P7 Audit and Assurance Summary $o% alling =Allo%ed "ut uality shouldn>t suer? Contingent *ees =@ot allo%ed due to Self-interest and Intimidation? ractical Co''ercial Issue (Resources Commercially ,iale)
Ethical and Professional Issues: Ethical Issues -
( I of C ) Integrity of Client (Restricting Us !iding from Us "rea#ing $a%) ( C of I ) Conict of Interest (&%o Interest (&%o Com'etitor clients on "oard Soft%are Recommendations) Co n n de de nt nt ia ial it it y ("ro#e la% re'ort to Authority $ ) (Risk to Auditor’s Independence) Independence) SSA*I Self-interest (+ifts *inancial Interest "usiness o''ortunity) Self-re,ie% (Pro,ision of non-audit ser,ices to audit client) Ad,ocacy (negotiation on ehalf of client guaranteeing for client) Familiarity ($ong ser,ice relationshi' %ith client) Intimidation (*ee 'ressure Intimidation to sue) Management Pressure
rofessionall Issues rofessiona o ISA !"#A ($) Money $aundering (E.cessi,e Cash agic Cash Cash "ased "usiness) oney $aundering Ste's : /0Placement10Integration2 /0Placement10Integration20$ayering 0$ayering Ant-oney $aundering: $R30 *irm 4ide controls training and 56C $iaility : &i''ing o Client or *ailure to Re'ort 8Concealing the Crime8 o $ia%ility &f &ur Fir' (In case Something gone %rong *irm e $iale) 4rong 3'inion Ina''ro'riate ad,ice 9isclaimer
o
(P) ractice Manage'ent Manage'ent ISC / ; ISA 11<: (C) (uality Manage'ent ($ac# of o,ersight $ac# of Structure) 3,ersight Structure (9irected Su'er,ised ; Re,ie%ed) S#ills E.'erience of team ; &raining Correct allocation of resources Cold Re,ie%s and !ot re,ie%s
)endering (Portray your) Introduction to the r'* o (ualications Specialist S#ills Specialist S#ills E.'erience o Countries Countries $ocations Presence E.'lain Audit Approach and Approach and ho% it suits the client Re+uire'ent of Re+uire'ent of client Adherence to Code of Ethics ,eadlines and ,eadlines and timings Fee matters Fee matters and ey Sta. Any non-audit ser/ices %e ser/ices %e can oer
o
Ad/ertising (9on>t Use) @o Unsustantiated Claims Criticism on other accountants %or# or ma#e their %or# duious UnethicalIllegal selling ,erses B+et 4hat you e.'ect Clarity and @o Use of un'rofessional language language isuse ACCA name unless =D< or more ACCA then 'lace after the name BChartered BChartered CertiFed Accountants I'pact on Audit 0ork (E.tend Audit Procedures due to $ac# of controls or ore Stress on going concern %or# @eed an E.'ert)
Safeguards* Se'arate Audit &eams &eams Resign *rom the audit %or# •
•
•
•
•
Inform the Client
•
!ot Re,ie%s 9ecline &he audit %or# $egal 3'inion
•
•
•
E.'ert Re,ie% Resign and Sign usiness deal Cold Re,ie%s and &raining &raining
•
• • •
Engage'ent Appoint'ent Considerations* Enough Resources Resources And Sta Audit Risk &oo ris#y $iailities Re'utational ris#s Is Fee ethical Fee ethical and 'ractical ore than /D Client Ale to Pay
P7 Audit and Assurance Summary -
Conicts of Conicts of Interest %ith 'otential client rofessional rofessional clearance clearance $ast Auditor>s gone %hy Any fs dis'ute GIntegrity reconditions for audit in 'lace o Client using correct accounting frame%or# as 'er la% o 9ocumented control 'rocess o,er fs o Access to all rele,ant information reHuired for the audit rofessional issues0 Any ethical and rofessional
-
o $ac# of control eecti,enes eecti,eness s or monitoring ,R* 9etection Ris# 8Auditors $ac# of E.'erience Short Sam'les $ac# of E.'ert)
4hat is the Risk of Material Misstate'ent to Misstate'ent to consider - 4hat is the issue: 4hat item in fs might e 'otentially %rong - 4hy is that issue: Ris# of 3,erUnder 3,erUnder stated ($in# to Scenario) - In case of Audit Ris# (Include 9etection 9etection ris# as %ell) Audit %or# in 'rogress: Audit Matters to consider
Ris#: 2usiness Risk* &perational Risk3 Financial Risk3 Co'pliance Risk -
9amag 9amage e to Com'a Com'any> ny>s s ailit aility y to achie achie,e ,e goal goals s Re'ut Re'utati ation on Cos Costs ts Cash Cash o% o% Pro Prole lems ms etc0 etc0
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4hat 4hat Accoun Accountin ting g rules rules A''ly A''ly 4hat 4hat IAS Says Says 4hat 4hat Client Client did did right right or or %rong %rong "re "reach ach of of IAS 4hat 4hat doe does s it o,er o,eru und nder erst stat ates es ateriality I* I* Audi Auditt Re' Re'or ortt Cons ConseH eHue uenc nce e I*
Audit rocedures 0hen Audit )esting 7 Audit E/idence 0hen Re/ie8ing )ES) )9E FAC)S FAC)S :E/ents :A'ounts )ES) )9E A7C R;$ES
AEI&;
AnalyKe
=Com'arati,e and &rend Analysis?
EnHuiry =4ritten Re'resentation "oard inutes?
)9I=>S
,A,A?
,ocument
=Agreements 9eeds Laluation ?
Assets =Physical =Physical Intangiles?
Audit Risk* IR 1 CR 1 ,R 4 R&MM 5Risk of Material Misstate'ent6* Misstate'ent6* IR 1 CR 4 -
-
IR* Inherent Ris# o @ature of usiness: Cash "ased $isted 8 IAS 22 and I*RS J disclosure ris# o Integrity of anagement: anagement 3,erride of controls or 9elierate Policies o Pressures on anagement : 9irectors 'aid "onus on ProFt Earning anagement Ris# o anagement E.'erience and 5no%ledge 8 9i,ersiFcation into ne% sector o Com'le. Accounts and Estimates 8 *inancial instruments and deri,ati,es o Unusual transactions 8 %ire transfer to foreign institution 8 *oreign *oreign E.change CR* Control Ris# o Changes in o'erating en,ironment0
Ins'ection =Ins'ection of Assets and Control Processes?
&ser,ation
=3ser,ation of "oo#s and Procedures? Recalculation =Recasting Re%or#ing the assignment? Audit of >roups >roups (S'ecial considerations):
-
,irector>s EnHuiry =40R "oard inutes?
Accounting oo#s =Cashoo#s Asset Register "an#s statements?
