Audit - Chapter 11 Audit Report

Front 1

What are the objectives of auditor in forming an opinion and reporting on FS ?

Back 1

As per SA 700 ,

1. Evaln of concln drawn ➡️ from th AE obtained

2. Clearly express ---- written report .

Hint 1

SA 700 - pg 11.1

Front 2

How can the auditor obtain Reasonable assurance to conclude ?

Back 2

Concl shall take into account:

1. Obtained SAAE

2. UnC M's ----material individually or in agg ?

3. Evaln ---- of FS

Hint 2

Pg 11.1

Front 3

What does the auditor evaluate in the FS ?

Back 3

1. AFRF ✔️

2. A/c prac --- qualitative aspect , i.e. possible bias in mgmt judgement

Hint 3

Pg 11.1

Front 4

How the auditor can check the qualitative aspects of A/c prac ?

Back 4

1. No. Of judgements made by mgmt

2. SA 260 - a/c prac Qlty aspects

3. SA 540 - biasness in a/c estimates

4. lack of neutrality + UnC M's = FS--- ---MM's

Hint 4

Pg 11.1

Front 5

What are the indicators of lack of neutrality?

Back 5

1. M's - Selective correction by mgmt

2. Biasness in a/c estimate

Hint 5

Pg 11.2

Front 6

What does possible mgmt bias in acc est under SA 540 indicate and what it does not ?

Back 6

1. May affect auditor evln - FS free from MM's .

2. Do no mean - reasonableness of ind acc est are M's.

Hint 6

Pg 11.2

Front 7

What is evaluated by the auditor in specific evln of FS ?

Back 7

1. FS - Disclose a/c policy sel + applied

2. A/c policy ~ with AFRF

3. A/c est by mgmt --- reasonable

4. Info in FS - RRCU

5. Disclosure for users - U the effect of mat trans

6. Terminology app.

Hint 7

Specific evln => AFRF ---- pg 11.2

Front 8

What are the forms of opinions explain?

Back 8

1. Unmodified opinion

=> When auditor concludes that th FS are prepared ~ AFRF , in all mat respects .

2. Modified opinion

=> SA 705 , if auditor concludes :

- FS =❌ free from MM's , based on AE obtained

OR

- unable to obtain SAAE to conclude - FS free from MM's.

Hint 8

SA 705- , Pg 11.2

Front 9

Explain Auditor's report?

Back 9

- in writing

- encompasses reports issued in hard copy + electronic medium

- SA 700 req use of ,

Specific headings = assists in making AR~SA, more recognisable.

Hint 9

11.3 SA 700 - "FORMING AN OPINION AND REPORTING ON FS "

Front 10

What are the basic elements of audit report in accordance with SA ? Format for STANDARDS ON AUDITING.

Back 10

1.Title

2. Addressee

3. Auditor's opinion

4. Basis for opinion

5. GC

6. KAM

7. Responsibility for the FS

8. Auditors responsibility for the audit of FS

Section l

Section ll

Section lll

9. Location of the description of Auditor's responsibility

10. Other reporting responsibility

11. Signature of the auditor

12. Auditors address

13. Date of Auditor's report

Hint 10

11.3 , 11.4 , 11.5 , 11.6

Front 11

What is the format of audit report in as prescribed by law or regulation?

Back 11

1.

2.

3.

4.

5.

6.

7.

8.

9. Description of management responsibility

10. Description of Auditor's responsibility

11. Auditors signature

12. Place of signature

13. Date of AR

Hint 11

11.7

Front 12

Explain SA 705 ?

What are the obj of an auditor in clearly expressing an appropriately Modified opinion?

Back 12

SA 705 - the obj of an auditor is to clearly express an appropriately Modified opinion on the FS that is necessary when :

1. Auditor concludes - FS ❌ free from MM's based on AE obtained

2. Unable to obtain SAAE to conclude

FS ✅ free from MM's

Hint 12

11.7

Front 13

Under what circumstances the Auditors opinion is reqd to be modified state with SA ?

Back 13

1. AE obtained --> FS ❌ free from MM's

2. Unable to obtain SAAE to conclude FS ✅ free from MM's.

Hint 13

11.8

Front 14

What are the types of modified opinion?

Back 14

3 TYPES OF MODIFIED OPINION

1. Qualified

2. Adverse

3. Disclaimer of opinion

Explanation

1. Qualified opinion when ;

- SAAE obtained✅ ---> concludes ---> M's (individually/aggregate) are material ✅ but ❌ pervasive to FS

- Unable to obtain SAAE , but concludes ---> if any undetected M's exists , its effects on FS could be ✅ material but ❌ pervasive .

2. Adverse opinion

- SAAE obtained ✅---> concludes ---> M's (individually/aggregate) are material ✅+ pervasive ✅

3. Disclaimer of opinion

- Unable to obtain SAAE & concludes---> if any undetected M's exists , its effects on FS could be ✅ material +✅ pervasive

*Disclaimer is given in extremely rare cases .*

Hint 14

11.8, 11.9

Front 15

Explain basis of opinion para ?/ When auditor modifies the opinion the auditor shall also perform ?

