Reporting.

By what means can matters be communicated with those charged with governance?

Writing or orally.

under the CA06, what are publicly traded companies required to include in their annual report?

a Corporate Governance Statement

What is less formal, assurances or audits?

assurance reports have less formal requirements than audit reports

what should an auditor do if they expect to include an 'emphasis of matter' or 'other matters' para?

communicate with TCWG regarding expectation and proposed wording of para

Under the listing rules, what must auditors report on?

compliance with the ten provisions of UK Corporate Governance Code

In the opinion, what are requirements with date?

date should be date where auditor has obtained sufficient appropriate evidence to support opinion.

define pervasive?

has an impact on the FS

In the opinion para: what is definition of 'fair'?

info free from discrimination and bias. in compliance with expected standards and rules.

In the opinion para: what is definition of 'true'?

info that is factual and conforms with reality. not false. info conforms with required standards and law.

In the Key Audit Matters para: what are KAMs?

matters the auditor considers to be most significant during the audit

what methods should matters be communicated?

orally or in writing. certain matters must be communicated in writing (e.g. significant deficiencies in internal controls)

What must an auditor do if a Corporate Governance Statement is not included in annual report of a public traded comp?

report by exception

Define those charged with governance

the role of persons entrusted with supervision, control and direction of the entity. usually responsible for ensuring that entity achieves its objectives, financial reporting and reporting to interested parties e.g. directors, audit committee members, partners etc.

in the title para: why does an auditors report need an appropriate title?

to distinguish it from the other material included within the FS and to try to reduce the 'expectations gap'

In the opinion paragraph, how are statements identified?

traditionally done using page numbers. but due to errors, if the number of pages changes etc. This process has become irrelevant. Financial statements are allowed to be published as webpages, therefore now the best practise is to refer to statements by name.

when should the auditor add an 'emphasis of matter' paragraph?

where it is necessary to draw users attention to matters presented or disclosed in the FS that are relevant to users understanding of FS where there is degree of uncertainty surrounding FS - regarding going concern or other significant uncertainties

What are the two types of modified reports?

1. Where the auditor's wishes to highlight an issue but where the auditor opinion is not effected. 2. Where there is an impact on the audit opinion.

In the opinion paragraph, what should be included in regards to the respective responsibilities of directors and auditors?

A statement on directors responsibilities towards the financial statements. A statement of the auditors responsibilities, emphasising that the auditor reports on the truth and fairness of the financial statements.

ISA 265

Communicating deficiencies in internal controls to those charged with governance and management.

In the opinion para: what do FS have to be prepared in accordance with?

Financial reporting framework. In the UK this is CA06.

What type of assurance do we give on review reports and what ISA would support this?

ISRE 2400, Limited assurance is given on review assignments. The ISRE defines limited assurance as the level of assurance obtained where engagement risk is reduced to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for expressing a conclusion.

What do we express in a modified report for inability to obtain sufficient appropriate evidence?

Qualified opinion (except for )-MATERIAL BUT NOT PERVASIVE. Disclaimer- MATERIAL AND PERVASIVE.

The auditor must ensure the communication is done on what basis?

TIMELY

In the opinion para: what do auditors express their opinion in reference of?

TRUE AND FAIR VIEW

What is a modified report?

The auditor is either not satisfied with the sufficiency or appropriateness of the evidence that has been obtained , compared with what could reasonably be expected, or has issues with the content of financial statements.

What is an unmodified report?

The auditor is satisfied that the evidence obtained is sufficient and appropriate and supports the view presented in the financial statements prepared by the company's management.

Who is the report addressed to?

The companies act requires the report to be addressed to the members or shareholders of a company because the audit is carried out on their behalf.

In the opinion paragraphs, what are requirements with the name and signature of engagement partner?