?rd Party conFrmations
E.is E.isti ting ng Sus Susid idia iari ries es:: y
P7 Audit and Assurance Summary 9ierent Currencies ( *3REM ris#) 9ierent Auditors (Com'onent Auditor) o Intragrou' &rading (@ot Cancelled on Consolidation) o Related Party &ransactions (Undisclosed RP&) o +ood%ill im'airment test of e.isting susidiaries AcHuisitions: o ClassiFcation ($e,el of Control: Noint Lenture Associate Susidiary) o 9ate of Control (Ris# in Pre-Post AcHuisition ProFt and their Im'acts) o +ood%ill Calculation (Ris# in Assessment of +ood%ill *L of @0A o If "efore 6E Im'airment Re,ie% o Consolidation Consolidation Schedule o
o
9ierent Auditors (Com'onent Auditor)
o
-
-
uality Control
-
-
Agree &heir Plan
-
Re,ie% their %or#
ore Audit 4or# 8 =+rou' ateriality Re,ie% conditions for Audit *ee? 9is'osals: o ClassiFcation (9is'osal $e,el of Control) o 9ate of dis'osal (Sto''ed eing consolidated S-?I ) o 9is'osal Proceeds (+ains(loss) on dis'osal) o 9iscontinued 9iscontinued 3'eration and !*S =I*RS D? o 9is'osal resulting to Associate or In,estment o
P7 Audit and Assurance Summary Audit Re'ort:
P7 Audit and Assurance Summary
Structure of an Audit Report*
)A&2ME&&RA,
Matters in an Audit Report 5Criticis'6* A/aila%ility3 Rele/ance3 Co'para%ility3 ;nder sta%ility -
-
-
-
&itle!eadings Structure =Correct 'lace of Audit Re'ort com'onents? 3'inion correctness "asis Paragra'h $ac# of E.'lanation of %hat>s I*RS reached $ac# of Amounts $ac# of Im'act Analysis 4hy is materiality mention aterial uncertainty going concern (I* A@6) E3: correctly used (I* A@6) ey Audit Matters: 9oes it e.'lain %hy the matter is signiFcant Reference to related disclosure included Is ho% the matter addressed in the audit e.'lained Any conclusions dra%n y auditor missing 3: correctly used (I* A@6) 3ther Info: E.'lained &ther Info res'onsiility for auditor Engagement Partner name disclosed ClarityUse of Professional 4ords
Audit Report &utco'es*
ISA DO<
Mater ial 6es
er/asi /e @o
7<<
@o
@o
=E0 7
6es
7
6es
7
&ther
&utco' e
4hen there is 'aterial uncertainty o/er the entity’s going concern
aterial uncertaint y regarding going concern
Something or @othing SigniFca Signicant nt Matters to the atter Audit and Auditors response to those Matters and )herefore conclusions@ @o $ac# of E,idence
6es
6es
$ac# of E,idence
6es
@o
6es
6es
6es
@o
6es
@o
aterial isstatement aterial isstatement Refer to ISA details elo% Correctly disclosed ut is *undamental to users understanding *S
Standard Re'ort &o e 'resente d in all cases e.ce't for disclaime r E.ce't *or 9isclaim er of 3'inion E.ce't *or Ad,erse 3ther atter Em'hasi s of atter
P7 Audit and Assurance Summary
71<
6es
@o
Signicant Matter ista#e in other infor'ation in *S
3ther Informatio n
P7 Audit and Assurance Summary Standar d @ame
5ey Points
ISA 1<<
&/erall &%ecti/es of the Independent Auditor and the Conduct of an Audit in Accordance 8ith ISAs Stay Ethical: Auditor shall loo# inde'endent in mind and in a''earance as %ell0 Maintain professional skepticis' throughout the audit0 An attitude that includes a Huestioning mind eing alert to conditions %hich may indicate 'ossile misstatement due to error or fraud and a critical assessment of audit e,idence E1ercise rofessional Budge'ent in 'lanning and 'erforming the audit 3tain Sucient Appropriate Audit E/idence0 Agreeing the )er's of Audit Engage'ents Auditor shall acce't audit engagement in light of: / Com'etency Ethical reHuirements Integrity of Client roect anagement Issues 5no% your client 'rocedures to understand usiness model and funds for oney $aundering Pre Engagement conditions: / Pro'er remo,al of 'redecessor auditors and #een reason ehind it 1 anagement Acce'ts res'onsiility to 're'are *S 2 Use of 'ro'er Fnancial re'orting frame%or# under statutory and regulatory la%s Q 9ocumented and im'lemented internal controls ensuring fs are free from D Pro,ide all information access to auditor %hich management #no%s and auditor inHuires or reHuest to inHuire from other 2 rd Party0 (uality Control for an Audit of Financial State'ents Audit *irm is reHuired to maintain rofessional co'petency3 Attitude and &/ersight of its em'loyees to maintain Huality of audit ser,ices deli,ered and a,oid negligence claims Engage'ent artner should e Authoritati/e Independent and Co'petent and E1perienced enough together %ith sucient time to discharge duties of a Huality audit and o%n it0 / Assignment of Audit &eam and 9elegation of tas# 1 9irection Su'er,ision and Re,ie% of Audit 2 Consultation and uality control re,ie%er a''ointment uality control 'rocedures must e =CARE? : - Co'plied - Ade+uate - Rele/ant- E.ecti/e Engagement re,ie% e done y independent authoritati/e e1perienced and +ualied generally 'artner le,el 'erson to ensure re,ie% is done to Huality standards0 Post Audit uality Control easure : Engagement Huality controller %ill concern the follo%ing 9iscuss Audit %or# signiFcant udgements and deri,ed o'inion 9iscuss 'ossile HualiFcation of 3'inion atters to e dicussed %ith management Audit 9ocumentation should e com'lete Audit ,ocu'entation Auditor shall document in such a %ay that an e.'erience auditor can understand and re,ie% the audit %or# D @ature timing and e.tent of audit 'rocedures ! SigniFcant matters and Nudgements made ? Results of 'rocedures !ot ;Cold re,ie%s or Engagement uality Control Re,ie%s )he Auditor’s Responsi%ilities Relating to Fraud in an Audit of Financial State'ents &o identify and assess the risks of 'aterial 'isstate'ent of the nancial state'ents due to fraudT 0hy Frauds are detected* &o otain sucient appropriate audit e/idence regarding the assessed risks of 'aterial 'isstate'ent duenot to fraud through designing and im'lementing a''ro'riate res'onses - >enerally concealed3 &o respond appropriately to fraud or sus'ected fraud identiFed during the audit / Presum'tion that Re,enue contains fraud
ISA 1/<
ISA 11<ISC /
ISA 12<
ISA 1Q<
P7 Audit and Assurance Summary
ISA 1D<
ISA 1O<
ISA 1OD
ISA 2<<
regulations Consideration of $a8s and Regulations in an Audit of Financial State'ents &o 'erform specied audit procedures to hel' identify instances of non-co'pliance 8ith other la8s and regulations that may ha/e a 'aterial e.ect on the nancial state'entsT &o o%tain sucient appropriate audit e/idence regarding co'pliance 8ith the pro/isions of those la8s and regulations generally recogniKed to ha,e a direct e.ect on the determination of material amounts and disclosures in the nancial state'entsT &o respond appropriately to non-co'pliance or sus'ected non-com'liance %ith la%s and regulations identiFed during the audit0 ISA !# Co''unication 8ith those charged 8ith go/ernance - &o co''unicate clearly %ith those charged %ith go,ernance the responsi%ilities of the auditor in relation t o the nancial state'ent audit and 'lanned sco'e and timing of the auditT - &o o%tain from those charged %ith go,ernance infor'ation rele/ant to the auditT - &o 'ro,ide those charged %ith go,ernance %ith ti'ely o%ser/ations arising fro' the audit that are signicant and rele,ant to their res'onsiility to o,ersee the Fnancial re'orting 'rocessT - &o pro'ote e.ecti/e t8o-8ay co''unication et%een the auditor and those charged %ith go,ernance to co''unicate 'atters of Auditor’s independence or ,iculties faced %y Auditor Co''unicating ,eciency in internal controls An internal control of signicant i'portance is 8eak A description of deciency in internal control and its possi%le i'plications Some suggesti/e 'easures to ma#e control ecient lanning an Audit of Financial State'ents Audit Strategy Characteristics of engagement -
ISA 2/D
Re'orting oecti,es timing of communications
SigniFcant factors identiFed to audit engagement
@ature timing and e.tent of resources
