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The auditors’ report should be dated on the day that the:
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You are the Manager-in-charge of the audit of Moonshine Limited. Your auditor’s report for the financial year ended December 31, 2019, was signed without modification in February 2020. The scope of the audit for the year ended December 31, 2020, has been limited because the company’s Chief Executive Officer fled the country in April 2020, taking the accounting records with him.
You have identified a valuable training opportunity for Richard, a member of your audit team. As a training exercise, you have asked Richard to draft the extracts for the basis of opinion and opinion paragraphs that may not be standard wording in an unmodified auditor’s report.
Richard’s draft extracts were produced as follows:
Required:
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Your audit firm was recently appointed as the external auditors of a fast-growing fast-food outlet, Foods Only Limited. The directors are not clear as to their responsibilities and the nature of their relationship with the external auditors. The engagement partner has instructed you to visit the client and explain to the directors some fundamental aspects of the appointment.
Required:
a. Explain the matters to be stated in an audit report according to Companies and Allied Matters Act (CAMA) 2020. (5 Marks)
b. State the auditor’s rights under Companies and Allied Matters Act (CAMA). (5 Marks)
c. State the duties of external auditors under Companies and Allied Matters Act (CAMA). (5 Marks)
d. What are the responsibilities of management and those charged with governance in relation to the accounting function of the company? (5 Marks)
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The auditor’s report is regulated by either the law (CAMA 2020) or regulation (ISA 700).
i. State the minimum elements of the auditor’s report as required by ISA 700. (10 Marks)
ii. Explain briefly the matters to be expressly stated in the report of the auditors of a company to its members on the accounts examined by them as stated in CAMA 2020. (10 Marks)
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The basic objective of an audit is to form and express an opinion on the financial statements. The tangible means by which the auditor achieves this objective is the Auditors Report that is issued to members of the company after the completion of the audit.
Required:
i) Discuss TWO (2) authoritative sources which govern the form and content of the auditor’s report to members. (4 marks)
ii) Explain the essence or importance of Management Responsibility and Auditor’s Responsibility paragraphs in the auditor’s report. (6 marks)
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In addition to the Auditor’s Report, the auditor communicates with those charged with governance and audit committees of their clients.
Required:
i) What are the objectives of an auditor communicating with those charged with governance or audit committees? (3 marks)
ii) State SEVEN (7) matters to be communicated with those charged with governance or audit committees of a non-listed company by an auditor. (7 marks)
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You have recently been promoted to Senior Manager of Life Matters and Associates, a firm of Chartered Accountants. As part of your job description, you are to handle two clients in a given month. Below are some issues you will be faced with during the audit of these clients. The financial year-end for each client is 30 September 2020.
You are reviewing the Audit Senior’s draft auditor’s reports for the two clients, Factory Co Ltd and Toys Co Ltd.
Toy Co Ltd
The Audit Senior suggests that Toys Co Ltd’s audit opinion should not be qualified but should include an emphasis of matter paragraph after the audit opinion to highlight the situation below:
In October 2020, a legal claim was filed against Toys Co Ltd by a toy retailer. The suit was from a customer who slipped on a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liability in the notes to the financial statements. Audit working papers also provided sufficient evidence that no provision is necessary as Toys Co Ltd’s lawyers have stated in writing that the likelihood of the claim succeeding is remote. The amount of the claim is fixed and is adequately covered by cash resources.
Factory Co Ltd
Factory Co Ltd, a listed company, permanently closed several branches in May 2020, with all closure costs finalised and paid in August 2020. The said branches all produced the same items, which contributed 10% of Factory Co Ltd’s total revenue for the year ended 30 September 2020 (2019 – 23%). The closure has been discussed accurately and fully in the Chairman’s statement and Directors’ Report. However, the closure was not stated in the notes to the financial statements nor separately disclosed on the financial statements.
The audit senior has proposed an unmodified audit opinion for Factory Co Ltd as the matter has been fully addressed in the Chairman’s statement and Directors’ Report.
