10. Audit Completion

Question 1

Completion: 2 checks during (partner) FS review

Answer 1

1. Compliance check
2. Sense check

Question 2

Completion: FS review: Compliance check: Compliance with what?

Answer 2

With CA

Checklist should be used

Question 3

Completion: FS review: Sense check

Answer 3

Do the FS make sense?

Question 4

Completion: FS review: Sense check: What should be used?

Answer 4

Analytical procedures

Question 5

Completion: FS review: Sense check: What APs shold be used?

Answer 5

1. Interpretation
   Review the financial statements considering absolute figures and ratios
2. Investigation
   Unusual movements or numbers should have been identified as audit risks so the answers to questions should be in the audit working papers
3. Corroboration
   If answers cannot be found in the working papers then further work is required.

Question 6

OBT: How are misstatements dealt with as a whole?

Answer 6

Accumulated

Question 7

What should the auditor do with the misstatements?

Answer 7

1. Inform management
2. Reassess materiality
3. Determine whether uncorrected misstatements are material, individually or in aggregate
4. Seek written management representations to confirm that the effect of uncorrected misstatements is immaterial.

Question 8

Can non-compulsory information contribute to material misstatement? (e.g. climate)

Answer 8

Yes (by nature)

Question 9

OBT: Procedures if auditor didn’t audit prior year FS

Answer 9

1. Agree brought forward figures to last year’s financial statements
2. Assess accounting policies have been appropriately applied to opening balances
3. Perform at least one of the following:
   a. review the previous auditor’s working papers
   b. consider whether this year’s audit tests provide evidence over opening balances
   c. perform specific procedures on opening balances.

Question 10

What to do if last year’s financial statements contained a misstatement and the matter was unresolved?

Answer 10

Consider the need to modify this year’s audit opinion

Question 11

When are FS not prepared on going concern basis?

Answer 11

Management intends to liquidate the company or to cease operations, or has no realistic alternative but to do so

Question 12

Going concern: What should Ado if less then one year has been considered by mgmgt?

Answer 12

Ask to be extended

Question 13

Should the A consider going concern at all stages of audit?

Answer 13

Yes

Question 14

Going concern issues: Acceptance

Answer 14

Clients who are unlikely to continue in business will be classed as high risk and the firm must consider carefully if they wish to commit to such work

Question 15

Climate issues affecting going concern examples

Answer 15

Bans on types of technology or energy used

An adverse weather event

Climate-related litigation changes.

Question 16

Do auditors sign off the audit report some time after the accounting date?

Answer 16

Yes

So subsequent events should be considered

Question 17

The 2 types of subsequent event

Answer 17

1. Adjusting
2. Non-adjusting

Question 18

Going concern: Process for: Adjusting events

E.g.
Resolution of a court case
Major customer enters liquidation
Evidence of the NRV of inventory
Discovery of fraud or error

Answer 18

1. Provide evidence of conditions existing at the date of the financial statements
2. Adjust FS

Question 19

Going concern: Process for: Non-adjusting events

E.g.
Destruction of an asset by fire
Dividends declared after the year end
Announcement of plan to close part of the business

Answer 19

1. Provide evidence of conditions arising after the date of the financial statements
2. If material, disclose event
   (ONLY if going concern status
   affected)

Question 20

Does the auditor have an active duty to carry out audit procedures to identify events that require adjustment or disclosure in the financial statements?

Answer 20

Yes

Mgmnt representations all subsequent events adjusted/disclosed

Question 21

Does the A have to react to an event after sign-off?

Answer 21

Yes

If requires adjustment/disclosure

Should discuss with mgmnt and they should adjust if necessary

Question 22

Post sign-off events not amended by management?

Answer 22

Consider withdrawing audit report

Question 23

A wants to withdraw audit report and mgmnt continue distributing FS: What to do?

Answer 23

Take action. E.g.

1. Seeking legal advice
2. Using the right to speak at the AGM
3. Considering resignation and calling an EGM

Question 24

When should the letter of rep be signed by directors?

Answer 24

BEFORE audit rpeort signed