AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
THE PURPOSE OF AN AUDITThe purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.
[clarified ISA 200.3]
CLARIFIED ISA DEFINITION Reasonable assurance
In the context of an audit of financial statements, a high, but not absolute, level of assurance [clarified ISA 200.13]
Clarified ISAs require the auditor to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error
Reasonable assurance is a high level of assurance
Requires sufficient appropriate audit evidence to reduce audit risk to an acceptably low level
WHICH COLUMN BEST DESCRIBES THE RESPONSIBILITIES OF AN AUDITOR?
♦Confirms that the financial statements present a true and fair view
♦Corrects all errors in a set of financial statements
♦Involves checking all the controls in an organization to ensure they are working effectively
♦Is responsible for identifying instances of fraud
♦Gives an opinion on whether a set of financial statements give a true and fair view
♦Gives an opinion as to whether the financial statements are prepared in all material respects in accordance with an applicable financial reporting framework
♦Is not responsible for identifying all instances of fraud, but material misstatements, whether due to fraud or error
OVERALL OBJECTIVES OF THE AUDITOR Objectives
Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error
Express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework
To report on the financial statements, and communicate as require by the ISAs, in accordance with the auditor’s findings
[clarified ISA 200.11]
♦Responsibilities −Remain independent
−Maintain an attitude of professional skepticism
−Apply professional judgment
−Conduct audits in accordance with the clarified ISAs
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
MATERIALITY Materiality is an amount that represents the size of an omission of misstatement in the financial statements that, in light of the surrounding circumstances, could reasonably be expected to influence the economic decisions of users of financial statements
In general, misstatements, including omissions, are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. [clarified ISA 200.6]
MATERIALITY
Materiality $100,000Influences economic decisions of users
Performance Materiality (PM) $70,000
Use to plan and perform our audit .
Audit misstatement
posting threshold (AMPT)
$4,000Summarize audit misstatements over this amount
Figures used for example purposes only
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
WHY DO WE PERFORM AN AUDIT? Users of financial statements Legal and regulatory requirements Financial reporting framework Internal and external reviews Independent audit report
KEY COMPONENTS OF AUDIT REPORTS Title and addressee Introductory paragraph Management’s responsibility for the financial statements
Auditor’s responsibility Auditor’s opinion Other reporting responsibilities Signature of the auditor Date of the auditor’s report and auditor’s address [clarified ISA 700.21-42]
TYPES OF AUDIT REPORTS Unmodified opinion Modified opinion
Qualified Adverse Disclaimer
Modified report Emphasis of matter
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
COMPARATIVE INFORMATION - CLARIFIED ISA 710 The auditor should obtain sufficient appropriate audit evidence about whether the comparative information included in the financial statements has been presented, in all material respects, in accordance with the requirements for comparative information in the applicable financial reporting frameworkDoes comparative information agree with the amounts and disclosures presented in the prior period (provided no restatements)?
Have consistent accounting policies been applied in the current and comparative period (provided no policy changes)?
OTHER INFORMATION – CLARIFIED ISA 720 The financial statements and auditor’s report may be presented together with other unaudited information
The auditor shall read the other information to identify material inconsistencies, if any, with the audited financial statements
Determine whether the audited financial statements or the other information needs to be revised
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
AGENDA What is an Audit? The concept of Materiality and What it Means on the Audit
Why Do We Perform an Audit? Format of the Financial Statements Users of Financial Statements Learning points
WHAT HAVE YOU LEARNED? The objective of an audit is to enhance the confidence of users of the financial statements
An expectation gap exists between the purpose of an audit under clarified ISAs and what the public understands as the auditor’s role
The responsibilities of an auditor, including giving an opinion on whether
a set of financial statements give a true and fair view
WHAT HAVE YOU LEARNED? (CONTINUED) The auditor obtains reasonable assurance, not absolute assurance
Materiality helps us to determine our audit procedures, assess misstatements, assess results of procedures and determine appropriate audit opinion
The auditor may issue an unmodified or modified audit report depending on the circumstances of the audit
Our audit includes consideration of comparative information and other information included with the financial statements
There are various users of the financial statements
Top Related