Audit plan: Continuous eort to im'lement the audit strategy ,ia course of acti,ities0 An audit 'lan is not rigid it is eected y the dynamic circumstances identiFed during the course lanning initial Audit engage'ents: o Consult predecessor auditor for any info aout engagement and management itself : Re,ie% %or#ing 'a'ers o ,iscuss 'aor Financial Standards a''licale to Entity %ith anagement o Audit Procedures in relation to ISA D/< Initial Audit engagements for opening %alances o Re/ie8 of the audit strategy y another senior 'artner %ithin the Frm o !igh *ee and increased materiality screening and ig sam'les more audit %or# 9igh professional skepticis' as the ris# %ill e high on detection of Identifying and Assessing the Risks of Material Misstate'ent through ;nderstanding the Entity and Its En/iron'ent Auditor is reHuired to de/ise and audit plan and strategy in such a 8ay that all 'aterial 'isstate'ents in F7S and risk are identied and res'onded in an eecti,e manner0 A udit or sh ou ld gain understanding of : SI>=IFICA=) RISS / Industry and En,ironment 1 Regulatory and Industry $a%s Ris# of fraud 2 *inancial Performance and Entity>s "usiness odel 9egree of suecti,ity Q Internal controls and anagements attitudes Unusual transactions Auditor shall in+uire fro' 'anage'ent AnalyGe regulations aecting fs and use prior audit kno8ledge and e1perience (0$) Auditor shall assess identiFed risks and there eects at F7S le/el3 assertion le/el and %asis for other audit procedures Re lat ed Par ty Auditor shall respond e.ecti/ely y detailed 'rocedures audit %or# and use of e.'erts0
P7 Audit and Assurance Summary ISA 21<
ISA 22<
Materiality in lanning and erfor'ing an Audit ProFt efore &a.: D &otal Assets: /-1 ProFt after &a.: D-/< lanning Materiality ; erfor'ance Materiality conce't aterial y A'ount =ature I'pact ateriality in Planning and Performing an Audit reHuires that 'ateriality should %e re/ised if necessary as the audit 'rogresses and circumstances de,elo' )he Auditor’s Responses to Assessed Risks &/erall responses include em'hasising to the audit team the need for 'rofessional sce'ticism assigning additional7alternati/e sta. to the audit using e1perts 'ro,iding more su'er,ision on the audit and incor'orating more un'redictaility into the audit0 &estof Controls - Sustanti,e Procedures - Comined Consider %hether e.ternal conFrmation 'rocedures are to e 'erformed as sustanti,eaudit 'rocedures0 ,ocu'ent Ris# assesments and res'onses ,ia audit 'rocedures and e,eidences sought against them
P7 Audit and Assurance Summary ISA Q<1
ISA QD<
ISA D<<
Audit Considerations Relating to an Entity ;sing a Ser/ice &rganiGation - Auditor is reHuired to o%tain an understanding of nature of ser/ice pro/ided and outsourced function e/aluating its i'pact on controls and otain SAAE for the outsourced function eecting *S0 - Auditor is reHuired to o%tain SAAE regarding controls and procedures at ser/ice organiGation sucient to deri,e ris#s of material misstatements - Auditor is reHuired to o%tain : A type D re'ort focuses on the description and design of controls %hereas a type ! report also co,ers the operating e.ecti/eness of the controls ,o procedures and analytical at Ser,ice organiKation (Client Permission ReHuired) ;se another auditor to 'erform 'rocedures at ser,ice organiKation E/aluation of 'isstate'ents identied during the audit C ommu ni cat e t he 'isstate'ents in indi/idual or in aggregate &he i'pact of 'isstate'ents on auditors o'inion if they remain incorrect ,ocu'ent all the e/aluation and o%tain 'anage'ents representation regarding immateriality of the misstatements Audit E/idence *rame %or# to 'erform audit 'rocedures to otain Audit E,idence: Audit Procedures ( A E I & ; ): &ransactions (ACCA C&) Account "alances (REC<) —a l l t r a ns a ct i o nswe r epr o pe r l yau t h or i z e d 1Au t h or i z a t i on
Analytical and Analyse 1 En+uiry and E.'lainations 2 Inspection and In,estigation Q &%ser/ation D Recalc ulation and Re'erformance /
on (, A , A ?) - ,irectors
—t h ee nt i t yho l d so rc o nt r o l 1Ri g ht sa ndOb l i g at i o ns
2Cut off —t h et r a ns a ct i o nsh av ebe enr e c o r d e di nt h ec o r r e c t a c co un t i n gp er i o d
—a ss et s ,l i a bi l i t i e sa nde qu i t yba l a nc ese 2Ex i s t e nc e
3Cl a ss i fic a t i o n —t h et r a n sa c t i o n sh a v eb e enr e c o r d e di nt h e p r o pe ra c c o un t s
- Assets - ,ocu'ents
a pp r o pr i a t ea mo un t s
4Va l u at i o na ndAl l oc a t i o n —a ss et s ,l i abi l i t i esandeq b al a nc e sa r ei n c l u de di nt h efi na nc i a ls t a t e me nt sata pp
- Accounting 2ooks
- ? arty
3Compl et eness — al l as se t s ,l i a bi l i t i e san de qui t ybal t h ats h ou l dh a v eb ee nr e c o r d edh a v ebe enr e c o r d e d.
4Accur acy —t h et r a ns a ct i o nswe r er e c or d edatt h e
rd
r i ght st oi t sas set sandowesobl i gat i onst oi t sl i abi l i t i es
—a l l t r a ns a ct i o nst h ats h ou l dha v eb ee n 5Compl et eness
a mo un t sa n da nyr e su l t i n gv al u at i o no ra l l o ca t i o na dj u s
r e c o r d e dh a v eb e enr e c o r d e d
a r ea pp r o pr i a t e l yr e co r d ed .
—t h et r a ns ac t i o nsa ct u al l yt o okpl a ce 6Occur r ence
CARCO) Pr e se nt a t i o na nddi s c l o su r e :(
-
—fi n an c i a ls t a t e me nt sar ea pp r o p r i a t e l ypr e s en t e da ndd es c r i b ed ,a n di n f o r ma t i o ni nd i s c l o s ur ei sc l e ar l yex p r e s s ed . Cl a s si fi ca t i ona ndUnd er s t a n da bi l i t y Accur acyandVal uat i on —fi n an c i a la ndo t h eri n f o r ma t i o ni sdi s c l o s edf a i r l yan da ta p pr o pr i a t ea mo un t s . Ri g ht sa ndOb l i g at i o ns —t h et r a ns ac t i o nspe r t a i n edt ot h ee nt i t y Compl et enessandOccur r ence— a l ld i s c l o s ur e st h ats h ou l dha v eb ee ni n c l u de di nt h efi n an c i a ls t a t e me nt
If: (a) Audit e,idence otained from one source is inconsistent %ith that otained from anotherT or () &he auditor has douts o,er the reliaility of information to e used as audit e,idence the auditor shall determine %hat modiFcations or
P7 Audit and Assurance Summary &he auditor shall determine %hat modiFcations or additions to audit 'rocedures are necessary to resol,e the matter and shall consider the eect if any on other as'ects of the audit0 ISA D
s Estimates - Relating Fnancial and non-Fnancial info - Lariance and audit 'lan Calculations ISA Audit Sa'pling D2< Sam'ling Ris#s - @on Sam'ling Ris#s - Statistical Sam'ling ,s +uess Sam'ling Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures ISA Review the outcome of accounting estimates included in the prior period financial statements and their subsequent re- estimation for the purpose of the current period DQ< Obtain understanding of underlying financial reporting framework and its requirement about estimations and judgements Identify means b which management identif transactions that require estimations !ow management assess estimates and degree of judgement required in the process Obtain written re"resentation from management about validity of estimates E#tend audit "rocedures verifying market reports valuation letters and past estimation criteria to verify managements way (also utilized auditors experience) Obtain $AAE that estimation methods are in line with Financial re"orting framewor% and necessar discloses are made as "er $tandard Document all its finding and uncertainties and estimated deviations -
P7 Audit and Assurance Summary IA&' ()))* hy is audit of financial instruments challenging! "inancial reporting requirements com"le# #ransactions themselves difficult to understand $ack of evidence and need to rel on management judgement - %uditor may need to rel on e#"ert &ay be hard to maintain attitude of skepticism Internal controls ma be deficient in this area -
ISA DD<
