What is an audit report and the purpose?
Audit report highlights Auditor’s opinion on financial statements and whether the statements comply with accounting principles and are free from material statement. Approved Auditors
Need to carry on the audit independently and it’s part of their professional obligations. The type
Of the report issued will be dependent on the findings. The most common type opinions are
- Unqualified Opinion – financial records are free from misstatements and verify the guidelines are met.
- Qualified opinion – This report will be issues on two occasions – 01. When auditor cannot
Obtain sufficient evidence. 02. If the financial statements contain material misstatement.
- Adverse opinion – Auditor concludes the misstatement in the financial reports are material.
- Disclaimer of opinion – Auditor is unable to conclude the audit due to insufficient audit evidence.
Why the auditor’s report cannot be dated before the directors’ declaration
According to ASA 560.A3 (ISA 560.A3), the auditor’s report cannot be dated earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the opinion on the financial report, including that those with the recognised authority have asserted that they have taken responsibility for that financial report. As a result, the date of the auditor’s report cannot be earlier than the date of approval of the financial report by those charged with governance.
If management refuses to provide written representations, what three actions must an auditor take?
According to ASA580.19 (ISA 580.19), if management does not provide one or more of the requested written representations, the auditor must:(a) discuss the matter with management(b) re-evaluate the integrity of management and evaluate the effect that this may have on the reliability of representations and audit evidence in general(c) take appropriate actions, including determining the possible effect on the opinion in the auditor’s report.
‘Going concern assumption’, and explain its impact on the preparation of the financial report
According to ASA 570.2 (ISA 570.2), under the going concern assumption, an entity is viewed as continuing in business for the foreseeable future. A general-purpose financial report is prepared on a going concern basis unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. A special-purpose financial report may or may not be prepared in accordance with a financial reporting framework for which the going concern basis is relevant (for example, the going concern basis is not relevant for some jurisdictions’ financial reports prepared on a tax basis). When use of the going concern assumption is appropriate, assets and liabilities are recorded on the basis that the entity will be able to realise its assets and discharge its liabilities in the normal course of business.
