Module 21 Audit Process: Completion

Question 1

Materiality

Answer 1

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

Question 2

Reporting materiality

Answer 2

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

Question 3

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

Answer 3

• Sufficient approporate evidence
• Effect of unadjusted misstatments identified

Question 4

The Summary of Audit Misstatments

Answer 4

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

Question 5

Should material misstatments be adjusted?

Answer 5

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

Question 6

Should immaterial misstatments be adjusted?

Answer 6

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

Question 7

What does ISA (UK) 570 outline?

Answer 7

Auditors resposbility to going concern

Question 8

Directors resposibility in relation to going concern?

Answer 8

• 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

Question 9

Auditors responsibilities in relation to going concern?

Answer 9

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

Question 10

Material Uncertainty

Answer 10

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

Question 11

Outcome if auditor judges entity has applied going concern correcly?

Answer 11

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

Question 12

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

Answer 12

Financial statments do not show a true and fair view

Question 13

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

Answer 13

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

Question 14

What does ISA (UK) 520 Analytical procedures states?

Answer 14

Auditor must carry out analytical procedures during the completion

Question 15

What does ISA (UK) 560 Susbsequent events require?

Answer 15

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

Question 16

Directors resposibilites for subsequent events?

Answer 16

• Subsequent events review
• Necessary adjustments or disclosures

Question 17

Auditors resposibilites for subsequent events?

Answer 17

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

Question 18

Auditors subsequent events procedure

Answer 18

• Understand procedures
• Enquire
• Review minutes
• Review managment accounts
• Litigation
• Written Representations

Question 19

What does ISA (UK) 580 Written representations require?

Answer 19

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

Question 20

Timing of the mangment representation letter

Answer 20

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

Question 21

What two ISAs require representation?

Answer 21

• ISA (UK) 560
• ISA (UK) 450

Question 22

Three areas requiring represntation

Answer 22

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