Related arty )ransactions Auditor is not e.'ected to Fnd all related 'arty transactions ut is reHuired to o%tain SAAE o/er R)s a.ecting Financial state'ents and those need to %e reported under IAS-! Related Party transactions A ud it or ma y f ac e risk that RP&s are un#no%n to auditor %hen 'anage'ent conceals or related 'arty is itself not e/ident to auditor A uditor shall In+uire that all RP&s ha,e een disclosed and also perfor' procedures such as chec#ing cross com'any o%nershi's and shareholding of directors in other com'anies &ransactions %ith directors are Related Party transactions and are al%ays MA)ERIA$ %y nature@ A 8ritten representation from management stating that management has disclosed to the auditor the identity of the entity>s related 'arties and all the related 'arty relationshi's and transactions of %hich they are a%are that management has a''ro'riately accounted for and disclosed such relationships and transactions in accordance %ith the reHuirements of IAS 1Q0 ro%le's in identifying related parties and transactions* (i) Co'ple17su%ecti/e denition of related 'arty (some of the deFnitions in IAS 1Q Related Party) (ii) Reluctance of management to disclose and 9ard to identify from accounting system (iii) ,eli%erate conceal'ent for fraud%indo% dressing and ateriality relati,ely com'le. to a''ly
P7 Audit and Assurance Summary ISA DO<
$ubsequent Events Events between re"orting date till Auditor+s Re"ort #he auditor shall "erform audit "rocedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor's report that require adustment of or disclosure in the financial statements have been identified* #he following are the procedures+ Inquire &anagement ,ew ommitments .evelopments and /etirements /eview 0oard &inutes /eview Interim records onsider management procedures for identifying suseHuent e,ents ritten re"resentations will be sought that all events occurring subsequent to the date of the financial statements which require adustment or disclosure have been adusted or disclosed* EAR& adjusted or disclosed "ro"erl+ ,o modification 1ighlight in 2O& if material and pervasive EAR& adjusted or disclosed im"ro"erl + %sk management to amend for correction or consider implications on %udit /eport
ISA D7<
Events between Auditor+s re"ort and "ublish of F-$ or Events after "ublish of F-$ 'o obligation to "erform an audit "rocedures regarding the financial statements after the date of the auditor's report* 1owever if auditor discovers 2%/3 and if had been discovered at date of auditors report and would have caused amendment to report then+ %uditor shall discuss with management and if required then suggest to amend "45 .anagement does amend+ %mend "45 and review and extend audit procedures and issue a new auditor6s report and O& should be included* .anagement does not amend + %sk management to stop issue to 7 rd parties or if issued then take legal advice to prevent reliance on "45 /oing 0oncern - %n entity is said to be going concern when its able to continue normal course of business in force1able future ("orce-able future is 89 months from reporting date) - %uditor is required to asses managements going concern assum"tion and obtain $AAE about it 5ee if management has done any "reliminar assessment of going concern and if not ask to conduct one Indicators: - Ad,erse *inancial ratios Evaluate evidences and assum"tions and material uncertainties - @et $iailities or @egati,e cash o%s Inquire management about "lans to mitigate ris%s over going concern - Sustantial o'erating losses - $oss of #ey management %ithout 0ash flow analsis for in the context of going concern re'lacement Obtain managements written re"resentation regarding the correctness of their assumptions - Uninsured or underinsured 0onclude based on Audit evidence obtained for an material uncertaint e#ists that challenges going concern* catastro'hes %hen they occur
Audit O"inion* ( .aterial uncertaint E#ist and &ro"erl disclosed + 5ection headed 2.aterial 3ncertaint Related to /oing 0oncern2 and unqualified Opinion 4 .aterial uncertaint E#ist and not disclosed + :ualify or adverse based on pervasiveness 5 Ina""ro"riate assum"tions used + :ualify or adverse based on pervasiveness 6 .ulti"le .aterial 3ncertainties e#ist + %uditor ;nable to 3rovide Opinion on truth and fairness of "45 ( DI$07AI.ER OF O&I'IO' is advised) hat 5hould be ritten in 2.aterial 3ncertaint Related to /oing 0oncern+
&he 'aragra'h should highlight that a materi al uncertainty e.ists and should descri%e the uncertainty including any rele,ant Fnancial information such as the amount of net lia%ilities at the year end0 &he 'aragra'h should clearly state the e1istence of a 'aterial uncertainty that may cast signiFcant dout o,er the com'any>s aility to continue as a going concern0 &he 'aragra'h should also state that the audit opinion is not +ualied in this respect3 and refer to the note to the Fnancial statements %here the material uncertainty is discussed0 ISA DJ<
0ritten Representations Auditor is allo%ed to o%tain 8ritten representations for Manage'ent responsi%ilities and to support other e/idence In case of managements refuse the auditor shall consider 'anage'ents integrity and a%ility to o%tain SAAE Auditor shall chec# reliance on representation in light 8ith audit e/idence o%tained and managements integrity and auditors #no%ledge
P7 Audit and Assurance Summary
ISA 1Q<
ISA 1D<
ISA QD<
ISA D
ISA DQ<
ISA DD<
ISA DO<
ISA D7<
ISA 7/<
P7 Audit and Assurance Summary ISA O<<
Special Considerations - Audits of >roup Financial State'ents 5Including the 0ork of Co'ponent Auditors6
/esponsible for assessing the com"etenc, objectivit level of the com"onent auditor and the e#tent to which reliance can be "laced over their work* /rou" auditor is solel res"onsible for the grou" audit and shall not place reference over component auditor however while referencing incase group auditor has to mention then also state that it won6t give up group auditors liability omponent /eport shall be modified at component level while impact shall only be made when it6s over the grou" materialit In order to obtain 5%%2 the group auditor needs to look at = /rou" level - 0om"onent level
/rou" Audit Acce"tance* #he %uditor is not expected to engage unless it6s is rest assure to obtain 5%%2 must obtain an understanding of the grou" before acce"tance
,iculties in )ransnational Audit: •
Regulation and o,ersight of auditors diers from country to country
•
&lanning and Ris% Assessment* % component will be significant if it6s asset4liabilities or 3rofit4$osses e#ceed (89 of the total grou"+s corres"onding figures or $ignificant b nature If a com"onent is financiall significant to the group f inancial statements then the group engagement team or a component auditor will "erform a full audit based on the com"onent materialit level* here the component is significant the grou" auditor must be involved in the com"onent auditor wor%
&eeting with the component management or the component auditors to obtain an understanding of the com"onent and its environment* Reviewing the com"onent auditor2s overall audit strateg and audit "lan* &erforming ris% assessment "rocedures to identify and assess risks of material misstatement at the component level* #hese may be performed with the component auditor or by the group auditor* omponents that are not 2significant com"onents' will be subect to analtical "rocedures at a grou" level = a full audit is not required*
Other As"ects* 4 0oterminous ear end + there should be no more difference than 7 month between parent and subsidiary reporting end date else two separate "45 would be required to be prepared 5 0hanges in /rou" $tructure+ %uditor will need to take account for the group structure on consolidation process 6 $u""ort letter + 5ometime a subsidiary may look going concern by unable to pay parent debt in that case letter of comfort *%n assessment of parent6s financial ability to support subsidiary shall be made 8 In case of subsidiar in develo"ing countr+ subsidiary will be required to restate "45 to I"/5+ I"/5 8 "irst time adoption of I"/5 .ORE A3DI: OR;<< 0onsolidation &roblems* IFR$ =+ Operating 5egment Identification IA$ 46+ /elated 3arty .isclosures IFR$5 + Intra group trading4 ;n-realized 3rofits IA$ (+ 3resentation and .isclosure or% of 0om"onent Auditor* /eliance on component auditor shall be placed by udging ( Ethical >adherence of I250% code of ethics and Obective? 4 0om"etent >5kill base /esources? 5 Regulated >Oversight and %ccess to relevant trainings and governance? Involvement of
