Reasonable Assurance Engagement Limited Assurance Engagement

The practitioner gathers sufficient and The practitioner gathers sufficient and
appropriate evidence to be able to draw appropriate evidence to be able to draw
reasonable conclusion limited conclusion

Performs very thorough procedures to Performs significantly fewer procedures,

obtain sufficient appropriate evidence mainly enquiries and analytical procedures.
including tests of controls and substantive
procedures. Concludes that the subject matter with
respect to identified suitable criteria, is
Concludes that the subject matter confirms plausible in the circumstances.
in all material respects with identified
suitable criteria. Gives a negatively worded assurance
conclusion
Gives a positively worded assurance (Negative Conclusion).
opinion.
Gives a moderate or low level of assurance
Gives a high level of assurance (confidence) than that of an audit

- The Directors are the stewards of the company.

- The shareholder is the principal, employing the directors (the agents) to run the
company on their behalf.
- The directors are accountable to the shareholders for the way in which they run the
company.
- Shareholders appoints the Auditor by voting.
- Directors can appoint the first auditor or to fill casual vacancy. This requires the
shareholders approval at a shareholder meeting.
- Auditors of public companies are appointed from one AGM to the next one.
- Auditors of private companies are appointed until they are removed.
Auditor’s Rights:
During Appointment as Auditor
- Access to the company’s books and records at any reasonable time
- To receive information and explanations necessary for the audit
- To receive notice of and attend any general meeting of members of the company
- To be heard at such meetings on matters of concern to the auditor
- To receive copies of any written resolutions of the company
On Resignation
- To request a general meeting of the company to explain the circumstances of the
resignation
- To require the company to circulate the notice of circumstances relating to the
resignation

The International Federation of Accountants (IFAC):

The IFAC is the global organization for the accountancy profession
IFAC promotes international regulation of the accountancy profession. By ensuring
minimum requirements for accountancy qualifications, post qualification experience and
guidance on accounting and assurance for accountant around the world, there will be
greater public confidence in the profession as a whole.
International Standards on Auditing (ISAs):
One of the subsidiary boards of IFAC in the International Audit and Assurance Standards
Board (IAASB).
It is the IAASB’s responsibility to develop and promote ISAs.

Main Features of ISAs:

- ISAs are professional guidance that the auditor must follow to ensure each audit is
performed consistently and to a required standard of quality.
- ISAs are not legal requirement. If a country has a law in place which is inconsistent
with the requirements of the ISAs, local law should be followed.
- ISAs are written in the context of an audit of the financial statements but can be
applied to the audit of other historical financial information
- ISAs must be applied in all but exceptional cases. Where the auditor deems it
necessary to depart from an ISA to achieve the overall aim of the audit, this
departure must be justified.
- ISAs contains basic principles and requirements followed by application and other
explanatory material to aid the auditor on how to follow the requirements

Development of ISAs:
- For an ISA to be issued, a lengthy process of discussion and debate occurs to ensure
the members affected by the guidance have had an input
- An exposure draft (ED) is issued for public comment and these comments may result
in revision of ED
- Approval of two thirds of IAASB members is required for the ISA to come into force.
- IAASB is responsible for developing new ethical and auditing standards
- Quality reviews are not undertaken by the IAASB

International vs Local Standards and Regulations:

IFAC is simply a grouping of accountancy bodies, therefore it has no legal standing in
individual countries. Countries therefore need to have their own arrangements in place for
REGULATING THE AUDIT PROFESSION and IMPLEMENTING AUDITING STANDARDS.
National standard setters may develop their own auditing standards and ethical standards,
OR may adopt and implement ISAs possibly after modifying them to suit national needs.
In the event of a conflict between the two sets of guidance, local regulation will apply.

Corporate Governance:
Corporate governance is the means by which a company is controlled and operated.
The aim of corporate governance is to ensure that companies are run well in the interest of
their shareholders, employees and other key stakeholders such as the wider community.
The aim is to try and prevent company directors from abusing their power which may
adversely affect these stakeholders’ group. For example, the directors may pay themselves
large salaries and bonuses while claiming they have no money to pay dividend to
shareholders. Similarly, they may be making large numbers of staff redundant but awarding
themselves (directors) a pay rise.