Back 15

1. Amend Basis of opinion => basis of Q/A/D Opinion.

AND

2. Include description of of matter under this section .

Hint 15

11.9

Front 16

.

Back 16

.

Front 17

Define the term pervasive?

Back 17

- in auditor's judgement :

1. ❌Confined to specific element of FS

2. If ✅Confined ---> then represents substantial propn of FS .

3. Disclosures ---> fundamental to users ---> to understand the FS .

Hint 17

11.9

Front 18

Which type of modified opinion is appropriate depends upon?

Back 18

1. FS MM's✅ or unable to obtain SAAE maybe MM's

AND

2. Auditor's judgement ---> pervasiveness of effects/possible effects on FS

Hint 18

11.9

Front 19

Explain the nature of comparative information?

Back 19

As per SA 710 - comparative info - Corr. Fig. & Comparative FS

1. Nature of comparative info in an entity ==> AFRF

2. Auditors opinion on different approaches ;

a. Corr. Fig. -->refer to only current period

b. Comparative FS -->refer to each period for which FS is presented

Hint 19

11.12

Front 20

What Audit procedures are to be applied by the auditor for comparative information ?

What shall the auditor evaluate to determine whether comparative info is included as reqd by AFRF ?

Back 20

1. Comparative info ~ amts and disclosure in prior period

And

2. Acc policy in comparative info ~ CY

If any changes, --> they are properly accounted+presented+disclosed

Hint 20

11.13

Front 21

What are the Restrictions/ compliance of Auditor's reporting regarding Corr. Fig. ?

Back 21

Auditor's opinion shall not refer to Corr. Fig. If presented in CY FS .

However in the foll. Circumstances the Auditors opinion shall refer to the Corr. Fig. :

1. Prior Period AR ---> opinion ---> Q/A/D ---> matter still unresolved

↪️ CY FS opinion ➡️ modified

=> Basis of modfn para (any 1) :

a. Refer both period fig. ---> effects of Corr. Fig is material on CY fig.

OR

b. explain the reason for modfn of opinion => effect/possible effect on => comparability of FS

2. Currently obtained AE---> FS of prior period is MM's + unmodified opinion expressed earlier .

a. M's dealt with ~ ✅AFRF

OR

b.if not => Qualify CY opinion

3. ❌Audited prior period FS .

Front 22

State the compliance regarding Comparative FS ?

Back 22

1. If comparative FS presented ---> Auditor's opinion refer ---> to each period for which FS ✅ presented and ✅opinion is expressed.

2. Only if current opinion differ from previous ---> Prior period FS ---> in current period audit ----> disclose subst. Reasons in OM para

SA 706

Hint 22

SA 706 -

Pg 11.14

Front 23

Define key audit matters that are to be communicated in the independent Auditor's report?

Back 23

Most significant Matters in audit of CY FS --> in auditor's prof . judgement --> seln. From matters commn. w/TCWG .

Hint 23

11.11

Front 24

What shall the auditor take into account while determining the KAM to be communicated?

Back 24

TCWG --> Matters that reqd significant Auditor's attention

1. Areas of ⬆️ assessed RMM / signf. Risk u/SA 315

2. Signf. Auditor's judgement+ signf. Mgmt judgement areas ==> ⬆️estm uncertainty

3. Signf. Events/trans. during period

Hint 24

11.11

Front 25

What is the Communication of KAM not a substitute for ?

Back 25

Communicating KAM in AR = Formed an opinion on FS as a whole

1. Disclosure in FS by mgmt ~ AFRF / fair presn.

2. Modified opinion by auditor u/SA 705

3. Signf. Doubt on GC u/SA 570 --> Mat. Uncertainty .

4. It is not a seperate opinion on indv matters.

Hint 25

11.12

Front 26

What are the obj of auditor in regards to EOM para and OM para in independent Auditor's report while forming an opinion on FS ?

Back 26

As per SA 706 - "EOM para & OM para in the independent Auditor's report."

The obj of the Auditor -->draw users attention ---> when necessary in auditor's judgement --> clear comn. In AR.

1. EOM : disclosed / presented in FS --> users understanding of FS .

2. OM : relevant to users (other matter) --> understanding of audit/ Auditor's responsibility/ AR

Hint 26

11.10

Front 27

What are the Conditions for inclusion of EOM para in independent AR ?

Back 27

.

Hint 27

11.10

Front 28

What features of EOM para shall the auditor take into account

Back 28

J

Hint 28

11.10

Front 29

What are the Conditions for inclusion of OM para in independent AR ? And also it's features ?

Back 29

1.❌ Prohibited by L&R

2. SA 701✅---> ❌

3. (feature) speerate section

Hint 29

11.11