What’s the purpose of an Audit conducted under the Companies Act 2006?
- To ensure accountability ensuring the Directors are acting in the company’s best interest
- To promote confidence of the intended user
- To express an opinion re truth and fairness of the financial statements
What is the audit opinion showing?
That the financial statements show a true and fair view.
True - conforms to reality, presented in accordance with laws and standards and reflects actual transactions.
Fair - free from bias
What’s the benefits of assurance?
- Credible and reliable information
- Increased credibility reduces risk to those who provide finance
- Draws attention to deficiencies
- Results in improved internal controls from suggestions from the management letter
-Deters fraud
What is the Expectation Gap?
The difference between what the auditor does and what is perceived
How can the Expectation Gap be narrowed?
- Educating users
- Extending auditors responsibilities
- Include auditors responsibilities in planning letter and engagement letter
What’s the difference between an audit and any other assurance engagements?
Other Assurance Engagements
- Limited Assurance
- Less extensive (less work)
- Negative conclusion
- “Nothing has come to our attention…”
Audit
- Reasonable Assurance
- More extensive (more work)
- Positive opinion
- “The subject matter is true and fair in all material respects”