Required:
a) Evaluate whether the Audit Senior’s draft auditor’s report is appropriate, and where you disagree, recommend the amendment necessary to the draft auditor’s report of:
i) Toy Co Ltd (4 marks)
ii) Factory Co Ltd (6 marks)
b) Assuming the auditors of Life Matters and Associates are contemplating whether to use an emphasis of matter paragraph and other matter paragraph in the audit report, explain both options and the situations when each is relevant. (10 marks)
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An auditor’s report may include an ‘emphasis of matter’ paragraph and/or an ‘other matter’ paragraph. These types of paragraph are the subject of ISA 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report. The purpose of these paragraphs is to provide additional communication in the auditor’s report.
Required:
Differentiate between the ‘emphasis of matter’ paragraph and ‘other matter’ paragraph citing ONE (1) circumstance in each case. (4 marks)
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You are a manager in the Quality Control Review department of Integritas & Co, and are currently responsible for reviewing the appropriateness of your firm’s proposed auditor’s reports on financial statements. The draft financial statements of Lamptey Group for the year to 30 June 2017 disclose the following notes.
Notes
i) Significant event
During the year, Lamptey Group sold a significant amount of its business and certain assets (plant and equipment and inventory) and commenced a systematic winding down of its operations. The Group’s remaining assets (including property, trade receivables, and cash) were sufficient to meet the group’s liabilities, as at 30 June 2017.
ii) Accounting policies
The consolidated financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. As described in Note (i), the group has commenced the winding down of its operations and remaining assets have been restated to their net realizable values.
There are no other disclosures relating to the going concern basis although the ‘significant event’ is referred to in the directors’ report under the heading ‘principal activities and business review.’ Lamptey Group ceased to trade in October 2017. The auditor’s report on Lamptey Group’s financial statements for the year ended 30 June 2016 was unmodified.
Required:
Comment on the suitability or otherwise of an unmodified auditor’s report for Lamptey Group for the year ended 30 June 2017. Your answer should discuss the appropriateness of alternative audit opinions.(10 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
The auditors’ report should be dated on the day that the:
Find Related Questions by Tags, levels, etc.
You are the Manager-in-charge of the audit of Moonshine Limited. Your auditor’s report for the financial year ended December 31, 2019, was signed without modification in February 2020. The scope of the audit for the year ended December 31, 2020, has been limited because the company’s Chief Executive Officer fled the country in April 2020, taking the accounting records with him.
You have identified a valuable training opportunity for Richard, a member of your audit team. As a training exercise, you have asked Richard to draft the extracts for the basis of opinion and opinion paragraphs that may not be standard wording in an unmodified auditor’s report.
Richard’s draft extracts were produced as follows:
Required:
Find Related Questions by Tags, levels, etc.
Your audit firm was recently appointed as the external auditors of a fast-growing fast-food outlet, Foods Only Limited. The directors are not clear as to their responsibilities and the nature of their relationship with the external auditors. The engagement partner has instructed you to visit the client and explain to the directors some fundamental aspects of the appointment.
Required:
a. Explain the matters to be stated in an audit report according to Companies and Allied Matters Act (CAMA) 2020. (5 Marks)
b. State the auditor’s rights under Companies and Allied Matters Act (CAMA). (5 Marks)
c. State the duties of external auditors under Companies and Allied Matters Act (CAMA). (5 Marks)
d. What are the responsibilities of management and those charged with governance in relation to the accounting function of the company? (5 Marks)
Find Related Questions by Tags, levels, etc.
The auditor’s report is regulated by either the law (CAMA 2020) or regulation (ISA 700).
i. State the minimum elements of the auditor’s report as required by ISA 700. (10 Marks)
ii. Explain briefly the matters to be expressly stated in the report of the auditors of a company to its members on the accounts examined by them as stated in CAMA 2020. (10 Marks)
Find Related Questions by Tags, levels, etc.
The basic objective of an audit is to form and express an opinion on the financial statements. The tangible means by which the auditor achieves this objective is the Auditors Report that is issued to members of the company after the completion of the audit.
Required:
i) Discuss TWO (2) authoritative sources which govern the form and content of the auditor’s report to members. (4 marks)
ii) Explain the essence or importance of Management Responsibility and Auditor’s Responsibility paragraphs in the auditor’s report. (6 marks)
Find Related Questions by Tags, levels, etc.