P7 Audit and Assurance Summary ISA O/<
;sing the 0ork of Internal Auditor 4hat to chec# in internal Auditor efore 'lacing reliance on their %or# Co'petent roper rocesses Independent - 3rganiKational status - 9ocumented Controls and Procedures - 3ecti,e - &raining - Estalished 'olicies and S3Ps - Em'loyment decisions - Pro'er Staed - Pro'er setu' such as Audit Committee - Constraints - *inancial Re'orting 5no%ledge - 3,ersight y the oard - emers of Pro0 "odies ,egree of uncertainty in/ol/ed in their %or# (i0e0 udgements and assum'tions) in,ol,ed 9o not 'lace reliance on %or# %hich ha,e een carried y internal audit de't0 itself or signicant udg'ent in/ol/ed
- ISA O/< en,isages three %ays of using the %or# of internal auditors: (/) &o otain information to e used %hen assessing the risk of 'aterial 'isstate'ent (1) &o use internal auditorsV %or# instead of perfor'ing procedures (2) &o use internal auditors themsel,es to 'erform audit 'rocedures ( direct assistance) 8only %hen e.ternal auditor 'ro'erly re,ie%s and o,ersees the %or# of Internal Auditor8 ISA ;sing the 0ork of an Auditor’s E1pert O1< Auditor shall ma#e use of Auditor’s E1perts 8ork 'ro,ided Auditor is assured that SAAE has %een o%tained fro' e1perts 8ork A uditor shall Re/ie8 efore choosing E.'ert / (ualication 1 E1perience 2 Independence Auditors shall 'ro,ide all the necessary guidance / Pur'ose intended use and conte.t of e.'ert>s %or# 1 assum'tions and methods intended Auditor shall see# re/ie8 of e1perts 8ork and conFrm that e.'ert has follo%ed discussed guidelines and has de,oted sucient time and eort0 &his %ill enale auditor to 'lace reliance o,er e.'erts %or#0 Chec#ing Auditors 4or#: / &he source data used 1 &he assum'tions and methods used 2 4hen the e.'ert carried out the %or# Q &he reasons for any changes in assum'tions and methods D &he results of the e.'ertVs %or# in the light of the auditorsV o,erall #no%ledge of the usiness and the results of other audit 'rocedures Auditor shall not include reference to e1pert’s 8ork and %here,er necessary include it %ith statement that the reference doesn>t disclaim auditor>s liaility o,er the o'inion formed ISA ,EFI=I)I&= AM* 7s 'rofessional udgment %ere of 'ost signicance in the audit of the Fnancial statements of the current 'eriod0 5ey =E0 audit matters are selected fro' 'atters co''unicated 8ith those charged 8ith go/ernance@ 5As must al%ays relate to 'atters already included SE %ithin the Fnancial statements0 !#D - Im'ro,es the Huality of information gi,en to sta#eholders y highlighting the diculties encountered y the auditor - Pro,ides an insight on ho% the audit is 'erformed and %hat goes through the mind of the auditor %hereas u' to no% it only focused on the users of the Re'ort ,E)ERMI=A)I&= &F AM Areas of higher risks of 'aterial 'isstate'ent or %hich %ere dee'ed to %e Jsignicant risks’ in accordance 8ith ISA ?D" Signicant auditor udg'ents in relation to areas of the Fnancial statements that in/ol/ed signicant 'anage'ent udg'ent0 &he eect on the audit of signicant e/ents or transactions that ha,e ta#en 'lace during the 'eriod0 RE&R)I=> AM Contents*
P7 Audit and Assurance Summary
ISA 7
ISA 7/<
ISA 71<
! =o separate opinion is pro/ided on the' %ecause they are co/ered %y the audit opinion 2 0hy the 'atter 8as deter'ined to %e one of 'ost signicance and therefore a #ey audit matter and 9o8 the 'atter 8as addressed in the audit A descri'tion of the auditor>s a''roach a rief o,er,ie% of 'rocedures 'erformed %ith an indication of their outcome and any other 5ey oser,ations0 E.ce'tion : $a% or regulation 'recludes 'ulic disclosure aout the matter such as entioning money laundering may ti'o In case of conict 8ith 'atters to %e discussed in "asis for o'inion 'ara or aterial uncertainty relating to going concern the former 'aragra'h %ill e gi,en 'reference and 5A %ill refer E'phasis of Matter paragraphs and &ther Matter paragraphs in the independent auditorHs report E&M: 4hen a matter of Funda'ental ;nderstanding / 4hen a Fnancial re'orting frame%or# 'rescried y la% or regulation %ould e unacce'tale ut for the fact that it is 'rescried y la% or regulation 1 &o alert users that the Fnancial statements are 're'ared in accordance %ith a s'ecial 'ur'ose frame%or# 2 4hen facts ecome #no%n to the auditor after the date of the auditorVs re'ort and the auditor 'ro,ides a ne% or amended auditorVs re'ort (i0e0 suseHuent e,ents) &M: 4hen matter is instructed to e highlighted In auditors re'ort other than those 'aragra'hs / 4here 'rior 'eriod Fnancial statements %ere audited y a 'redecessor auditor (ISA 7/<) 1 4here 'rior 'eriod Fnancial statements %ere not audited (ISA 7/<) 2 4hen re'orting on 'rior 'eriod Fnancial statements in connection %ith the current 'eriodVs audit if the auditorVs o'inion on such 'rior 'eriod Fnancial statements diers from the o'inion the auditor 're,iously e.'ressed (ISA 7/<) Co'parati/e Infor'ation : Corresponding Figures and Co'parati/e Financial State'ents Auditor shall otain SAAE that accounting policies used for the co'parati/es are consistent %ith those a''lied in 'rior 'eriod and any changes is reasoned and disclosed 'ro'erly0 Auditor shall see that co'parati/e a'ounts 'atch 8ith current period and are free fro' 'aterial 'isstate'ents in conte.t of current year *S ISA 7/< reHuires that the auditor o%tains 8ritten re'resentations for all 'eriods referred to in the audit o'inion0 Reporting* rior year ;naudited or audited %y another auditor: Incase audited y other auditor in 'ast : also mention the - &y'e of re'ort and if modiFed therefore reasons - date of that re'ort State prior F7S 8ere unaudited or audited y other auditor State Auditor is not reli/ed of reHuirement to carry out 'rocedures to otain SAAE o/er opening %alances 5ISA "D#6 If auditor nds a 'isstate'ent then ask 'anage'ent to re/ise else modify a''ro'riately0 Case: If there %as a matter in Past : rior 'atter Resol/ed as of no8 and 'odied %efore: @o modiFcation0 I* aterial to current 'eriod then E3 rior 'atter ;nresol/ed as of no8 and 8as Modied %efore: odify for current as %ell as for corres'onding Fgures rior 'atter ;nresol/ed as of no8 and ;n'odied %efore: odify due to misstatement in current Fgures and identify that 're,ious one %as unmodiFed incorrectly )he Auditor’s Responsi%ilities Relating to &ther Infor'ation Auditor is not res'onsile for other information disclosed in *inancial re'ort or incase Auditor might e reHuired to audit other information under local statutory la%s0 Auditor is reHuired to read out other information in *S i0e0 Chairman>s note and see if it doesn>t clash %ith #no%ledge 'resent in Audited *S0 Incase other information is materially di.erent then the auditor shall see# : D Re%or# s'eciFc accounts ! As# management to 'ro,e their other information If there is a re%or# and 'isstate'ent is found auditor shall ask 'anage'ent to correct misstatement in the *S considering management integrity as %ell0 If management refuses ao,e then modify as 'er ISA 7
P7 Audit and Assurance Summary integrity0 Ad/antage and ,isad/antage of Audit as opposed to li'ited assurance re/ie8 Audit ,s $imited Assurance Re,ie%s: 5A)I
ISAE ?##
Audit of rospecti/e Financial Infor'ation Matters %e consider for FI ter's of engage'ent* PM;ARF,K &he auditor and the client should agree on the ter's of the engagement0 Manage'ent Co'petence ; Res'onsiilities for 're'aring P*I ;se Intended: Is it to e disclosed to 2 rd 'arties 9isclaimer eriod of *orecast Assu'ptions @ature Report &o %hom *orm ; Contents Fees ,eadlines &he auditor should not acce't or should %ithdra% from an engagement 8hen the assu'ptions are clearly unrealistic or 8hen the auditor %elie/es that the prospecti/e nancial infor'ation 8ill %e inappropriate for its intended use0 Reporting* P)I=ACK - )itle7Addressee
ISAE ?#!