Advantages of a company following good corporate governance principles:

- Greater Transparency
- Greater Accountability
- Efficiency of Operations
- Better able to respond to risks
- Less likely to be mismanaged

The chairman’s role:

- Leads the board of directors and is responsible for its overall effectiveness
- The chair should ensure that directors receive clear, accurate and timely information
- Ensures satisfactory channels of communication with the external auditors
- Ensures effective operation of board sub-committees
- The chair should be independent to enhance effectiveness.
The chief executive’s role:
- Ensures the effective operation of the company
- Head of the executive directors
Executive directors:
- The executive directors have responsibility for running the company on a day to day
basis
NEDs:
- The NEDs monitor the executive directors and contribute to the overall strategy and
direction of the organization. They are usually employed on a part time basis and do
not take part in the routine executive management of the company
- NEDs will:
o participate at board meetings
o Bring experience, insight and contacts to assist the board
o Sit on sub-committee as independent, knowledgeable parties

The chair should be independent

The chair and chief executive should not be the same person
At least half the board, excluding the chair should be independent NEDs
The board should identify the independent NEDs in the annual report
Independence affected if:
- Employee of the company or group within the past five years
- Material business relationship within last 3 years
- Has served the board for more than 9 years from the date of first appointment
Key points
 One of the independent NEDs should be appointed as a senior independent director
to provide sounding board for the chairman
 The NEDs and the senior independent director should meet without the chair
present at least annually to appraise the chair’s performance
 NEDs appoint and remove executive directors and scrutinize performance against
agreed performance objectives
 The responsibilities of the chair, chief executive, senior independent director, board
and committees should be set out in writing and publicly available
 The annual report should set out the number of meetings of the board and its
committees and the attendance of each director
 A nomination committee should be established to appoint board members
 A majority of the committee members should be independent NEDs
 The chair should not be a member of committee when the committee is dealing with
the appointment of their successor
 All directors should be subject to annual re-election
 The chair should not be more than 9 years.
 Open advertising / external search consultancy should be used for the appointment
of the chair and NEDs

Audit Committee:
- The board should establish audit committee of independent NEDs, with a minimum
member of 3, or in case of small companies, 2
- The chair of the board should not be the member of the audit committee
- At least one member must have recent and relevant financial experience
- The committee as a whole must have competence relevant to the sector in which
the company operates
- The main roles and responsibilities of the audit committee includes:
o Monitoring the integrity of the financial statements
o Providing advice on whether the annual report and accounts are fair,
balanced and understandable
o Reviewing the company’s internal financial controls and risk management
systems
o Monitoring and reviewing the effectiveness of the internal audit function
o If there is no IA function in place, they should consider annually whether
there is a need for one and make a recommendation to the board
o Making recommendation in relation to the appointment and removal of
external auditor and their remuneration
o Reviewing and monitoring the external auditor independence and objectivity
and the effectiveness of the audit process
o Developing and implementing policy on the engagement of the external
auditor to supply non-audit services
 - The annual report should describe the work of the audit committee including:
o Significant issues considered relating to the financial statement
o How it has assessed the independence and effectiveness of the external audit
process
o Where there is no internal audit function, an explanation for the absence and
how internal assurance is achieved
o An explanation of how auditor independence and objectivity are
safeguarded, if the external auditor provides non-audit services
- Where there is disagreement between audit committee and the board which can not
be resolved, the audit committee should have the right to report it to the
shareholders as part of its report within the annual report

Remuneration Committee:
- Should be comprising minimum of 3 NEDs
- The chair of board cannot chair the remuneration committee and can only be a
member of the committee
- The remuneration committee should determine the policy for executive director
remuneration and set the remuneration for the chair, executive directors and senior
management
- NED remuneration should be determined by the board and should no t include share
options and performance related elements
- The work of remuneration committee should be described in the annual report

Ethics & Acceptance

Fundamental principles:
- Objectivity:
- Professional Behavior
- Professional competence and due care
- Integrity
- Confidentiality

