Kế toán, kiểm toán - Chapter 12: Completion and review

CHAPTER 12COMPLETION AND REVIEW1Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTHE NATURE OF COMPLETION AND REVIEW PROCEDURES2Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettDATE OF AUDIT REPORTImportant because it establishes date of auditor’s responsibility for knowledge of events that should be reflected in financial report.Audit report should be dated when it is actually signed, and no earlier than date of directors’ declaration.Ensures financial report was completed and formally accepted by officers of company prior to auditor expressing an opinion.3Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDIT PROCEDURES AFTER BALANCE DATEMany audit procedures performed after balance date as normal tests of balances, e.g.:Cut-off testsCollectability of accounts receivable determined by subsequent paymentOut-of-period liability search4Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettANALYTICAL PROCEDURES AFTER BALANCE DATEAuditor also required to apply analyticalprocedures at or near completion of audit to:Assist in overall review of reasonableness of financial reportEnsure financial report is consistent with auditor’s knowledge of entityCorroborate conclusions formed during audit5Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSUBSEQUENT EVENTS REVIEWAASB 1002 (IAS 10) indicates that financial report should reflect the effects of certain events occurring up to time of completion, which is defined as date of approval of financial report by owners or controlling management.Auditor’s responsibility to consider subsequent events extended up to date on which auditor signs audit report.6Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPES OF EVENTS SUBSEQUENT TO BALANCE DATETwo types of events may materiallyaffect financial reports. These are:Type 1 or adjusting eventsType 2 or disclosing events7Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPE 1 OR ADJUSTING EVENTSEvents, both favourable and unfavourable, that provide evidence of, or further elucidate, conditions that existed at balance date Financial effect of such events needs to be brought to account (amounts in the financial statements might need to be adjusted)8Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLES OF ADJUSTINGEVENTSSubsequent collection of a material account receivable that has been treated as uncollectable at balance dateA commercial assessment or legal determination, subsequent to balance date, that establishes definitively a claim that was in existence, but of uncertain amount, at balance date9Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPE 2 OR DISCLOSING EVENTSDo not relate to a condition that existed at balance dateInclude both favourable and unfavourable events that create new conditions, as distinct from any condition that might have existed at balance dateIf material, consider disclosure in the notes to the accounts10Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLES OF TYPE 2 EVENTSA fire or flood loss after balance date not fully covered by insuranceRaising of additional share or loan capital after balance dateMergers and acquisitions after balance date11Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEVENTS BETWEEN BALANCE DATE AND DATE OF AUDIT REPORTThe auditor has a responsibility to apply audit procedures sufficient to enable auditor to determine whether all material Type 1 and Type 2 events have been appropriately adjusted for or disclosed in the financial report.12Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEVENTS SUBSEQUENT TO DATE OF AUDIT REPORTAuditor has no responsibility to seek audit evidence to identify such events. Where auditor becomes aware of events that have a material effect on financial report and report has not yet been issued (sent to shareholders), auditor should discuss the matter with management and seek to have an amended financial report issued.13Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEVENTS SUBSEQUENT TO ISSUE OF FINANCIAL REPORTIf material events come or are brought to auditor’s attention after financial report has been sent to shareholders, auditor should discuss matter with management.Where decision made to issue new financial report, auditor should perform procedures necessary to form an opinion on revised financial report.Auditor should take steps to prevent reliance on superseded financial report and audit report.14Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPES OF REPRESENTATIONLETTERSTwo types are commonly soughttowards completion of audit:Solicitor'sManagement15Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSOLICITOR’S REPRESENTATION LETTERAuditor should obtain letter from solicitors consultedby the client during year to obtain evidence onexistence, completeness, valuation and presentationof legal issues identified during audit.All enquiries of legal representatives of clients, and their responses to these enquiries (representations) will be documented in this letter.Example representation letter contained at Exhibit 12.2 (pp. 554-555)16Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettMANAGEMENT REPRESENTATIONLETTER — DEFINEDA written representation letter, prepared by auditor and signed by management, which formalises management responses to inquiries made by auditor during audit and clarifies management’s responsibilities.17Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettRELIABILITY OF MANAGEMENT REPRESENTATION LETTERLimited in its reliability as audit evidence, and is usually used to corroborate other evidence (should not replace other evidence gathered by auditor)Might be only evidence available to support management’s intentions of future actionsExample contained at Exhibit 12.3 (pp. 558-559)18Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettREVIEW OF WORKING PAPERSAND FINANCIAL REPORTUndertaken at end of the engagement as a final check to ensure that all significant matters and problems have been identified, considered and satisfactorily resolved.Must consider size and nature of errors, as might affect risk assessment and audit testing.Immaterial errors identified during audit may be considered material when aggregated, and thus require adjustment.19Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettREVIEW OF OTHER INFORMATION CONTAINED IN THE ANNUAL REPORTOther information in the annual report is not part of the financial report and is not covered by the audit report, e.g. directors’ report.Auditor should review other information to identify:Material inconsistencies with the financial reportMisstatements of fact20Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAPPROPRIATENESS OF GOINGCONCERN BASISAs well as assessing risk of going concern problems at planning stage, AUS 708 (ISA 570) requires auditor to assess again at final review stage in order to confirm appropriateness of going concern principle as a basis for preparing financial report.If not clear that going concern basis is appropriate, additional audit procedures might be necessary.21Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettADDITIONAL AUDIT PROCEDURES FOR ASSESSING GOING CONCERN AT COMPLETION STAGEAdditional procedures include:Review after-balance-date eventsAnalyse latest interim financial reportRead minutes of meetingsReview terms of loan agreementsInformation from entity’s solicitorsEffect of unfilled customer orders22Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCOMFORT LETTERSAuditor needs to confirm arrangements made with third parties to provide additional finance to support the audited entity, and the capacity of the third party to provide promised support.Often a parent entity will support subsidiary in financial difficulty:Letter of support, where parent agrees to provide financial assistance to subsidiary for fixed periodLetter of subordination, where parent agrees not to demand repayment of financial debts owed by subsidiary23Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger Simnett