ACCA 上财 审计 P7chap8

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1、Chapter 8 Audit evaluation and review()Topic listRevision: review proceduresRevision:opening balancesRevision: comparativesRevision: other informationRevision: subsequent eventsRevision: going concern Exam guideGoing concern is particularly Important,links with other proceduresRevision: review proce

2、duresnThe auditors must perform and document an overall review of the financial statements before they can reach an opinionCompliance with accounting regulationsnThe auditors should consider whetherInformation presented is in accordance with statutory requirementsAccounting policies employed are in

3、accordance with accounting standardsPolicies commonly adopted in particular industriesPolicies for which there is substantial authoritative supportWhether any departure from applicable accounting standard are necessaryWhether financial statements reflect the substance of transactionsReview for consi

4、stency and reasonablenessnPrincipal considerationsnWhether the financial statements reflected the information, explanations and conclusions previouslynWhether it reveals any new factors which may affect the financial statementsnWhether analytical procedures produce results consistent with the overal

5、l conclusionnWhether the presentation adopted may have been unduly influenced by the directors desirenThe potential impact on the financial statements of the aggregate of uncorrected misstatements identified,if anyAnalytical proceduresnAreas must covernImportant accounting ratiosnRelated itemsnChang

6、es in products;customersnPrice and mix changesnWages changesnVariancesnTrends in production and salesnChanges in material and labor content of productionnOther profit and loss account expenditurenVariations caused by industry or economy factorsSignificant fluctuations and unexpected relationships mu

7、st be investigated and documentedSummarizing errorsnAt the end of the audit, some errors may still be outstanding and the auditors will summarize these unadjusted errorsnThe summary of errors will not only list errors from the current, but also those in the previous years, allowing errors to be high

8、lightednCumulative errors may also be shownnIt is normal to show both the balance sheet and the profit and loss effect (e.g. on p202)nEvaluating the effect of misstatementsnAuditors should consider whether the cumulative effect of the unadjusted errors is material.Aggregated of uncorrected misstatem

9、entsSpecific misstatementsBest estimate of other misstatementsPerforming additional audit proceduresRequesting management to adjustAppropriated modification to auditors reportApproach material levelAuditor should refuseRevision: opening balancesnOpening balances are those account balances which exis

10、t at the beginning of the period.nAppropriate and sufficient audit evidence is required and this depends on:nAccounting policies followed by the entitynWhether prior periods financial statements were audited, if so, whether the report was modifiednThe nature of the accounts and the risk of their mis

11、statement in current financial statementsnThe materiality of the opening balances relative to current financial statementsnPrior period balances auditednReview the predecessor auditors working papersnIf the report was modified, the auditors should pay particular attention to the matter resulting the

12、 modificationnPrior period balances not auditednEvidence for current assets and liabilities can be obtained through current proceduresnInventories by observing a current count and reconciling it back,testing the valuation of opening inventory items and testing gross profit and cut-offnNon-current as

13、sets and liabilities by examining the records underlying the opening balancesnAudit conclusion and reportingnISA510.11-14(p 205)nIf the opening balances contain material misstatements, auditors should inform management and predecessor auditornThe report will be modified if accounting policies are no

14、t consistently appliednIf prior periods report was modified, the auditors should consider the effect on the current periods financial statementRevision: comparativesnWhat types of comparativesnThe auditor should determine whether the comparatives comply in all material respects with the financial re

15、porting framework applicable to the financial statement being auditednCorresponding figuresnComparative financial statementsCorresponding figuresnAuditors must assess whether:nAccounting policies used for corresponding figures are consistent with current period or whether adjustments should be maden

16、Corresponding figures agree with the amounts and whether adjustments have been madeWhen prior period financial statements:nHave been audited by other auditorsnWere not audited nReporting nISA710.10,12,15 p207nWhen prior periods audit report was modifiednThe matter was properly dealt with, current re

17、port would not refer to the previous modificationnThe matter was material to current period, the auditors may include an emphasis of matter paragraphnIncoming auditors:additional requirementsnISA710.17,18,19-p208nWhen prior period financial statements were audited by other auditors, the incoming aud

18、itors can refer to the predecessor auditors report, which could be added to the first paragraph of the audit reportnIf they were not audited, the incoming auditor should state in the auditors report that the corresponding figures are unauditedComparative financial statementsnISA710.20,24,25 on p208-

19、209nThe auditors should obtain sufficient appropriated audit evidence that the comparative financial statements meet the requirements of the applicable financial reporting frameworknThe auditors may express a modified opinion or include an emphasis of matter paragraph with respect to one or more fin

