Alexandra Ester S.
Mangalindan
Section 2
1. Define the phrase, applicable financial reporting framework.
The phrase applicable financial reporting framework is defined as the auditor’s
judgment regarding whether the financial statements are presented fairly, in
all material aspects.
2. When forming an opinion on the financial statements, an auditor considers
several factors. Give at least three of them and explain each one briefly.
a. The financial statements adequately disclose the significant accounting
policies selected and applied
b. The accounting estimates made by management are reasonable
c. The accounting policies selected and applied are consistent with the
applicable financial reporting framework and are appropriate
3. What are the basic sections of the auditor's report?
a. Title
b. Addressee
c. Auditor’s opinion
d. Basis for opinion
e. Going concern
f. Key Audit Matters (KAM)
g. Responsibilities of management and those charge with governance for the
financial statements
h. Auditor’s responsibilities for the audit of the financial statements
i. Other reporting responsibilities
j. Name of the engagement partner
k. Signature of the auditor
l. Auditor’s address
m. Date of the auditor’s report
4. Who is the usual addressee of the audit report?
The audit’s report is usually addressed to the shareholders or to those
charged with governance of the client.
5. What are key audit matters?
Key audit matters are matters that were of most significance in the audit of
financial statements of the current period.
6. What is management's responsibility in a financial statement audit?
The management is responsible for the preparation and fair presentation of
the financial statements in accordance with PFRS, and for such internal
control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatements. They are also
responsible to assess the entity’s ability to continue as a going concern.
7. What is the auditor's responsibility in a financial statement audit?
The auditor’s responsibility is to obtain reasonable assurance about whether
the financial statements as a whole are free from material misstatements and
to issue an auditor’s report that includes an opinion.
8. How is the audit report dated?
The auditor’s report shall be dated no earlier than the date on which the
auditor has obtained sufficient appropriate evidence on which to base the
auditor’s opinion on the financial statements.
9. Give the four basic reports which may be issued in an audit engagement.
Identify the situations which warrant the issuance of each type of report.
a. Unmodified opinion report – the auditor concluded that the financial
statements are prepared, in all material respects, in accordance with the
applicable financial reporting framework.
b. Qualified opinion report – expressed when the auditor concludes that an
unqualified opinion cannot be expressed but that the effect of any
misstatements is material but not pervasive.
c. Disclaimer of opinion report – expressed when the possible effect of an
auditor’s inability to obtain sufficient appropriate audit evidence is both
material and pervasive.
d. Adverse opinion report – expressed when the effect of a misstatement is
both material and pervasive to the financial statements that the auditor
concluded that a qualification of the report is not adequate to disclose the
misleading nature of the financial statement.
10. When is an emphasis of a matter paragraph used in the audit report? Where
is it located in the audit report?
An emphasis of a matter paragraph is used in an audit report when the auditor
considers it necessary to draw users’ attention to a matter presented or
disclosed in the financial statement. The placement of an emphasis of matter
paragraph in an auditor’s report depends on the nature of the information to
be communicated and the auditor’s judgment as to the relative significance of
such information to intended users.
11. What are the two reporting frameworks which makes use of comparatives?
Contrast one with the other.
a. Corresponding figures – comparative information is where amounts and
other disclosures for the prior period are included as an integral part of the
current period financial statements, and are intended to be read only in
relation to the amounts and other disclosures relating to the current period.
b. Comparative figures – comparative information is where amounts and
other disclosures for the prior period are included for comparisons with the
financial statements of the current period but, if audited, are referred to in
the auditor’s opinion.
12. What are the auditor's responsibilities for comparatives:
a. Where the prior year financial statements have been audited by another
auditor?
The auditor shall state in an Other Matter paragraph that the financial
statements of the prior period were audited by a predecessor auditor; the type
of opinion and if it was modified, the reasons; and the date of the report.
Additionally, if the auditor concludes that a material misstatement exists that
affects the prior period financial statements, the auditor shall communicate the
misstatement with the appropriate level of management and those charged
with governance.
b. Where the prior year financial statements are unaudited?
The auditor shall state in an Other Matter paragraph that the comparative
financial statements are unaudited.
13. If there is substantial doubt regarding a client's ability to continue as a going
concern, what type of report should be issued?
The auditor shall express an adverse opinion.
14. When does the principal auditor:
a. Divide responsibility? – when obtaining sufficient and appropriate audit
evidence.
b. Assume responsibility for the work of the other auditor? – Principal auditor is
not responsible for other auditor’s work except that in case of any suspicion
arises about the reliability of the auditor’s work
15. What are the reporting implications when using experts?
If the auditor makes reference to the work of an expert in the auditor’s report
because such reference is relevant to an understanding of a modification to
the auditor’s opinion, the auditor shall indicate in the report that the reference
used does not reduce their responsibility for that opinion.
16. What are the two types of subsequent events?
a. Type I subsequent event
b. Type II subsequent event
17. What is dual dating? When is dual dating applied in a financial statement
audit?
Dual dating supplements the original audit report date with a current date
limited specifically to the note describing the subsequent event. A dual dating
is applied in a financial statement audit when the auditor becomes aware of a
material subsequent event requiring disclosures.