Threats to Objectivity:
- Self Interest:
o Own shares, Fee dependency, Gifts & hospitality, Loans, Business & personal
relationship, Employment with clients, Overdue fees, Contingency fees,
Litigation with a client
- Self-Review:
o Accounts preparation, Internal audit, Tax computations, Valuation services,
Client staff joins the audit firm
- Familiarity:
o Long association, Personal relationship, Movement of staff between the firm
and client, Gifts and hospitality
 - Intimidation:
o Fee dependency, Personal relationship, Audit partner leaves to join client,
Litigation with client
- Advocacy:
o Representing the client, Promoting the client, Negotiating on behalf of the
client

Fee dependency:
- For Non-Listed clients the total fees from an audit client exceeds 30% of the firm’s
total fees for five consecutive years
- An engagement quality review should be performed. This can be either a pre-
issuance review, before the 5th year audit opinion is issued or a post issuance review
on the 5th year audit before the 6th year audit opinion is issued by a person not a
member of the audit firm expressing the opinion, or by the professional regulatory
body.

- For Listed client the total fees exceed 15% of the firm’s total fees for two consecutive
years
- An engagement quality review should be performed by a person not a member of
the audit firm expressing the opinion prior to the 2nd year audit opinion being
issued
- If the fees remain at this level for five consecutive years, the firm must resign as
auditor after the audit opinion on the 5 th year is issued. An exception may be made if
the professional body considers it would be in the public interest for the firm to
continue. In this case a pre-issuance review must be performed before the opinion
on the 6th and any subsequent year’s financial statement is issued.
Overdue fee:
- Have an appropriate reviewer who did not take part in the audit review the work
performed
Potential Employment with an audit client:
- Member must notify the firm of the possibility of the employment with the client
- Remove the member from the engagement
- Have an appropriate reviewer review any significant judgements made by that
member

The Engagement Partner, EQR or any other key audit partner must not act for a period of
more than seven cumulative years (‘time-on’ period).
After the time-on period individual must serve a cooling-off period
5 years for engagement partner, 3 years for EQR, 2 years for key audit partner.

During the cooling-off period, individual shall not:

- Be an engagement team member
- Consult with engagement team or client
- Be responsible for, or provide, other professional services to audit client
 - Undertake any role which would require significant interaction with senior
management or directly influence the outcome of the audit
In exceptional circumstances, a key audit partner may be permitted serve a one-year
extension if continuity is important to maintain audit quality
If an audit client becomes public entity, the length of time served as a key audit partner
before the client becomes public entity is considered
If the key audit partner was a key audit partner in that engagement at a different firm, the
length of time served at the prior firm should be considered
An independent regulatory body may provide an audit firm with an exemption from partner
rotation if the firm does not have sufficient people with the necessary knowledge and
experience to enable partner rotation

Recruitment services: Reviewing qualifications and interviewing applicants to advice on

financial competence is allowed.

Audit firm cannot provide a listed client with accounting and bookkeeping services
A firm shall only provide a non-listed audit client with accounting and bookkeeping services
which are routine or mechanical in nature, means which require little or no professional
judgement. E.g. the firm can accept the work if the trial balance is created and approved by
client management, accounting policies are determined by the client and areas of
judgement are considered by the client.
The audit firm would not be able to select accounting policies, determine depreciation rates
or other estimates such as the allowance for the expected credit losses.
Professionals who are not audit team members must be used to perform the services and
an appropriate reviewer who was not involved in providing services should review the audit
work or services performed.

A firm cannot provide internal audit services for a listed audit client. And for non-listed
audit client, professionals who are not audit team members must be used to perform the
internal audit service.

The firm must not prepare tax calculations of current or deferred tax for listed audit client.
And for non-listed audit client, the firm should use professionals who are not audit team
members to perform the service, and an appropriate reviewer who was not involved in
providing the service should review the audit work or service performed

The existing auditor must ask the client for the permission to respond to the prospective
auditor
If the client refuses permission, the existing auditor should notify the perspective auditor of
this fact.