,ue ,iligence 2enets* PI
ISAE !D# O !##
Re/ie8 of 9istorical and Interi' F7S Consistent accounting 'olicies Consider %or# of internal audit In+uiries from management aout signiFcant change in usiness ris#s 3tain 8ritten representations form management regarding 're'aration of interim fs $oo# for co'pliance of IAS ?@ &he Code: - &he 'ractitioner 'erforms 'rimarily in+uiry and analytical procedures to otain sucient a''ro'riate e,idence - &he 'ractitioner shall co'ply 8ith rele,ant ethical re+uire'ents including those 'ertaining to inde'endence0 - &he 'ractitioner shall 'lan and 'erform the engagement %ith professional skepticis' recogniKing that circumstances may e.ist that causes the Fnancial statements to e
ISRS ##
Agreed ;pon rocedures P;RCMK ;ser Intended rocedures Intended Rationale ehind 'rocedures Conditions of Engage'ent are clear Manage'ent responsi%ility for 'rocedures0 Reporting* PIERF&K /0 IdentiFcation of Info on %hich s'eciFc 'rocedures are a''lied 10 Statement that 'rocedures 'erformed %as in line %ith reci'ient>s e1pectation0 20 IdentiFcation of Rationale Q0 $isting of rocedures D0 Auditors Factual Findings O0 Statement that Auditor doesn>t e.'ress any opinion o,er it0
P7 Audit and Assurance Summary - Identication of FI infor'ation to %e reported on - Reference to the purpose : Report* =egati/e assurance o,er assum'tion o'inion that P*I is ased on assu'ptions A''ro'riate Ca/eats of Assum'tion 0hen the auditor %elie/es that the presentation and disclosure of the prospecti/e nancial infor'ation is not ade+uate the auditor should e.'ress a HualiFed or ad,erse o'inion in the re'ort on the 'ros'ecti,e Fnancial information or %ithdra% from the engagement as a''ro'riate0 - 9ateAddressSign >eneral rocedures* Re-'erform calculations consistency of the accounting 'olicies accuracy of forecasts 're'ared in 'rior y com'arison %ith actual Perform analytical 'rocedures &est the facts ; assum'tions Lerify 3'ening Cash Positions $oo# for missing im'acts such as *inance costs and &a.ation Com'etency of the 'erson %ho 're'ared forecast
5ey Personnel and management Re'utational Ris#s )er's of engage'ent* P&,,)MFK @ature of the opinion deadline of the re,ie% $iaility disclai'er )er's of reference Manage'ents responsi%ility of decision ma#ing and o%nershi' Fee ,ue diligence /s 9istorical F7S Audit PSAFCK
materially misstated0 - &he 'ractitioner shall e.ercise professional udg'ent in conducting a re,ie% engagement - Perform 'rocedures necessary to /alidate the true and fair presentation of interim Fnancial statements in accordance %ith IAS 2Q0 - Perform analytical 'rocedures and enHuiries regarding changes in entity 'ositions such as signicant transactions agreements or loan co,enants signed that aect the matter0 - Practitioner must ensure consistency of accounting policies and any de,iations are reasonale to auditors understanding - Practitioner should in+uire 8hether 'anage'ent has identied all e/ents up to the date of the re/ie8 report that may reHuire adustment to or disclosure in the interim Fnancial information
Forensic Auditing *or in,estigating Fnancial frauds and cases of dis'utes E1pert 8itness 9uty of due care Matters* PCREOK Conte1t of in,estigation Report %ill e consumed y %hom E/idences and procedures ust li#e audit0 Social7En/iron'ental Audit ,iculty in 'easure'ent P,(SCK 9icult to dene 9icult to +uantify Syste's not set u' to ca'ture data !ard to ma#e co'parisons
P7 Audit and Assurance Summary Accounting Standard Accounting
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Audit IFRS -D? FAIR s useful life and un-%inded each year end En/iron'ental Cost: E.'ensed out each year in the consum'tion and e.'enses incurred other than that0 9id auditor ins'ected asset and ,eriFed that it does not suect to 'attern of the asset0 Asset 9eld at Cost: 9e'reciate the asset o,er the useful economic life0 im'airment Asset 9eld at Re/aluation: Re,aluation at the end of each year for all 9e'reciation of asset Charged to Pn$ Re,aluation: *L measurement chec#ed assets in a similar class and de'reciate the asset o,er the useful economic !a,e deferred ta. and e.cess de'reciation aroused addressed life and any gain or loss of re,aluation is ta#en through eHuity and e.cess LeriFcation of useful life y document and oard notes de'reciation is adusted in eHuity0 9eferred &a. im'lication Recasting of all calculations of de'reciation ,isclosures are a signiFcant reHuirement in re,aluation for assum'tions and methods used0 Co'ple1 Asset conce't &/erhauling concept ,E-recognition of asset0 IAS : ? IMAIRME=) Internal and E.ternal Indications of i'pair'ent 9id auditor loo# for im'airment indications Assets to re/ie8 8ithout indication : +ood%ill Intangile Assets %ith !a,e management conducted im'airment re,ie% 9id Auditor ,erify CA from asset register indeFnite life and intangile asset under de,elo'ment 9id Auditor ,erify RA %hich is higher of *L-C&S ; Lalue in use I m' ai rme nt %h en CA K RA W RA is the higher of Is Lalue in use e.clusi,e of Fnancing and ta.ation acti,ity /
P7 Audit and Assurance Summary IFRS -" ASSE) 9E$, F&R SA$E and ,ISC&=)I=;E, &ERA)I&=S ASSE) 9E$, F&R SA$E* ASSE) 9E$, F&R SA$E* Asset held for sale O Criteria : 9id auditor chec# the asset held for sale is according to / Asset is i''ediately a/aila%le for sale in 'resent condition criteria of I*RS D 1 An acti/e progra' to locate a %uyer e.ists 9id auditor test the criteria 2 Asset is +uoted at a reasona%le price !as the asset een u'dated %ith 'rior I*RSIAS and Q It is pro%a%le that the asset %ill e sold at the year end im'airment tested efore classifying into I*RS D D a na ge men t is co''itted to a plan to sale the asset ; doesnVt intend to re,o#e its &est @RL and CL correctly transferred selling 'lan Any further mar#s of de,aluation of asset A@9 test that Asset is open to sale is an indication of i'pair'ent and should e tested %ith it no further de'reciation is charged in lieu of this asset Asset then shall e reclassied fro' =CA to CA as A9FS : ,alued at lo8er of cost or =R< !a,e all necessary disclosures een made ,epreciation for the asset held for sale 'ust %e stopped0 Correct ClassiFcation done
,ISC&=)I=;E, &ERA)I&=S: /
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9is'osal of identiFale line of usiness Susidiary ought for re-sale Single 'lan to dis'ose o'eration in s'eciFc geogra'hy 1 Inco'e fro' ,iscontinued &perations as single line in S3CI and re-state co'parati/e *S for S3CI and also state net cash o8 fro' discontinued operations on cash o% statement0 2 Classify Assets as A9FS and liailities as $9FS se'arately in S3*P0 ,isclosures reHuired: / ,escription of the nature of assets (or dis'osal grou') held for sale and facts and circumstances surrounding the sale 1 If a''licale the Reporta%le seg'ent (IFRS Q) in %hich the non-current asset or dis'osale grou' is 'resented0
,ISC&=)I=;E, &ERA)I&=S* -
!as the com'any dis'osed signiFcant line or segment of usiness !a,e they disclosed single line income from discontinued o'erations !a,e they restated com'arati,e Fnancial information as 'er ISA 7/< !a,e they classiFed asset as held for sale and liailities as held for sale se'arately !a,e rele,ant disclosures regarding the nature of assets and reasons disclosed in notes to *S0 Is it a re'ortale segment dis'osed !a,e they considered I*RS J Is it a sale and lease ac# arrangement in the future
