Topic: Completion Procedures and Reporting

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

Identification of circumstances leading to modified audit opinions and types of opinions issued in each case.

Question

c) According to ISA 705: Modification of the auditor’s report, the auditor’s opinion on financial statements other than unmodified opinion depends on his/her judgement on two major circumstances.

Required:
i) State the TWO (2) circumstances that may result in an audit opinion being modified. (2 marks)
ii) Discuss the types of opinion that may be issued under each of the two circumstances. (8 marks)

Answer

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Tags: Audit evidence, Audit opinion, Financial Misstatements, ISA 705
Level: Level 2

Topic: Completion Procedures and Reporting
Series: JULY 2023

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

This question requires brief notes on the terms: Qualified opinion, Disclaimer of opinion, Emphasis of Matter paragraph, and Other Matter paragraph.

Question

ISA 705: Modifications to the opinion in the independent auditor’s report and ISA 706: Emphasis of Matter paragraphs and Other Matter paragraphs in the independent auditor’s report provide modifying phrases for use when issuing modified reports.

Required:
Write brief notes on the following terms:

i) Qualified opinion
ii) Disclaimer of opinion
iii) Emphasis of Matter paragraph
iv) Other Matter paragraph
(10 marks)

Answer

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Tags: Disclaimer of Opinion, Emphasis of Matter, ISA 705, ISA 706, Other Matter Paragraph, Qualified Opinion
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2023

AA – Nov 2023 – L2 – Q4b – Completion Procedures and Reporting

This question explains circumstances where the audit opinion should refer to comparative figures.

Question

ISA 710: Comparative information—corresponding figures and comparative financial statements deals with audit work on corresponding amounts and other comparative information for the preceding financial reporting period.

Required:
Explain THREE (3) circumstances under which the audit opinion should refer to the comparatives figures.
(3 marks)

Answer

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Tags: Audit opinion, Comparative figures, Financial reporting period, ISA 710
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2023

AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting

Classifies subsequent events and indicates the required treatment in financial statements.

Question

During the audit of Die Hard Company Limited, the following items were listed on the file divider under subsequent events:
i) Kodjo Armah, a major debtor for GH¢400,000 has been found to be insolvent.
ii) Large quantities of stocks were destroyed by fire in the first month after the reporting date.
iii) Judgment in respect of litigation that was ongoing before the year-end has been given against the company shortly after the end of the financial year. The judgment debt was GH¢5 million.
iv) Two customers had put in a claim in respect of goods sold to them under warranty before the year-end of GH¢300,000 and GH¢450,000 respectively. No provision was made for warranty claims in the financial statements.
v) The company issued fresh equity shares after the year-end. The number of shares was 2.5 million which generated GH¢5 million.

Required:
Classify the above items and indicate the treatment required in the financial statements.
(10 marks)

Answer

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Tags: Adjusting Events, Financial Reporting, Non-adjusting Events, Subsequent Events
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2019

AA – Nov 2020 – L2 – Q5c – Completion Procedures and Reporting

Discuss key matters to include in the communication with those charged with governance.

Question

You have completed the audit engagement for ABC Company Ltd, and the engagement partner has asked the audit manager to bring the draft communication with those charged with governance for discussion. You were among the audit field staff who performed the audit and prepared the working papers and documented issues for management’s considerations.

Required:
Discuss the main matters that should be included in the communication with those charged with governance.
(10 marks)

Answer

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Tags: Audit findings, Auditor’s Independence, Communication, Governance, ISA 260, Reporting
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2020

AA – Nov 2020 – L2 – Q4a – Completion Procedures and Reporting

Outline reasons for obtaining a letter of representation before signing the audit report.

Question

The audit engagement team of which you are a member, for the audit of Survival Ltd, has almost completed the audit of the financial statements for the year ended 31 October 2019. You have been told that your firm will need to obtain a letter of representation from management as part of the audit evidence needed to form an opinion on the financial statements.

Required:
i) Outline FOUR (4) reasons why your audit firm needs to obtain a letter of representation before the audit report is signed.
(6 marks)

ii) Outline TWO (2) factors you will consider determining the adequacy of management representation as audit evidence.
(4 marks)

Answer

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Tags: Audit evidence, Audit report, ISA 580, Letter of Representation, Management Responsibility
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2020

AA – May 2016 – L2 – Q4b – Completion Procedures and Reporting

This question explains the possible audit reports that can be issued when the going concern status of a company is questioned.

