ACCA上财审计P7_chap8.ppt

chapter 8 audit evaluation and review(),topic list revision: review procedures revision:opening balances revision: comparatives revision: other information revision: subsequent events revision: going concern,exam guide,going concern is particularly important,links with other procedures,revision: review procedures,the auditors must perform and document an overall review of the financial statements before they can reach an opinion,compliance with accounting regulations,the auditors should consider whether,information presented is in accordance with statutory requirements,accounting policies employed are in accordance with accounting standards,policies commonly adopted in particular industries,policies for which there is substantial authoritative support,whether any departure from applicable accounting standard are necessary,whether financial statements reflect the substance of transactions,review for consistency and reasonableness,principal considerations whether the financial statements reflected the information, explanations and conclusions previously whether it reveals any new factors which may affect the financial statements whether analytical procedures produce results consistent with the overall conclusion whether the presentation adopted may have been unduly influenced by the directors desire the potential impact on the financial statements of the aggregate of uncorrected misstatements identified,if any,analytical procedures,areas must cover important accounting ratios related items changes in products;customers price and mix changes wages changes variances trends in production and sales changes in material and labor content of production other profit and loss account expenditure variations caused by industry or economy factors,significant fluctuations and unexpected relationships must be investigated and documented,summarizing errors,at the end of the audit, some errors may still be outstanding and the auditors will summarize these unadjusted errors the summary of errors will not only list errors from the current, but also those in the previous years, allowing errors to be highlighted cumulative errors may also be shown it is normal to show both the balance sheet and the profit and loss effect (e.g. on p202),evaluating the effect of misstatements auditors should consider whether the cumulative effect of the unadjusted errors is material.,aggregated of uncorrected misstatements,specific misstatements,best estimate of other misstatements,performing additional audit procedures,requesting management to adjust,appropriated modification to auditors report,approach material level,auditor should,refuse,revision: opening balances,opening balances are those account balances which exist at the beginning of the period. appropriate and sufficient audit evidence is required and this depends on: accounting policies followed by the entity whether prior periods financial statements were audited, if so, whether the report was modified the nature of the accounts and the risk of their misstatement in current financial statements the materiality of the opening balances relative to current financial statements,prior period balances audited review the predecessor auditors working papers if the report was modified, the auditors should pay particular attention to the matter resulting the modification prior period balances not audited evidence for current assets and liabilities can be obtained through current procedures inventories by observing a current count and reconciling it back,testing the valuation of opening inventory items and testing gross profit and cut-off non-current assets and liabilities by examining the records underlying the opening balances,audit conclusion and reporting isa510.11-14(p 205) if the opening balances contain material misstatements, auditors should inform management and predecessor auditor the report will be modified if accounting policies are not consistently applied if prior periods report was modified, the auditors should consider the effect on the current periods financial statement,revision: comparatives,what types of comparatives the auditor should determine whether the comparatives comply in all material respects with the financial reporting framework applicable to the financial statement being audited corresponding figures comparative financial statements,corresponding figures,auditors must assess whether: accounting policies used for corresponding figures are consistent with current period or whether adjustments should be made corresponding figures agree with the amounts and whether adjustments have been made when prior period financial statements: have been audited by other auditors were not audited,reporting isa710.10,12,15 p207 when prior periods audit report was modified the matter was properly dealt with, current report would not refer to the previous modification the matter was material to current period, the auditors may include an emphasis of matter paragraph,incoming auditors:additional requirements isa710.17,18,19-p208 when prior period financial statements were audited by other auditors, the incoming auditors can refer to the predecessor auditors report, which could be added to the first paragraph of the audit report if they were not audited, the incoming auditor should state in the auditors report that the corresponding figures are unaudited,comparative financial statements,isa710.20,24,25 on p208-209 the auditors should obtain sufficient appropriated audit evidence that the comparative financial statements meet the requirements of the applicable financial reporting framework the auditors may express a modified opinion or include an emphasis of matter paragraph with respect to one or more financial statements for one or more period for incoming auditors,isa710,26,28,30,31 on p209-210,revision: other information,auditors should always read other information to identify material inconsistencies with the audited financial statements. other information-financial and non-financial information included in its annual report material inconsistency auditors may be engaged separately, or required by statute, to report on elements of other information. then the auditors responsibilities are determined by the nature of the engagement and by local legislation and professional standards.,examples of other information are: a report by management or the board of director on operations financial summaries or highlights employment data planned capital expenditures financial ratios name of officer and directors selected quarterly data,access to other information material inconsistency isa720.11/12/13 the actions taken by the auditors will depend on the individual circumstances and the auditors may consider taking legal advice. material misstatements of fact isa720.16/17/18 availability of other information after auditors report date decide whether the audited financial statements or the other information need revision,revision: subsequent events,subsequent events include events occurring between the period end and the date of the auditors report facts discovered after the date of the auditors report two types of event those that provide further evidence of conditions that existed at the period end those that are indicative of conditions that arose subsequent to the period end,events occurring up to the date of the auditors report auditor should perform procedures designed to obtain sufficient appropriate audit evidence that all event up to the date of the auditors report that may require adjustment or disclosure. the procedures should be performed as near as possible to the date of the auditors report. examples of procedures(table on p213),facts discovered after the date of the auditors report but before the financial statements are issued,auditors do not have obligation to perform procedures or make enquires after the date of their report when the financial statements are amended, auditors should extend the procedures to the date of their new report,when the statements are not amended but the auditors feel that they should be if the auditors report has not been released to the entity, the auditor should express a qualified opinion or an adverse opinion if it has been issued to the entity, auditors should notify the management not to issue it to third parties, if already issued,the auditors should take steps to prevent reliance on the report,facts discovered after the financial statements have been issued,auditors have no obligations to perform procedures or make enquiries regarding the financial statements after they have been issued. isa560.16(page215) when management revise the financial statement,auditors should: carry out the audit procedures necessary review the steps taken by management issue a new report on revised statements,revision:going concern,the going concern assumption when preparing accounts, management should make an explicit assessment of the entitys ability to continue as a going concern. the degree of uncertainty about the events being assessed increases the further. judgments are made on the basis of information available at the time. judgments are affected by size and complexity of the entity the nature and condition of the business and the degree to which it is affected by external factors,possible indicators of going concern problems financial indications(eg.) net liability or inability to comply with loan terms operating indications(eg.) loss of key management without replacement other indications(eg.) non-compliance with capital or other statutory requirements such indications may be mitigated by some other factors( e.g. maintain adequate cash flow, suitable alternative source of supply),auditors responsibilities the appropriateness of the going concern assumption the existence of material uncertainties about going concern assumption needs disclosure the auditors should evaluate managements assessment of the entitys ability to continue. the process management used the assumption the assessment