Engagement Letter should be reviewed every year to ensure that it is up to date but does
not needs to be reissued every year unless there are changes to the terms of the
engagement.
The auditor should issue a new engagement letter if the scope or context of the assignment
changes after initial appointment, or if there is a need to remind the client of the existing
terms.
Reasons for changes would include:
- Changes to statutory duties due to new legislation
- Changes to professional duties, for example due to new or updated ISAs
- Recent changes in senior management
- A significant change in ownership

RISK
Audit Risk is the risk that auditor expresses an inappropriate opinion when the financial
statements are materially misstated.
Audit risk comprises the risk of material misstatement and detection risk
Risk of material misstatement consists of inherent risk and control risk
Auditor can only influence detection risk, as inherent risk and control risk are influenced by
the client. In order to reduce audit risk to an acceptable level, the auditor must reduce
detection risk, for example by assigning more experience people to the audit team,
performing a wider range of procedures and testing larger sampling sizes.
Risk of material misstatement is the risk that financial statements are materially misstated
prior to the audit. This will due to fraud or errors occurring during the year when
transactions have been processed or when the financial statement have been prepared

Inherent Risk is
Control Risk is
Detection Risk is the risk that the procedures performed by the auditor to reduce audit risk
to an acceptably low level will not detect a misstatement that exist and that could be
material.
Detection risk comprises Sampling Risk and Non-Sampling Risk
Sampling Risk is the risk that auditors’ conclusion based on a sample is different from the
conclusion that would be reached if the whole population was tested.
Non-sampling Risk is the risk that the auditor’s conclusion is inappropriate for any other
reason, e.g. the application of inappropriate procedures or the failure to recognize a
misstatement

Materiality:
- ½ ---- 1% revenue
- 5 ----- 10% profit before tax
- 1 ----- 2% total assets
Liquidity Ratios:
Current Ratio: current assets / current liabilities
Quick Ratio: (current assets – inventory) / current liabilities
These ratios indicate the ability of the company to meet its short-term debts. As a result,
these are key indicators when assessing going concern. If there are indicators of going
concern uncertainties, the financial statements must include disclosure and the auditor
must evaluate the adequacy of the disclosures
Investor Ratios:
Gearing: borrowings / (share capital + reserves)
ROCE: PBIT / (share capital + reserves + borrowings)
Gearing is a measure of external debt finance to internal equity finance.
ROCE indicates the returns those investments generate
Any changes in these could indicate change in the financing structure of the business

PLANNING
The objective of the auditor is to plan audit so that it will be performed in an effective
manner
Planning consists of a number of elements. They can be summarized as:
- Preliminary engagement activities:
o Performing procedures regarding the acceptance and continuance of the
client relationship and audit engagement
o Evaluating compliance with ethical requirement
o Ensuring there are no misunderstandings with the clients as to the terms of
the engagement
- Planning activities:
o Developing the audit strategy
o Developing an audit plan
The audit strategy and the audit plan must be documented in the audit working papers. Any
updates to them must also be documented

The Audit Strategy sets the scope, timing and direction of the audit.
- The nature of resources (human, technological or intellectual) to be deployed for
specific audit areas (e.g. experienced team members, experts)
- The amount of resources to be allocated (i.e. no. of team members)
- When these resources are to be deployed
- How the resources are directed and supervised, including the timings of meetings,
debriefs and manager reviews
The Audit Plan: Once the audit strategy has been established, the next stage is to develop a
specific, detailed plan to address how the various matters identified in the overall strategy
will be applied.
The strategy sets the overall approach to the audit and the plan fills in the operational
details of how the strategy is to be achieved
The audit plan should include specific description of:
- The nature, timing and extent of the planed direction and supervision of
engagement team members and the review of their work
- The nature, timing and extent of risk assessment procedures
- The nature, timing and extent of further audit procedures, including:
o What audit procedures are to be carried out
 o Who should do them
o How much work should be done (sample size, etc.)
o When the work should be done (interim vs final)
- Any other procedures necessary to confirm ISAs.

