at the completion stage using the finalised financial statment numbers
Materiality is used at the completion stage to check for what?
- Sufficient approporate evidence
- Effect of unadjusted misstatments identified
The Summary of Audit Misstatments
A summary document containing all mistatments (adjusted and unadjusted) identified, other than those considered trival.
Should material misstatments be adjusted?
- Yes
- Otherwise financial statments will not give a true and fair reflection
Should immaterial misstatments be adjusted?
- Discretion of the entity/client
- However if the sum of all immaterial misstatments was above materiality then yes
What does ISA (UK) 570 outline?
Auditors resposbility to going concern
Directors resposibility in relation to going concern?
- Assess if entity is going concern and prepare financial statments accordingly
- Disclose going concern material uncertainties
- Disclose if the company has not prepared on a going concern basis
Auditors responsibilities in relation to going concern?
- Obtain evidence and conclude if going concern basis is correct
- Conclude on whether material uncertainity exists about continuing as going concern
Material Uncertainty
A material matter whose outcome depends on the future actions or events not under the direct control of the entity that may affect the going concern status
Outcome if auditor judges entity has applied going concern correcly?
- Provided no other issues
- No material misstatments
- Financial statments are true and fair view
Outcome if auditor judges entity has not applied going concern correcly?
Financial statments do not show a true and fair view
Outcome if auditor judges material uncetainy exists (going concern)?
- Should be disclosed in the financial statments
- If so, true and fair view
What does ISA (UK) 520 Analytical procedures states?
Auditor must carry out analytical procedures during the completion
What does ISA (UK) 560 Susbsequent events require?
- To be alert for events after year end date
- Subsequent events may affect the truth and fairness