20、ancial statements for one or more periodnFor incoming auditors,ISA710,26,28,30,31 on p209-210Revision: other informationnAuditors should always read other information to identify material inconsistencies with the audited financial statements.nOther information-financial and non-financial information

21、 included in its annual reportnMaterial inconsistencynAuditors may be engaged separately, or required by statute, to report on elements of other information.nThen the auditors responsibilities are determined by the nature of the engagement and by local legislation and professional standards.nExample

22、s of other information are:nA report by management or the board of director on operationsnFinancial summaries or highlightsnEmployment datanPlanned capital expendituresnFinancial ratiosnName of officer and directors nSelected quarterly datanAccess to other informationnMaterial inconsistencynISA720.1

23、1/12/13nThe actions taken by the auditors will depend on the individual circumstances and the auditors may consider taking legal advice.nMaterial misstatements of factnISA720.16/17/18 nAvailability of other information after auditors report datenDecide whether the audited financial statements or the

24、 other information need revisionRevision: subsequent eventsnSubsequent events includenEvents occurring between the period end and the date of the auditors reportnFacts discovered after the date of the auditors reportnTwo types of eventnThose that provide further evidence of conditions that existed a

25、t the period endnThose that are indicative of conditions that arose subsequent to the period endnEvents occurring up to the date of the auditors reportnAuditor should perform procedures designed to obtain sufficient appropriate audit evidence that all event up to the date of the auditors report that

26、 may require adjustment or disclosure.nThe procedures should be performed as near as possible to the date of the auditors report.nExamples of procedures(table on p213)Facts discovered after the date of the auditors report but before the financial statements are issuednAuditors do not have obligation

27、 to perform procedures or make enquires after the date of their reportnWhen the financial statements are amended, auditors should extend the procedures to the date of their new reportnWhen the statements are not amended but the auditors feel that they should benIf the auditors report has not been re

28、leased to the entity, the auditor should express a qualified opinion or an adverse opinionnIf it has been issued to the entity, auditors should notify the management not to issue it to third parties, if already issued,the auditors should take steps to prevent reliance on the reportFacts discovered a

29、fter the financial statements have been issuednAuditors have no obligations to perform procedures or make enquiries regarding the financial statements after they have been issued.nISA560.16(page215)nWhen management revise the financial statement,auditors should:nCarry out the audit procedures necess

30、arynReview the steps taken by management nIssue a new report on revised statementsRevision:going concernnThe going concern assumptionnWhen preparing accounts, management should make an explicit assessment of the entitys ability to continue as a going concern.nThe degree of uncertainty about the even

31、ts being assessed increases the further.nJudgments are made on the basis of information available at the time.nJudgments are affected by size and complexity of the entity the nature and condition of the business and the degree to which it is affected by external factorsnPossible indicators of going

32、concern problemsnFinancial indications(eg.)nNet liability or inability to comply with loan termsnOperating indications(eg.)nLoss of key management without replacementnOther indications(eg.)nNon-compliance with capital or other statutory requirementsnSuch indications may be mitigated by some other fa

33、ctors( e.g. maintain adequate cash flow, suitable alternative source of supply)nAuditors responsibilitiesnThe appropriateness of the going concern assumptionnThe existence of material uncertainties about going concern assumption needs disclosurenThe auditors should evaluate managements assessment of

34、 the entitys ability to continue.nThe process management usednThe assumption the assessment based onnManagements plans for future actionnISA570.11/12,17,22nAdditional audit proceduresnAnalyze and discuss cash flownAnalyze and discuss interim financial statementsnReview terms of debentures and loan t

35、ermsnRead minutesnEnquire litigation and claimsnConfirm the existence, legality and enforceabilitynAssess the financial ability of parties providing additional fundsnConsider the entitys position concerning customer ordersnReview events after the period end affecting going concern assumptionnAuditor

36、s should discuss with management its plans for future actionsnWhen analyzing cash flow should consider:nThe reliability of the system generating the informationnWhether there is adequate support for the forecastnHow recent forecasts have differed from actual resultsnISA570.26,30,33nAuditors reportnQ

37、ualified or adverse opinion(ISA510.34)nAdverse opinion (ISA520.35)nLimitation of scope (ISA520.37)nSignificant delaynWhen there is a significant delay in approving the accounts, auditors should consider whether this is due to doubts about the going concern status of the business.The end of chapter 88