IAS -?Q I=)A=>I2$E ASSE)S urchased Asset: Cost can e measured relialy X Proale o% of economic !as auditor chec#ed the 'urchase documents for cost of the asset !as life of the asset determined If not then %hy eneFts associated %ith the asset0 !as auditor ,eriFed the commercial ,iaility technical feasiility and Intangi%le Asset under ,e/elop'ent : - Commercially ,iale - &echnically intention and aility of management to com'lete the de,elo'ment feasile and Intention and Aility to com'lete the asset X Cost can e measured !as auditor loo#ed for the rea#u' of intangile asset costs and relialy X Proale o% of economic eneFts research costs are e.'ensed out rather than eing ca'italiKed Research Prototy'ing 3'timal method Search : E1pense out !as auditor re-casted and ,eriFed amortiKation of intangile asset !eld at cost 'odel or I* mar#et e.ist then re/aluation 'odel can also e !as intangile asset een suect to re,ie% ado'ted !a,e re,aluation een ,eriFed *Ls In case of re,aluation model asset need to re/alued at the year end !as intangile asset %ith indeFnite useful life re,ie%ed for A'ortiGe the intangile asset ha,ing a nite useful life o,er the 'attern in im'airment at year end in accordance %ith IAS 2O %hich future economic eneFts are e.'ected to e consumed !a,e assets %ith indeFnite useful life re,ie% for useful life &est intangile asset 8ith no nite life or can e rene8ed unli'itedly for determination im'airment at each year end !a,e asset that ha,e een mar#ed %ith useful life no% are eing / Re/ie8 annually if e,ents and circumstances still su''ort indeFnite amortiKed useful life 1 If no longer indenite change to Fnite useful life and start amortiKation0
P7 Audit and Assurance Summary
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IFRS - Financial Instru'ents Financial Asset classication: *air Lalue / *L&P@$ (Short &erm trade) : +ain and losses in *L to Pn$ *L measurements tested 1 *L&3CI (&o Collect Contractual cash o%s) +ain and losses in *L to 3CI 2 AmortiKed Cost =Premium S'read o,er lease term Interest Accrued Eecti,e AmortiKed Cost interest method? AmortiKation Premium cost s'read Financial $ia%ility classication : *inance cost charged / *L&P@$ 8 only if the liaility is ta#en to uy an asset that %ill e ,alued at *L or held !as the method used is eecti,e interest rate method for trading +ain or loss resulting from credit ris# to 3CI and 3ther +ain or $oss to Pn$ 9eri,ati,es: 1 AmortiKed Cost =Premium S'read o,er lease term Interest Accrued Eecti,e Is it S'eculation or hedge S'eculation is dealt as *inancial interest method? A$ Co'pound Financial instru'ent : PL of liaility and Residual as eHuity !edge: 9edging deri/ati/es: Criteria to e classiFed as hedge else S'eculation: / Cash o% hedge: gain or loss recogniKed in Pn$ At the ince'tion formal documentation and ris# assessment is done 1 *air Lalue hedge: +ain or loss recogniKed to 3CI !edge is e.'ected to e highly eecti,e (J<-/1D) throughout the 'eriod e.'ected to hedge Presentation and 9isclosure: Eecti,eness of hedge can e measured relialy Rele,ant disclosures made regarding ris# in Fnancial Cash o% hedge : highly 'roale for the forecast transaction to occur instrument contract disclosed in the notes to Fnancial 1 Cash o% hedge : gain or loss of re-measure in 3CI 2 *air ,alue hedge : gain or loss of re-measure in Pn$ statements for I*RS 7 ,isclosure reHuirements for ris# e.'osure including Huantitati,e and Hualitati,e e.'lanations f or instruments IAS -# I=s rea# u' of sale 'rice o,er 'erformance oligation allocation Payment terms Chec# deli,ery of 'erformance oligation and no managerial inuence e.ist Rights3ligations identiFed o,er it ! er fo r'a nc e Chec# undero,er statement of re,enue and recei,ales or cash oligation 3ecti,es 9eli,erales &ime 'eriod 2 )ransaction price (Price net of all costs) )ransaction price to each perfor'ance o%ligation Criteria for allocation Allocation of 'rice " Re/enue recognition 8hen each perfor'ance o%ligation is satised Control transferred either o,er the 'eriod or after s'eciFc
P7 Audit and Assurance Summary
@o *urther managerial in,ol,ement
IAS -! RE$A)E, AR) )RA=SAC)I&=S IAS 1Q reHuires the follo%ing to e disclosed %hen related 'arty transaction e.ists0 Chec# all related 'arty transactions are disclosed InHuire aout directors and relati,e holdings in other com'anies =a'es of the transacting related 'arties Chec# for the adeHuacy and suciency of disclosure in accordance A description of the relationship A description of the transaction and the a'ounts included %ith IAS 1Q &he a'ounts due to or from the related 'arty at the end of the year !as the transaction een accounted in *S Any other ele'ent of the transaction necessary for an understanding of the related 'arty0 IAS -D! I=C&ME )AL 0hich Rate of )a1 should %e used* EnHuire and Fnd ta. la%s for ta. rates a''licale Chec# arithmetical accuracy of calculations IAS /1 reHuires that deferred ta. is calculated at a rate of ta. that is Consider assum'tion and accounting 'olicies are consistent Hsu%stanti/ely enactedV and e.'ected to a''ly to the 'eriod %hen the $oo# for 3'ening and Closing alances of 9eferred ta. liaility and assets deferred ta. is to e settled0 Sustanti,ely enacted generally means that it 3tain a co'y of deferred ta. %or#ings has een made into la% not merely suggested or announced0 Lerify that all assets and liailities suect %hich ha,e caused ta.ale ,eferred $ia%ility tem'orary dierence ha,e een included IAS /1 Income &a.es reHuires deferred ta. to e recogniKed in res'ect of If deferred ta. asset0 ta.ale tem'orary dierences %hich arise et%een the carrying amount and / 3tain future forecast to ustify future ta.ale 'roFts 1 Lerify reasonaleness of assum'tions and forecast0 ta. ase of assets and liailities 2 Chec# for adeHuacy of disclosure IAS /O : Re,aluation 9e'reciation and 9ismantling Cost I*RS Y : *L&P@$ *L&3CI AmortiKed Cost and C*I IAS /7 : &a. authorities al%ays consider as 3'erating lease ,eferred ta1 asset an unused ta. loss carry-for%ard or unused ta. credit e.ist Should only e recogniKed %hen there are sucient ta.ale 'roFts0 9isclosure reHuired IAS -!# >&RA=)S Recognition* Chec# +rant document and grant ty'e Chec# for grant conditions and terms that must e com'lied %ith Entity %ill co'ply 8ith any conditions attached Chec# for grant re,o#e clauses and reimursement clauses to determine Entity %ill actually recei/e the grant need for any 'ro,ision in case of non-com'liance Capital >rants* Lerify an# statements for recei't of grant / =etting o. method: @et-o against the Cost of the asset Ins'ect asset 'urchased and asis of its accounting method 1 ,eferred Inco'e method: 9efer and release o,er the 'attern of $oo# for condition of grant and its com'liance and management>s intention eneFts recei,ed0 record and ca'aility to fulFll it0 Re/enue >rants* Pro,isions for non-com'liance incase 2 =etting &. method: reduce the e.'ense $oo# for accounting for grants: Q &ther Inco'e 'ethod: record as other income / Ca'ital grants should e recorded as deferred income and released In case of Conditional grant if entity cannot satisfy conditions then it to *S o,er the 'attern of consum'tion of economic eneFt shall not record the grant and if condition is long-term then oo# a 1 Re,enue grant should e recorded as net of e.'ense or other income pro/ision incase terms contain to reimurse the amount to go,ernment0 AdeHuate disclosures ha,e een 'ro,ided ,isclosures : Accounting 'olicy ado'ted @ature and e.tent of go,ernment grants recogniKed UnfulFlled conditions and other contingencies IAS -!? 2&RR&0I=> C&S)S
P7 Audit and Assurance Summary -
(ualifying asset: An asset that necessarily ta#es a sustantial 'eriod of time to get ready for its intended use or sale0 Interest Cost is to %e capitaliGed into asset for constructing asset y loan only from the start of the asset construction to e.tent %here asset comes into usale condition0 (any e.'ected sto''age to the construction %ill sto' ca'italiKation $ater asset needs to e de'reciated