Internal Auditors can help management fulfill their responsibilities in respect of fraud and
error. Typical functions the internal auditor can perform include:
- Testing the effectiveness of the internal controls at preventing and detecting fraud
and error and provide recommendations for improvements to the controls
- Performing fraud investigations to: identify how the fraud was committed, identify
the extent of the fraud, provide recommendations on how to prevent the fraud from
happening again.
- Performing surprise asset counts to identify misappropriation

Reporting of Fraud and Error: If the auditor identifies fraud they must communicate the
matter on a timely basis to the appropriate level of management. If the suspected fraud
involves management, the auditor must communicate the matter to those charged with
governance. If the auditor has doubts about the integrity of TCWG they should seek legal
advice regarding an appropriate course of action.

Laws and Regulations:

It is the responsibility of management, with the oversight of TCWG, to ensure that entity’s
operations are conducted in accordance with relevant laws and regulations, including those
that determine the reported amount and disclosures in the financial statement
The auditor must perform audit procedures to help identify non-compliance with laws and
regulations that may have material impact on financial statements

Engagement Quality Review (EQR) is an objective evaluation of the significant judgements

made by the engagement team and the conclusions reached thereon, performed by the
engagement quality reviewer and completed on or before the date of the engagement
report
An engagement quality reviewer is a partner, other individual in the firm, or an external
individual appointed by the firm to perform the engagement quality review.

Listed entities and other high-risk clients should be subject to an engagement quality
review. High risk clients include those which are in the public interest, those with unusual
circumstances and risks, and those where laws and regulations require EQR.
For audit engagements where an EQR is required, the engagement partner must determine
that an EQR has been appointed

Audit Working Papers:

- Property of Auditors
- Keep for 5 years (retention)
Services Organization: Records and information held by third party such as services
organization, the auditor has no legal right to access the client’s records held at third party
If access to records and other information is denied by the service organization, this may
impose a limitation on scope of the auditor’s work. If sufficient appropriate evidence is not
obtained, this will result in modified audit opinion.

Statistical Sampling allows each sampling unit to stand an equal chance of selection.
Non-statistical Sampling essentially removes this probability theory and is wholly
dependent on auditor’s judgement.
Statistical Sampling Methods:
- Random Selection – this can be achieved through the use of a random number
generator or table
- Systematic Selection – where a constant sampling interval is used (e.g. every 50 th
balance) and the first item is selected randomly
- Monetary unit Selection – selecting items based upon monetary values
Non-statistical Sampling Methods:
- Haphazard Selection – the auditor does not follow a structured technique but avoids
bias or predictability
- Block selection – this involves selecting a block of contiguous items from the
population

Test Data involves auditor submitting dummy data into the client’s system to ensure that
the system correctly processes it and that it prevents or detects and corrects misstatements.
Audit Software is used to interrogate a client’s system. In can be either packaged, off-the-
shelf software or it can be purpose written to work on a client’s system.
Specific procedures that can be performed include:
- Extracting samples according to specified criteria, such as: random; over a certain
amount e.g. individually material balances or expenses; below a certain amount; at a
certain date
- Calculating ratios and indicators
- Casting ledgers and schedules
- Recalculation of amounts
- Preparing reports (budget vs actual)
- Producing letters to send out to customers and suppliers

Components of Internal Control:

- The Control environment includes the governance and management function of an
organization. It focuses largely on the attitude, awareness and actions of those
responsible for designing, implementing and monitoring internal controls.
- The entity’s risk assessment process forms the basis for how management
determines the risks to be managed. The auditor is only interested in the business
risk relevant to the preparation of financial statements.
- Monitoring
- Information system
 - Control activities

Documenting client’s systems:

- Narrative notes – a written description of a system
- Flowcharts – a diagrammatical representative of the system
- Questionnaires – a prepared list of questions in relation to the client’s control
system. There are two types of questionnaire that can be used:
o Internal control questionnaires (ICQ) – a list of controls is given to the client
and they are asked whether or not those controls are in place
o Internal control evaluation questionnaire (ICEQ) – the client is asked to
describe the controls they have in place for a given control objective
- Organization Chart – a diagram showing reporting lines, roles and responsibilities

