AA Flashcards
(23 cards)
Reasonable Assurance
High level
Positive opinion
eg Audit of financial info
Limited Assurance
Moderate level
Negative
eg Review of financial info
The future of audit reports
The Kingman Review - Brings new Audit, Reporting and Governance Authority
Competition and market authority review
Brydon Report - recommendations
Current Issues to consider
Climate change
Sustainability (IFRS S1 ans IFRS S2)
Technology (AI, Big Data, Blockchain, RPA)
Data analytics
Restoring Trust in audit and corporate governance
White paper published in 2021.
Agreed with Kingman and Brydon - audit reform
More powers for ARGA
audit market competition. new reporting requirements
Auditors can be appointed by Directors …
- to fill a casual vacancy or
- first appointment of auditors
Auditors can be appointed by the members…
- Shareholders appoint by passing ord resolution in general meeting >50% vote
- Must make appointment within 28 days after latest date of FS, or existing auditor is deemed to be reappointed
Auditors can be appointed by the Secretary of state…
rare
where no auditor has been appointed by time audit is required
Removal/resignation of auditor
CA 2006
Duty of outgoing - prepare and submit statement of circumstances to companies registered office.
Rights of outgoing - prepare written representations to be circulated to the members of the company. Receive notice of, attend and speak at (extraordinary) general meeting where appointment is to be considered (which can be called as short notice for resignation)
- stricter for listed companies (cannot say there are no circumstances
In AA - Sustainability impacts…
Risk management
Assurance
Law and regulation
Biases which subconsciously impact logical and objective reasoning
6
Automation bias
Availability bias
Confirmation bias
Groupthink
Overconfidence
Anchoring Bias
Auditor should look for…
5
Related party transactions
Bribery
SOX act (US based)
Money Laundering
Fraud and Error
Qualified opinion
‘Except for …’
Materially misstated but not pervasive
Adverse opinion
‘Do not give T+F’
Material and pervasive
Qualified opinion
‘Except for …’
Inability to obtain sufficient information - not pervasive
Disclaimer of opinion
‘We do not express an opinion’
Inability to obtain sufficient information and is pervasive
Modified Report with unmodified opinion ISA 706
Emphasis of matter - Highlight fundamental area of FS. States opinion is not modified in this respect
Other matter paragraph - Describes the matter not in FS
Procedures to be carried out by non audit provider
Consider management competence for forecast prep
Assess reasonableness of assumptions made
Check forecasts based on basis of these assumptions
Check mathematical accuracy
Compare to historical information
Seek written representations from management
How Technology can enhance audit quality
Reduced detection risk
Better understanding of the client’s operations and controls, leading to a more sophisticated, focused, and capable risk assessment process
Time freed up on routine tasks, auditors can focus on more judgmental areas
Improved connectivity with audited entities, allowing for easier tracking of information requested and provided and questions raised, allowing for an earlier identification of delays
Use of predictive analysis to test complex areas such as financial instruments, where automated tools and techniques are suited to testing the complex models and assumption
Opening balances procedures
Agree brought forwards balances to last years financial statements
Assess accounting policies applied
At least one of:
- Review prev auditors WP
- consider if this yrs audit provide evidence over opening balance
- perform specific procedures on opening balances
Going concern procedures
planing stage - Understand entity and environment, and systems of internal control
Evidence stage - make enquiries of management and consider management bias risk.
- Review of future plans including forecast, projections, latest interim accounts.
- Review minutes of board/management meetings
- Review borrowing facilities
- consider new facts
- review legal correspondence for relevant matters
Audit responsibilities for subsequent events
Between Y/E and audit sign off - Active duty, perform procedures to identify those that require adjustments/disclosures. Written representations that all events disclosed/adjusted
After audit sign off - Passive duty, no obligation but must discuss with management
Why is independence and objectivity so important for audit?
Shareholders would not be able to apply the same degree of reliance on the auditor’s opinion and hence would not be able to rely on the financial statements prepared by directors due to the risk of bias or influence from relationships
