Module 21 Audit Process: Completion Flashcards

1
Q

Materiality

A

An expression of the relative significance or importance of a particular matter in the context of the financial statment as a whole

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2
Q

Reporting materiality

A

Final overall materiality level calculated at the completion stage using the finalised financial statment numbers

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3
Q

Materiality is used at the completion stage to check for what?

A
  • Sufficient approporate evidence
  • Effect of unadjusted misstatments identified
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4
Q

The Summary of Audit Misstatments

A

A summary document containing all mistatments (adjusted and unadjusted) identified, other than those considered trival.

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5
Q

Should material misstatments be adjusted?

A
  • Yes
  • Otherwise financial statments will not give a true and fair reflection
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6
Q

Should immaterial misstatments be adjusted?

A
  • Discretion of the entity/client
  • However if the sum of all immaterial misstatments was above materiality then yes
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7
Q

What does ISA (UK) 570 outline?

A

Auditors resposbility to going concern

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8
Q

Directors resposibility in relation to going concern?

A
  • 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
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9
Q

Auditors responsibilities in relation to going concern?

A
  • Obtain evidence and conclude if going concern basis is correct
  • Conclude on whether material uncertainity exists about continuing as going concern
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10
Q

Material Uncertainty

A

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

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11
Q

Outcome if auditor judges entity has applied going concern correcly?

A
  • Provided no other issues
  • No material misstatments
  • Financial statments are true and fair view
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12
Q

Outcome if auditor judges entity has not applied going concern correcly?

A

Financial statments do not show a true and fair view

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13
Q

Outcome if auditor judges material uncetainy exists (going concern)?

A
  • Should be disclosed in the financial statments
  • If so, true and fair view
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14
Q

What does ISA (UK) 520 Analytical procedures states?

A

Auditor must carry out analytical procedures during the completion

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15
Q

What does ISA (UK) 560 Susbsequent events require?

A
  • To be alert for events after year end date
  • Subsequent events may affect the truth and fairness
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16
Q

Directors resposibilites for subsequent events?

A
  • Subsequent events review
  • Necessary adjustments or disclosures
17
Q

Auditors resposibilites for subsequent events?

A
  • Obtain sufficent evidence
  • Events that require adujustment or disclosure have been identified
18
Q

Auditors subsequent events procedure

A
  • Understand procedures
  • Enquire
  • Review minutes
  • Review managment accounts
  • Litigation
  • Written Representations
19
Q

What does ISA (UK) 580 Written representations require?

A

The auditor to obtain written statments that managment has fulfilled their resposibilites

20
Q

Timing of the mangment representation letter

A
  • Dated as the date of the audit report
  • Obtained immediately before audit report is signed
21
Q

What two ISAs require representation?

A
  • ISA (UK) 560
  • ISA (UK) 450
22
Q

Three areas requiring represntation

A
  • Those charged with governance acknowledge their collective reposibility
  • Other ISAs
  • Support other audit evidence