Question Tag: Auditor's Report

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  • 30 Marks

AAA – May 2017 – L3 – Q1 – Audit Reporting

Prepare briefing notes covering benefits of IAASB auditor reporting project, sections of ISA 700 report, and explanation of Key Audit Matters.

You are Aremu Ana, an Audit Partner at Danda Audit firm who has kept pace with the International Auditing and Assurance Standards Board’s (IAASB) new and revised reporting standards which lay the foundation for the future of global auditor’s reporting and improved auditor communication.

You have concluded arrangements with the Human Capital Department of the firm to train the firm’s audit team, which includes trainees, supervisors, and managers. The training programme has been fixed to hold in two months’ time. You are now preparing notes that will assist in educating the audit team and make them appreciate the new standards.

Required:

Prepare a training briefing note which:
a. Clarifies the intended benefits of the IAASB’s new auditor reporting project. (5 Marks)
b. Identifies and describes the different sections of the new auditor’s report as required by ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements. (20 Marks)
c. Explains the term ‘Key Audit Matters’ (KAM), stating any TWO matters an auditor is required to take into account in the determination of KAM in accordance with ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report. (5 Marks)

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  • 1 Marks

AAA – Nov 2011 – L3 – SAII – Q19 – Audit Reporting

Effect of scope limitation on the type of auditor’s report.

Limitation in the scope of work may give rise to………… in an auditor’s report.

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q7 – Audit Reporting

Determines the correct date for an auditor’s report based on audit standards.

The auditors’ report should be dated on the day that the:

  • A. Report is delivered to the client
  • B. Field work is completed
  • C. Fiscal period under which the audit ends
  • D. Review of the working papers is completed
  • E. Board meeting approves the accounts

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  • 10 Marks

AAA – May 2024 – L3 – SB – Q3a – Audit Reporting

Discuss forming an appropriate opinion due to scope limitations and evaluate drafted audit report extracts.

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:

  • Basis of Opinion (extract)
    “However, the evidence available to us was limited because accounting records were missing from early in the year and it was not possible to reconstruct them completely.”
  • Opinion (extract)
    “Because of the possible effect of the limitations in the information available to us, we do not express an opinion on the financial statements.”

Required:

  1. Discuss the principal matters relevant to forming an appropriate opinion on the financial statements of Moonshine for the year ended December 31, 2020. (8 Marks)
  2. Evaluate the suitability of Richard’s draft extracts. (2 Marks)

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  • 20 Marks

AA – May 2023 – L2 – SA – Q2 – The Role and Responsibilities of Auditors

Outline audit report matters per CAMA, auditor’s rights, and management's financial responsibilities.

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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  • 20 Marks

AA – Nov 2021 – L2 – Q1b – Audit Reports

List the minimum elements required in an auditor's report according to ISA 700.

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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  • 10 Marks

AA – Nov 2019 – L2 – Q5b – Completion Procedures and Reporting

Discusses authoritative sources for the auditor’s report and explains the importance of management and auditor responsibility paragraphs.

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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  • 10 Marks

AA – Mar 2023 – L2 – Q5c – Completion Procedures and Reporting

Explain the objectives of communicating with those charged with governance and list matters to be communicated by an auditor.

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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  • 20 Marks

AAA – May 2021 – L3 – Q3 – Reporting | The audit approach

Evaluate the appropriateness of draft auditor’s reports for two clients and discuss the use of emphasis of matter and other matter paragraphs in audit reports.

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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  • 4 Marks

AAA – March 2023 – L3 – Q5c – Reporting, Current issues

Differentiate between the emphasis of matter and other matter paragraphs with examples.

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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  • 30 Marks

AAA – May 2017 – L3 – Q1 – Audit Reporting

Prepare briefing notes covering benefits of IAASB auditor reporting project, sections of ISA 700 report, and explanation of Key Audit Matters.

You are Aremu Ana, an Audit Partner at Danda Audit firm who has kept pace with the International Auditing and Assurance Standards Board’s (IAASB) new and revised reporting standards which lay the foundation for the future of global auditor’s reporting and improved auditor communication.

You have concluded arrangements with the Human Capital Department of the firm to train the firm’s audit team, which includes trainees, supervisors, and managers. The training programme has been fixed to hold in two months’ time. You are now preparing notes that will assist in educating the audit team and make them appreciate the new standards.

Required:

Prepare a training briefing note which:
a. Clarifies the intended benefits of the IAASB’s new auditor reporting project. (5 Marks)
b. Identifies and describes the different sections of the new auditor’s report as required by ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements. (20 Marks)
c. Explains the term ‘Key Audit Matters’ (KAM), stating any TWO matters an auditor is required to take into account in the determination of KAM in accordance with ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report. (5 Marks)

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  • 1 Marks

AAA – Nov 2011 – L3 – SAII – Q19 – Audit Reporting

Effect of scope limitation on the type of auditor’s report.

Limitation in the scope of work may give rise to………… in an auditor’s report.

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q7 – Audit Reporting

Determines the correct date for an auditor’s report based on audit standards.

The auditors’ report should be dated on the day that the:

  • A. Report is delivered to the client
  • B. Field work is completed
  • C. Fiscal period under which the audit ends
  • D. Review of the working papers is completed
  • E. Board meeting approves the accounts

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  • 10 Marks

AAA – May 2024 – L3 – SB – Q3a – Audit Reporting

Discuss forming an appropriate opinion due to scope limitations and evaluate drafted audit report extracts.

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:

  • Basis of Opinion (extract)
    “However, the evidence available to us was limited because accounting records were missing from early in the year and it was not possible to reconstruct them completely.”
  • Opinion (extract)
    “Because of the possible effect of the limitations in the information available to us, we do not express an opinion on the financial statements.”

Required:

  1. Discuss the principal matters relevant to forming an appropriate opinion on the financial statements of Moonshine for the year ended December 31, 2020. (8 Marks)
  2. Evaluate the suitability of Richard’s draft extracts. (2 Marks)

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  • 20 Marks

AA – May 2023 – L2 – SA – Q2 – The Role and Responsibilities of Auditors

Outline audit report matters per CAMA, auditor’s rights, and management's financial responsibilities.

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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  • 20 Marks

AA – Nov 2021 – L2 – Q1b – Audit Reports

List the minimum elements required in an auditor's report according to ISA 700.

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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  • 10 Marks

AA – Nov 2019 – L2 – Q5b – Completion Procedures and Reporting

Discusses authoritative sources for the auditor’s report and explains the importance of management and auditor responsibility paragraphs.

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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  • 10 Marks

AA – Mar 2023 – L2 – Q5c – Completion Procedures and Reporting

Explain the objectives of communicating with those charged with governance and list matters to be communicated by an auditor.

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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  • 20 Marks

AAA – May 2021 – L3 – Q3 – Reporting | The audit approach

Evaluate the appropriateness of draft auditor’s reports for two clients and discuss the use of emphasis of matter and other matter paragraphs in audit reports.

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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  • 4 Marks

AAA – March 2023 – L3 – Q5c – Reporting, Current issues

Differentiate between the emphasis of matter and other matter paragraphs with examples.

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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