The report must be signed by the senior statutory auditor, in his own name, for or on behalf of the auditor. The auditors (If the auditor is a firm) name may be omitted from the 1. published copies of the report. 2. The copy of the report delivered to the registrar of companies. They can be omitted if the following conditions are met: 1. The reasonable grounds that the statement of name would create serious risk that the auditor or senior statutory auditor would be subject to violence or intimidation. 2. The company has given notice of the resolution to the secretary of state, stating: a) name and registered number of the company. b) financial year of the company to which the report relates. c) Name of the auditor and the name of the person who signed the report as senior statutory auditor.

What are attributes for effective communication to those charged with governance?

Timing-prompt enough to allow those charges with governance to take appropriate action. Extent, form and frequency-should be appropriate, depends on size. Expectations- should be agreed in engagement letter. Management comments- should be included where relevant, to help the understanding of those charged with governance. Previous year points-where no action has been taken. Disclaimer- so third parties do not seek to rely on the information given in the report.

How can the auditor decide whether matters are significant enough to report on?

- The likelihood of the deficiencies leading to material misstatements. -The susceptibility to loss or fraud. -The financial statement amounts. -The volume of activity. - The importance of the controls to the financial reporting process.

What matters may auditors communicate with those charged with governance on?

-Auditors responsibilities in relation to the audit of financial statements. - Planned scope and timing of the audit. -Significant findings from the audit. -Auditor independence.

what do auditors have to make clear when communicating?

-audit is not designed to identify all relevant matters connected with governance

list the requirements under ISRE(2400), List as many as you can but dw if you can't as you will have audit bible anyways...

-conduct of review engagement -ethical requirements -professional scepticism and professional judgement -engagement level quality control -acceptance and continuance of client relationships and review engagements -communication with management and this charged with governance -performing the engagement -subsequent events -written representations -evaluating evidence obtained from the procedures performed -forming the practitioner's conclusion on the FS -the practitioners report -documentation

what should auditors do when the audited entity is listed? (in relation to iSA 260)

-confirm engagement team have complied with ethical requirement relating to independence -declare all relationships between firm and entity that may have bearing on independence, including details of fees for non-audit services -detail related safeguards that have been applied to eliminate identified threats to independence or reduce them to an acceptable level

what may the engagement letter include in terms of those communicating with TCWG?

-describe the form which any communications on gov matters will take -identify appropriate persons with whom such communications will be made -identify any specific matters of governance interest which it has agreed are to be communicated

In the other responsibilities para: what does the auditor have to do for entities that report on how they applied the UK Corporate Governance Code?

-descrive the most important risks of material misstatement identified by the auditor -provide an explanation of how the concept of materiality was applied in planning and carrying out the audit -provide an overview of the scope of the audit and how this was influenced by the risks and materiality

In the other responsibilities para: what other matters are UK auditors required to report on?

-directors report and strategic report are consistent with FS

what should be included in the 'emphasis of matter' para?

-heading 'emphasis of matter' -clear reference to matter being emphasised and where they can be found in FS -indicate auditors opinion is not modified in respect of issue dealt with

Where matters do not affect the audit opinion, what needs to be done in the audit report?

Emphasis of matters- If relating to the financial statements. Other matters- If its necessary to draw attention to any matter.

How can we avoid misunderstandings with communication with those charged with governance?

Only communicate matters that come to their attention as a result of the performance of the audit. It should only state that auditors are not required to design procedures for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

What do we express in a modified report for a material misstatement?

Qualified opinion (except for)- MATERIAL BUT NOT PERVASIVE Adverse opinion- MATERIAL AND PERVASIVE.

Describe the tripartite relationship which exists in an assurance engagement.

the responsible party----subject matter---subject matter information----user. Subject matter/subject matter information---(assurance work)---practioner---user.

when should the auditor add an 'other matters' paragraph?

where its necessary to draw users attention to any matters other than this presented or disclosed in FS that are relevant to users understanding of audit/ auditors responsibilities/ auditors report

Give examples of those charged with governance?

whole board, audit committee, supervisory board, directors

when conducting an engagement to examine forecast info, written representations are obtained from management. What are these written representations regarding?