Question

(b) Describe the possible audit reports that can be issued where the going concern status of a company is called into question; your answer should describe the circumstances in which they can be issued. (5 marks)

Answer

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Tags: Audit opinion, Audit Reports, Going Concern, Material Uncertainty, Modifications
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2016

AA – May 2016 – L2 – Q4a – Completion Procedures and Reporting

This question outlines the external auditor's responsibilities and the work required regarding the going concern status of a company.

Question

(a) Describe external auditor’s responsibilities and the work that the auditors must perform in relation to the going concern status of companies. (5 marks)

Answer

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Tags: Audit Procedures, Audit Responsibilities, External Auditor, Going Concern, ISA 570
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2016

AA – Nov 2015 – L2 – Q2c – Audit and Assurance Risk Environment, Completion Procedures and Reporting

This question covers auditors’ responsibilities for subsequent events and going concern assessments, as well as internal control reporting.

Question

c) Technolab has an internal audit department. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the report produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differ from one prepared by the external auditor.
(7 marks)

Answer

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Tags: Audit Responsibilities, Going Concern, ISA 560, ISA 570, Subsequent Events
Level: Level 2

Topic: Audit and Assurance Risk Environment, Completion Procedures and Reporting
Series: NOV 2017

AA – May 2017 – L2 – Q3c – Completion Procedures and Reporting

Audit procedures for determining if PharmaCo can continue as a going concern.

Question

PharmaCo provides scientific services to a wide range of clients. Typical assignments range from testing food for illegal additives to providing forensic analysis on items used to commit crimes to assist law enforcement officers.

The annual audit is nearly complete. As audit senior, you have reported to the engagement partner that PharmaCo is having some financial difficulties. Income has fallen due to the adverse effect of two high-profile court cases by customers who bought drugs from the company.

Required:
Explain the audit procedures that may be carried out to determine whether or not PharmaCo has the ability to continue as a going concern entity.

Answer

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Tags: Audit Procedures, Cash Flow Forecasts, Going Concern, ISA 570
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2017

AA – Nov 2016 – L2 – Q5a – Completion Procedures and Reporting

Explain what a management letter is and describe its contents.

Question

ISA 265 “Communicating Deficiencies in Internal Control to Those Charged with Governance and Management” requires auditors to communicate deficiencies in internal control with management.

Required:
Explain clearly what a management letter is, indicating the contents of such a letter. (5 marks)

Answer

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Tags: Internal Control, ISA 265, Management letter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2016

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

Question

ISA 706 (Revised): Emphasis of Matter Paragraphs and Other Matter(s) paragraphs in the Independent Auditor’s Report requires that an auditor’s report may include an “emphasis of matter” paragraph and/or an “other matter” paragraph.

Required:
Distinguish between Emphasis of Matter and Other Matter paragraphs, showing clearly requirements of Audit Report and communication with those charged with governance.

Answer

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Tags: Audit report, Communication with Governance, Emphasis of Matter, ISA 706, Other Matter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

AA – May 2021 – L2 – Q4a and b – Completion Procedures and Reporting

Discuss whether the financial statements require amendment and audit procedures to conclude on the amendment.

Question

Fafa Ltd operates a chain of food wholesalers across the Volta Region of Ghana, and its year-end was 30 September, 2019. The final audit is nearly complete, and it is proposed that the financial statements and audit report will be signed on 13 December, 2019. Revenue for the year is GHS 79 million, and profit before taxation is GHS 8.5 million. The following event occurred after the year-end.

Receivable:
A customer of Fafa Ltd has been experiencing cash flow problems, and its year-end balance is GHS 0.8 million. The company has just become aware that its customer is experiencing significant going concern difficulties. Fafa Ltd believes that as the company has been trading for many years, they will receive some, if not full, payment from the customer, hence they have not adjusted the receivable balance.

Required:
i) Discuss whether the financial statements require amendment. (1 mark)

ii) Describe THREE (3) audit procedures that should be performed to form a conclusion on the amendment.

(3 marks)

b) Describe management’s responsibility for subsequent events occurring between:
i) The year-end date and the date the Auditor’s report is signed. (3 marks)
ii) The date the Auditor’s report is signed and the date the financial statements are issued. (3 marks)

Answer

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Tags: Audit Procedures, Financial Statement Amendment, IAS 10, Receivable, Subsequent Events
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAY 2021

AA – Nov 2021 – L2 – Q5b – Completion Procedures and Reporting

Describes the purpose of a management letter and outlines its contents as per ISA 260.