Internal Audit Assignments: internal auditors perform many different types of assignments.
Common examples include:
- Value for money assignments
- Operational audit
- The audit of IT systems
- Financial audit

Audit for Not-For-Profit Organizations:

- Objective will be social and philanthropic
- There are no shareholders
- Dividends will not be distributed
NFP needs to prepare
- A statement of financial activities showing income and expenditure similar to a
statement of profit or loss. As the organization does not exist to make a profit, any
additional income over expenditure is known as surplus and any expenditure in
excess of income is deficit.
- A balance sheet showing assets and liabilities, the same as a statement of financial
position
- A cashflow statement
- Notes to the financial statements
NFP may have complex internal and external regulations governing its activities, reporting
requirements and taxation system. This means the audit team will have knowledge of these
regulations and experience of auditing this type of specialized entity, in order to be able to
perform the audit with sufficient competence and due care
Sufficient appropriate evidence will still need to be obtained through either a mixture of test
of control and substantive procedures, or substantive procedures only if the controls are
ineffective or not in place
Procedures will still involve enquiries, inspection, analytical procedures, etc.
The scope of the external audit of a NFP is much larger than that for a company
In addition to the financial statemen audit, the following may also be required:
 - Value for money audit – assessing whether the organization is getting the most from
the money spent
- Regulatory audit – ensuring the expenditure of the organization is in accordance
with regulations/legislation governing it
- Audit of performance indicators – auditing the targets of the organization that have
to be reported to stakeholders such as waiting times in a hospital accident and
emergency department.

Directional Testing – Google

Review and Reporting:

Going Concern:
It is director’s responsibility to assess the company’s ability to continue as a going concern
when they are preparing financial statement
Going concern disclosures required by directors in the financial statements –
- Where there is material uncertainty over the future of a company the directors must
include disclosure in the financial statements.
Auditor responsibility:
- Obtain sufficient appropriate evidence regarding the appropriateness of
management’s use of the going concern basis of accounting in the preparation of the
financial statements
- Conclude on whether a material uncertainty exists about the entity’s ability to
continue as a going concern
Audit procedures:
- Evaluate management’s assessment of going concern
- Assess the same period that management has used in its assessment and if it is less
than 12 months, ask management to extend its assessment
- Consider whether management’s assessment includes all relevant information
Where there is doubt over going concern:
-

Audit Procedures of Cash flow forecast

- Agree the opening balance of the cash forecast to the cash ledger account to ensure
accuracy
- Consider how reasonable company forecast have been in the past by comparing past
forecasts with actual outcomes
- Determine the assumption that have been made in the preparation of the cash flow
forecast. For example, if the company is operating in a poor economic climate, you
would not expect cash flow from sales and realization of receivables to increase, but
either to decrease or remain stable. If the costs are rising you would expect
payments to increase in the cash flow forecast.
- Examine the company’s detailed budgets for the forecast period and discuss any
specific plans with directors
- Recalculate cash flow forecast balances to verify arithmetical accuracy
 - Inspect board minutes for any other relevant issues which should be included within
the forecast
The Purpose of Review:
Review forms part of the engagement performance quality management procedures
As part of overall review, the auditor should assess whether:
- The audit work was performed in accordance with professional standards
- Significant matters have been raised for further consideration and appropriate
consultations have been taken place
- There is a need to revise nature, timing and extent of the work performed
- The audit evidence gathered by the team is sufficient and appropriate to support the
conclusions reached and provides a basis for the audit opinion
The auditor should ensure that initial assessments made at the start of the audit are still
valid in light of the information gathered during the audit and that the audit plan has been
flexed to meet any new circumstances