-the intended use of forecast info -completeness of significant management assumptions -managements responsibility for forecast info

what are the main components of an auditor report as required by ISA 700 (UK)?

-title -addressee -auditors opinion -basis for opinion -going concern (where applicable) -key audit matters -other info -responsibilities of management or the FS -auditors responsibilities for the audit of FS -opinion on other matters (e.g. directors report and strategic report consistent with FS) -matters on which auditor is required to report on by exception -name of engagement partner -signature of engagement partner -auditors address -date of report

ISA 260 states to report on significant findings from the audit. List some examples of these significant findings:

-written representations the auditor is requesting -auditors views about significant qualitative aspects of the entity's accounting practices -signif difficulties encountered during audit -signif matters arising from audit that were discussed with management -other matters arising from from audit that are significant to oversight of financial reporting process

What are the main components of an audit report?

1. Addressees 2. Scope and responsibilities. 3. Nature of work and level of assurance-a description of a review and its limitations, and how it differs from an audit. 4. Conclusion.

Where matters do affect audit opinion, what two types of ways can it affect it?

1. Material misstatement. 2. Inability to obtain sufficient appropriate evidence.

What are the specific ISA 265 requirements on reporting on internal controls?

1. The auditor shall determine whether deficiencies in internal controls have been identified. 2. Where deficiencies have been identified the auditor shall determine whether those deficiencies are significant. 3. Significant deficiencies shall be communicated in writing to those charged with governance. 4. Significant deficiencies shall be communicated in writing to management. 5. Other deficiencies shall be communicated to management if the auditor considers them important enough to warrant management attention.

The internal controls have to be put into context when communicating with those charged with governance, how is this done/ what should it include?

1. The purpose of the audit was to express an opinion on the financial statements. 2. The audit included consideration of internal control relevant to the preparation of financial statements in order to design audit procedures, not in order to express an opinion on those controls. 3. The matters being reported are limited to those deficiencies that the auditor has identified during the audit that merit being reported to those charged with governance.

what are the 3 opinions an auditor could issue?

1. an unmodified auditor's reports (no problems here) 2. a modified auditors report with an unmodified audit opinion (nothin wrong with FS, just some certain circumstances where this is applicable) 3. a modified auditors report with a modified audit opinion (which can be qualified opinion, except for an adverse opinion or disclaimer of opinion)

Where can we find general guidance on internal standards of auditing?

ISAE 3000

What are auditors required to do in terms of communication with those charged with governance?

Auditors are required to report privately to those charged with governance on various matters arising from the audit-;.

List the additional reporting requirements which may be included?

Bannerman and UK Corporate governance code.

What are the Bannerman requirements?

Bannerman decision, the wording of the paragraph is designed to restrict the auditor's duty of care.

ISA 260

Communication with those charged with governance.

in the title para: what words does the title to an auditors report include?

INDEPENDENT AUDITOR - to stress that it is responsibility of audit alone, also distinguishes auditors report from any other report issued to shareholders.

In the opinion , what are requirements with the address?

ISA 700 requires the report to name the location in the jurisdiction where the auditor practises.

What needs to be included in the auditors report, auditing standards and the auditors report- ISA700,701,705,706, 720.

ISA 700- Content and format of the auditors report. ISA 700- Provides illustrations of auditors report in the appendix ISA 701- New standard that requires auditors to communicate those matters that are viewed by the auditor as most significant together with an explanation of how those matters were addressed during the course of audit( aimed to improve quality of audit report) ISA 705- Key points relate to positioning of the basis for qualified/ adverse/disclaimer of opinion section after the opinion section. the omission of the key audit matters section when disclaiming an opinion. ISA 706- Revisions relate to key audit matters in particular the emphasis of matter paragraph should not be used as a substitute for a description of key audit matter. ISA 720- The revisions aim to clarify and increase the auditors involvement with other information.

In the opinion paragraph, what should be mentioned in regards to the basis for the opinion?

The ISAs have been followed. The auditor is independent. The ethical framework under which the auditor operates.