Question

The partner in your firm has requested you to train the newly recruited junior audit staff on ISA 260: Communication with those charged with governance.

Required:
Draft a training material for the new junior recruits on the provisions set out in ISA 260 in relation to:

i) The purpose of issuing a Management Letter to a client after an audit.
(5 marks)

ii) The contents of a Management Letter.

Answer

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Tags: Audit Reporting, Communication, Governance, ISA 260, Management letter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2021

AA – Nov 2021 – L2 – Q4a – Completion Procedures and Reporting

Discusses audit procedures for non-depreciation of buildings and the impact on the audit report if unresolved.

Question

ou are an audit intern in Transparency & Associates, a firm of Chartered Accountants. This year, one of your new clients is Obuse Ltd, a company having net assets of GH¢20,000,000. The audit work has been completed, but there is one outstanding matter you are currently investigating; the directors have decided not to provide depreciation on buildings in the financial statements, although International Financial Reporting Standards suggest that depreciation should be provided. The estimated depreciation is GH¢500,000.

Required:
i) State FOUR (4) additional audit procedures and actions you should take in respect of the above matter.
(6 marks)

ii) What should be the impact on the audit report if the issue remains unresolved at the reporting stage of the audit?

Answer

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Tags: Audit Procedures, Depreciation, Financial Reporting, IFRS, Modified Opinion
Level: Level 2

Topic: Completion Procedures and Reporting
Series: NOV 2021

AA – April 2022 – L2 – Q4a – Completion Procedures and Reporting

Discusses the need to amend financial statements based on subsequent events and the auditor's responsibility in the post-year-end period.

Question

a) Aseye Ltd is in the manufacturing sector and its year-end is 30 September 2019. The final audit is nearly complete and it is proposed that the financial statements and audit report will be signed on 10 November 2019. Revenue for the year is GH¢80 million and profit before taxation is GH¢9 million. Subsequent to the year-end, a lawsuit was filed against Aseye Ltd. Below are the details of the lawsuit:

A key supplier of Aseye Ltd is suing the company for breach of contract. The lawsuit was filed on 10 October 2019, and the sum claimed by the supplier is GH¢2 million. This has been disclosed as a contingent liability in the notes to the financial statements; however, correspondence has just been received from the supplier indicating that they are willing to settle the case for a payment by Aseye Ltd of GH¢1 million. It is likely that the company will agree to this.

Required:
i) For the event above:

Discuss whether the financial statements require amendment. (2 marks)
Describe audit procedures that should be performed to enable the Auditor to draw a conclusion on the amendment. (2 marks)

ii) Describe the auditor’s responsibility for subsequent events occurring between:

The year-end date and the date the auditor’s report is signed. (3 marks)
The date the auditor’s report is signed and the date the financial statements are issued. (3 marks)

Answer

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Tags: Audit Procedures, Contingent Liability, IAS 37, ISA 560, Subsequent Events
Level: Level 2

Topic: Completion Procedures and Reporting
Series: APR 2022

AA – Mar 2024 – L2 – Q5a – Completion Procedures and Reporting

Identify subsequent events and recommend auditor actions based on two scenarios for Benkum Ltd.

Question

Atiko Audit firm is the external auditor of Benkum Ltd, a company operating in the oil and gas sector. Benkum Ltd is listed on the Ghana Stock Exchange. On completing the audit for the year ended 31 December 2022, the following issues were brought to the attention of the senior partner:

On 25 February 2023, Benkum agreed with the workers’ union to increase the pay of all its employees by 10%, backdated to 1 July 2022. No provision for this has been made in the financial statements.
One of the company’s oil tankers shipwrecked at Cape Three Points on the western side of Ghana. There is a risk of serious oil spillage which could have a significant effect on the future of the company. Further information will not be available until after the auditor’s report has been signed.

Required:
i) State TWO (2) types of the event identified by ISA 560: Subsequent Events in relation to the scenario above. (2 marks)
ii) What further action should Atiko Audit firm take concerning each of the above issues? (8 marks)

Answer

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Tags: Adjusting Events, ISA 560, Non-adjusting Events, Subsequent Events
Level: Level 2