- 20 Marks
AAA – Nov 2017 – L3 – Q3 – Audit Reporting
Assess material and pervasive effects on financial statements, audit procedures, and draft audit report opinion paragraphs for Tophem Bank’s foreign associate investment.
Question
Tophem Bank Nigeria Plc has been operational for 20 years, with your firm auditing the company for the past five years. During the year, Tophem acquired an investment in Accra Insurance Limited, a foreign associate, which is accounted for using the equity method and listed at ₦575 million on the Statement of Financial Position as of December 31, 2016. Tophem’s income for the year includes its share of Accra’s net income. However, the audit team was denied access to Accra’s management, auditors, and financial data.
Following a review of the audit file for the year ended December 31, 2016, your partner has recommended a modified opinion for the audit report, providing a draft outline and requesting your input to complete it.
Requirements:
a. Evaluate the circumstances under which a matter could be both material and pervasive in its effect on the financial statements.
(4 Marks)
b. Explain EIGHT appropriate procedures to follow in the audit assignment before finalizing the audit opinion.
(8 Marks)
c. Draft an appropriate basis of opinion paragraph suitable for inclusion in the auditor’s report.
(4 Marks)
d. Draft an appropriate opinion paragraph suitable for inclusion in the auditor’s report.
(4 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit opinion, Basis of Opinion, Equity Method, Materiality, Pervasive Effects
- Level: Level 3
- Topic: Audit Reporting
- Series: NOV 2017