Completing the audit

• What is the main objective during the completion stage of an audit?

  To form the auditor's opinion
• Why is all audit work subject to review?

  To ensure sufficient appropriate audit evidence
• What is a contingent liability?

  A potential future obligation
• How is the existence of a contingent liability confirmed?

  By uncertain future events
• What is the key difference between a contingent liability and a provision?

  A provision is recognized as a liability
• What does FRS 137 state about contingent liabilities?

  They are not recognized as liabilities
• What should be disclosed in financial statements regarding material contingent liabilities?

  Pending litigation or court cases
• What are some audit procedures to identify contingent liabilities?

  Read minutes of meetings
• Why is making inquiries about litigation important during an audit?

  It may materially affect financial statements
• What is a commitment in the context of an audit?

  An agreement to fixed future conditions
• How are long-term commitments usually identified during an audit?

  Through inquiry of management
• What are capital commitments?

  Commitments related to capital expenditure
• What is required for the disclosure of commitments in financial statements?

  Approved and contracted amounts
• What does ISA 560 require auditors to consider?

  The effect of subsequent events
• What are Type I events in subsequent events?

  Events affecting estimates in financial statements
• What are Type II events in subsequent events?

  Conditions that did not exist at balance sheet date
• What should auditors do during the formal subsequent-events period?

  Discover and evaluate subsequent events
• What happens if management amends the financial statements?

  Auditors perform additional audit procedures
• What is the auditor's responsibility after the delivery of the report?

  No responsibility for additional procedures
• What does ISA 570 require regarding going concern?

  Assess risk at planning and final review
• What is the going concern assumption?

  Entity can continue for foreseeable future
• What should auditors consider regarding management's use of going concern assumption?

  Its appropriateness in financial statements
• What are some operating indications of going concern problems?

  Loss of major market or supplier
• What are some financial indications of going concern problems?

  Net liabilities or adverse financial ratios
• What are other indicators of going concern problems?

  Pendings legal proceedings against the entity
• What are the key learning objectives in completing the audit?

  • Review for Contingent Liabilities
  • Review for Commitments
  • Review for Subsequent Events
  • Final Evaluation of Audit Evidence
  • Going Concern
  • Opening Balance and Comparative Figures
  • Analytical Procedures
  • Accounting Estimates
  • Related Party Transactions
  • Communication with Those Charged with Governance
  • The Independent Auditor’s Report
  • Key Audit Matters
• What are the phases of an audit according to the auditing framework?

  1. Planning
  2. Risk Assessment
  3. Preliminary Evaluation of Accounting & Internal Control System
  4. Completing the Audit
  5. Audit Report
• What are the steps involved in the completion stage of an audit?

  • Review evidence obtained
  • Review final version of financial statements
  • Form auditor's opinion
• What are the audit procedures for subsequent events?

  • Review management policies
  • Read minutes of meetings
  • Review budgets and forecasts
  • Inquire with lawyers
  • Discuss new commitments and events
• What are the types of subsequent events?

  1. Type I - Adjusting events
  2. Type II - Non-adjusting events
• What steps should auditors take regarding going concern issues?

  • Assess risk at planning and review
  • Evaluate management's use of going concern assumption
  • Identify indicators of going concern problems
• What are the indications of going concern problems?

  • Operating indications
  • Financial indications
  • Other indicators
• What can result in interruptions to production lines?

  Important supplies
• What is a consequence of loss of management personnel?

  Without replacement
• What are financial indications that auditors should be alert for regarding going concern problems?

  Net liabilities or adverse key financial ratios
• What might substantial operating losses indicate?

  Poor sales, high costs, and reduced margins
• What does inability to pay creditors lead to?

  Legal action
• What change in transaction terms may indicate going concern issues?

  From credit to cash on delivery
• What does inability to obtain financing suggest?

  Potential going concern problems
• What does arrears or discontinuance of dividends indicate?

  Possible going concern issues