Written Representations – is a written statement by the management provided to the

auditor to confirm certain matters or to support other audit evidence

Reporting:
Unmodified Opinion: The auditor will give unmodified opinion when they conclude that
financial statements in all material aspects are prepared in accordance with the applicable
financial reporting framework
modified Opinion:
- qualified – Expect for
- Adverse opinion
- Disclaimer of opinion
Basis for opinion section:
The basis for opinion section refers to the professional standards the auditor has followed in
order to be able to form an opinion on the financial statement, to provide confidence to
users that the report can be relied upon.
When the auditor Modifies the opinion, the basis for opinion section will explain the reason
why opinion is modified e.g. which balances are misstated, which disclosures are missing or
inadequate, which balances the auditor was unable to obtain sufficient appropriate
evidence over and why. The title of the section must reflect the type of opinion being
issued. Therefore, the auditor must amend the heading, Basis for Opinion, to Basis for
Qualified Opinion, Basis for Adverse Opinion, or Basis for Disclaimer of Opinion, as
appropriate.
Key Audit Matters: ISA 701 communicating key audit matters in the independent auditor’s
report requires auditor of the listed companies to determine key audit matters and to
communicate those matters in the auditor’s report
Key audit matters are those that in the auditor’s professional judgement were of most
significance in the audit and are selected from matters communicated to those charged with
governance
The auditor of a non-listed entity may voluntarily, or at the request of management or those
charged with governance, include key audit matters in the auditor’s report
Each key audit matter should describe why the matter was considered to significant and
how it was addressed in the audit.
If there are no key audit matters to communicate, the auditor shall: Discuss this with the
engagement quality reviewer, if one has been appointed; Communicate this conclusion to
those charged with governance; Explain in the key audit matters section of the audit report
that there are no matters to report.
Material Uncertainty Related to Going Concern: This section is included when there is a
material uncertainty regarding the going concern status which the directors have
adequately disclosed in the financial statements. The auditor uses this section to draw the
attention of the user to client’s disclosure note.
Emphasis of Matter Paragraph: An Emphasis of Matter paragraph is used to a refer matter
that has been appropriately disclosed in the financial statements by the directors. The
auditor’s judgement is that these matters are of such fundamental importance to the users
understanding of the financial statements that the auditor should emphasis the disclosure.
An Emphasis of matter paragraph is usually included after the Basis for Opinion section.
When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of
Matter paragraph may be presented either directly before or after the Key Audit Matters
section, based on the auditor’s judgement as to the relative significance of the information
included in the Emphasis of Matter paragraph.
Other Matter paragraph: Other Matter paragraph is included in the audit report if the
auditor consider it necessary to communicate to the users regarding matters other than
those disclosed in the financial statements that, in the auditor’s judgement are relevant to
understand the audit, the auditor’s responsibilities or the audit report.

Other Information Section: other information refers to financial or non-financial

information, other than the financial statement and audit report.
The auditor must retain a copy of the final version of the other information on the audit file.
If the auditor issues a disclaimer of opinion on the financial statements, the Other
Information section should not be included in the auditor’s report as to do so may
overshadow the disclaimer of opinion.

Communication with Those Charged with Governance:

- Auditor’s responsibilities in relation to financial statements audit
- The planned scope and timing of the audit, including; How the auditor plans to
address the risk of material misstatement; The application of materiality; Business
risk that may result in material misstatements; Communications with regulators.
- Significant findings from the audit such as; Significant matters arising during the
audit that were discussed with management; Significant difficulties encountered
during the audit; Written representation auditor is requesting; Other matters that, in
the auditor’s opinion are significant to the oversight of the reporting process
 - Matters of auditor independence including; Safeguard applied to eliminate or reduce
threats to independence; Professional fees for audit and non-audit services charged
during the period
Timing of communication with those charged with governance:
Planning stage – Significant risk identified by the auditor; How auditor plans to address the
risk; Auditor’s approach to internal control relevant to the audit; Application of materiality
in the context of an audit
During the audit – If any situation occurs and it would not be appropriate to delay
communication until the audit is concluded
Conclusion of the audit – Major findings from the audit work; Delays caused by
management

Those charged with governance are responsible for overseeing:

- The strategic direction of the entity
- Promotion of good corporate governance
- Risk assessment process
- The establishment and monitoring of internal controls
- Compliance with applicable law and regulations
- Implementation of internal controls to prevent and detect fraud and errors

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