In addition to the Auditor’s Report, the auditor communicates with those charged with governance and audit committees of their clients.
Required:
i) What are the objectives of an auditor communicating with those charged with governance or audit committees? (3 marks)
ii) State SEVEN (7) matters to be communicated with those charged with governance or audit committees of a non-listed company by an auditor. (7 marks)
Find Related Questions by Tags, levels, etc.
You have recently been promoted to Senior Manager of Life Matters and Associates, a firm of Chartered Accountants. As part of your job description, you are to handle two clients in a given month. Below are some issues you will be faced with during the audit of these clients. The financial year-end for each client is 30 September 2020.
You are reviewing the Audit Senior’s draft auditor’s reports for the two clients, Factory Co Ltd and Toys Co Ltd.
Toy Co Ltd
The Audit Senior suggests that Toys Co Ltd’s audit opinion should not be qualified but should include an emphasis of matter paragraph after the audit opinion to highlight the situation below:
In October 2020, a legal claim was filed against Toys Co Ltd by a toy retailer. The suit was from a customer who slipped on a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liability in the notes to the financial statements. Audit working papers also provided sufficient evidence that no provision is necessary as Toys Co Ltd’s lawyers have stated in writing that the likelihood of the claim succeeding is remote. The amount of the claim is fixed and is adequately covered by cash resources.
Factory Co Ltd
Factory Co Ltd, a listed company, permanently closed several branches in May 2020, with all closure costs finalised and paid in August 2020. The said branches all produced the same items, which contributed 10% of Factory Co Ltd’s total revenue for the year ended 30 September 2020 (2019 – 23%). The closure has been discussed accurately and fully in the Chairman’s statement and Directors’ Report. However, the closure was not stated in the notes to the financial statements nor separately disclosed on the financial statements.
The audit senior has proposed an unmodified audit opinion for Factory Co Ltd as the matter has been fully addressed in the Chairman’s statement and Directors’ Report.
Required:
a) Evaluate whether the Audit Senior’s draft auditor’s report is appropriate, and where you disagree, recommend the amendment necessary to the draft auditor’s report of:
i) Toy Co Ltd (4 marks)
ii) Factory Co Ltd (6 marks)
b) Assuming the auditors of Life Matters and Associates are contemplating whether to use an emphasis of matter paragraph and other matter paragraph in the audit report, explain both options and the situations when each is relevant. (10 marks)
Find Related Questions by Tags, levels, etc.
An auditor’s report may include an ‘emphasis of matter’ paragraph and/or an ‘other matter’ paragraph. These types of paragraph are the subject of ISA 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report. The purpose of these paragraphs is to provide additional communication in the auditor’s report.
Required:
Differentiate between the ‘emphasis of matter’ paragraph and ‘other matter’ paragraph citing ONE (1) circumstance in each case. (4 marks)
Find Related Questions by Tags, levels, etc.
You are a manager in the Quality Control Review department of Integritas & Co, and are currently responsible for reviewing the appropriateness of your firm’s proposed auditor’s reports on financial statements. The draft financial statements of Lamptey Group for the year to 30 June 2017 disclose the following notes.
Notes
i) Significant event
During the year, Lamptey Group sold a significant amount of its business and certain assets (plant and equipment and inventory) and commenced a systematic winding down of its operations. The Group’s remaining assets (including property, trade receivables, and cash) were sufficient to meet the group’s liabilities, as at 30 June 2017.
ii) Accounting policies
The consolidated financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. As described in Note (i), the group has commenced the winding down of its operations and remaining assets have been restated to their net realizable values.
There are no other disclosures relating to the going concern basis although the ‘significant event’ is referred to in the directors’ report under the heading ‘principal activities and business review.’ Lamptey Group ceased to trade in October 2017. The auditor’s report on Lamptey Group’s financial statements for the year ended 30 June 2016 was unmodified.
Required:
Comment on the suitability or otherwise of an unmodified auditor’s report for Lamptey Group for the year ended 30 June 2017. Your answer should discuss the appropriateness of alternative audit opinions.(10 marks)
Find Related Questions by Tags, levels, etc.
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