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3tain asset construction schedule to ,erify construction stages and term Chec# for ca'italiKation should e directly attriutale to asset Re-calculate interest costs Lerify asset is de'reciated after coming into usale condition IAS -?? Earnings er Share For listed co'panies onlyT 2asic ES : @et ProFtloss attriutale to share holder directly4eighted A,erage no0 of ordinary shares !as the entity calculate correct EPS ; 9EPS !as the entity disclosed EPS ; 9EPS in notes to *S ,iluted ES : 9iluted earnings 9iluted %eighted a,erage numer of shares !as restated EPS ; 9EPS for com'arati,es in notes to resentation and disclosure* *S 9isclose in notes to annual Fnancial statements not on face of statement of com'rehensi,e !as the entity 9isclosed EPS and 9EPS for Income discontinued o'erations ,iscontinued operation* Under I*RS D (see elo%) then it must disclose the asic and diluted EPS for @ecessary disclosures in @otes to *S made the discontinued o'eration0
P7 Audit and Assurance Summary IAS -DU $EASES &perating lease 3tain co'y of lease agreement and ins'ect for conditions of Recognition : RR lessor or other than Fnance lease0 lease to identify lease ty'e0 Accounting: Rentals recorded on straight line %asis o/er the lease ter' charged to In case of Fnance lease ,erify that ris# and re%ards are Pn$ elonging to lessee / Res'onsiility of re'air and maintenance Finance lease 1 &ransfer of legal title at end of term Recognition : 2 Present ,alue of minimum lease 'ayments nearly < of Mini'u' lease pay'ent co,ers signiFcant asset>s CL amount assets cost (?7D) Q $ease term nearly asset>s useful life $ease %enets to lessee D "argain 'urchase o'tions e.ist $ease ter' co,ers sustantial 'art of asset>s useful life Lerify accounting for o'erating lease that is rental e.'ense 2argain urchase option are charged to the Pn$ o,er straight line asis Asset 'aintained y the lessee Lerify accounting for *inance lease that asset is recogniKed Accounting* RecogniKe Asset and *inance cost in comination %ith Current and nonand Fnance lease oligation is introduced %ith current and current *inance lease oligation and an# 'ayment0 *inance cost needs to e accrued non-current lease 'ortions / 9e'reciate the asset at lo%er of asset>s useful life or lease term $oo# for the Fnance cost accruals 1 IAS /7 guides that only the uildings element of the lease can e ca'italiKed as Re,ie% that asset is de'reciated o,er the lo%er of lease term a land lease is al%ays an o'erating lease0 or asset>s useful life Sale and Finance lease %ack* Lerify lease 'ayments through an# statements / Asset %ill e re-recogniKed at *L of lease amount and any gain or loss %ill e In case of sale and Fnance lease ac# identify the transaction deferred and realiKed o,er the lease term %hile Fnance lease %ill e initiated0 and nature of lease and gain is deferred %ith recognition of *inance cost to e accrued at the end ust li#e Fnance lease0 *$3 and Fnance cost Sale and &perating lease %ack* In case of sale and o'erating lease ac# identify the +ain is immediately recorded to Pn$ transaction and nature of lease and gain is immediately ,isclosures* Finance leases recorded to Pn$ / @et carrying amount at year end for each class of asset Re,ie% disclosure notes to ,erify a''ro'riate disclosures are 1 Reconciliation et%een total of minimum lease 'ayments at year-end and their made for Fnance and o'erating leases as 'er IAS /7 'resent ,alue 2 &otal of minimum lease 'ayments at year end and their 'resent ,alue (= / year /-D years ? D years) ,isclosures* &perating leases / &otal of future minimum lease 'ayments under non-cancellale o'erating leases (= / year /-D years ? D years) IAS ?U : R&E=) $IA2I$I)IES $ia%ility = Present legal or constructi,e oligation X as a result of 'ast e,ent X Amount is Certain X 3tain details of 'ro,isions and contingent 3uto% is Certain? liailities disclosed or recorded E,ents after re'orting date %ill e considered ro/ision =Present legal or constructi,e oligation X as a result of 'ast e,ent X Amount Can e estimated 9etermine for each liaility'ro,ision relialy X 3uto% Proale? / Present 3ligation (Constructi,elegal) Reimursements from third 'arties for some or all e.'enditure reHuired to settle a 'ro,ision are 1 Past E,ent recogniKed only %hen it is ,irtually certain that the reimursement %ill e recei,ed0 &he 2 3uto% is (CertainProalePossile) reimursement is treated as a se'arate asset %hich cannot e.ceed the amount of the 'ro,ision0 Chec# corres'ondence %ith solicitor Pro,isions are re,ie%ed at each re'orting date and adusted to reect the current est estimate $oo# for nature of usiness and any missed If it is no longer 'roale that an outo% of economic eneFts %ill e reHuired to settle the 'ro,isions Auditors 'oint estimate of 'ro,ision oligation the 'ro,ision is released Contingent Asset 'roale to e recei,ed Contingent $ia%ility =amount cannot e estimated relialy or either 3uto% Possile? =9isclosed in the 3nerous contract oo#ed at lo%er of 'enalty for
P7 Audit and Assurance Summary Contingent Asset =Insurance reco,ery or claim o,er su''lier? =only %hen 'roale to e recei,ed? !as restructuring 'ro,ision recorded after the =9isclosed in the notes to *S? formal 'lan has een de,ised and 'ulically &nerous Contracts ($oss ma#ing contracts) announcement to eected 'arties0 Consider %hether disclosures of 'ro,isions $ease termination : $34ER 3** (Cost of com'letion 3R Penalty for $a'se) contingent liailities and contingent assets are Restructuring : Em'loyee redundancy cost 'ro,ision correct and sucient 9etailed formal Plan: $ocation em'loyees in,ol,ed etc0 Pulically announced efore the year end 1 Relocating and retraining cost should e e.'ensed out RE$Erant type* Unconditional E.'ense immediately into Pn$ / Conditional @on Lesting E.'ense immediately into Pn$ Lesting : @on ar#et E.'ectation at 6ear End date ('ro'ortionate record)
P7 Audit and Assurance Summary -
Measure'ent 'ethod: @o0 of Shares . @o0 of Em'loyees . E.'ectation of em'loyees in scheme e.'ected to e retained until year end . *L of Share . Lesting Period&otal Period0 IAS -!D EFFEC)S &F C9A=>E I= F&REI>= ELC9A=>E Single co'pany* Chec# that foreign currency transactions are recorded at the historical Initial Measure'ent : at S'ot rate!istorical rate rate on initial recognition (and in the statement of 'roFt or loss) Su%se+uent Measure'ent : Chec# that monetary items included in the statement of Fnancial 'osition / Monetary Asset$iaility =AP AR? : Retranslate at the 6E rate at the yearend are translated at the closing rate of e.change =+ain loss Pn$? Chec# that non-monetary items are translated at the historical rate of 1 =on-Monetary =In,entor y achinery?: @o Retranslation =+ain e.change loss to Pn$? Consolidation done %ith translation Correct translation according to head of account ("S account or IS >roup: account) Retranslate "S items at closing rate All retranslation gainloss creditedcharged to 3CI Retranslate IS items at A,erage rate !a,e all necessary disclosures made All retranslation gain and losses from retranslation %ill e ta#en to eHuity0 ,isclosures
P7 Audit and Assurance Summary IFRS -? 2;SI=ESS C&M2I=A)I&=S Su%sidiary: 3,er %hich entity e.ercises signiFcant control Is it a susidiary associate or in,estment +ood%ill correctly measured Signicant Control denition 3%nershi' of more than D< ,oting rights or / *L of @A Correctly determined chec# 9ue diligence 'o%er to addremo,e directors or rights to ,ariale returns from its 'ractitioner %or# in,ol,ement 1 Consideration is correctly accounted Agree to sale aility to use its 'o%er o,er the in,estee to aect the amount of the agreement in,estorVs returns Contingent or deferred consideration shall e >ood8ill: Initial Recognition 8C3@SI9ERA&I3@ X *L 3* @CI A& AC0 *L 3* @A at AC 8 recorded at PL F< of =7A Laluation of @et Assets generally due diligence deri,ed Contingent consideration if not going fulFl then C&=SI,ERA)I&= Cash Share E.change $oan @otes 9eferred (PL) not consider Contingent(PL)(Conditional) PL ased 'ro,ision are to e un-%inded at year F< &F =CI If @CI e.ist (@o0 of shares of @CI . *L of shares at the transaction date) end Su%se+uent 'easure'ent* Im'airment &esting at year End @CI e.ist Correct accounting ta#en in +ood%ill and S3CI ; S3*P =CI: 27S : *L 3* @CI X S!ARE 3* @CI in Post-AcHuisition Reser,e of susidiary SuseHuent Im'airment testing for +ood%ill at 6E held I7S ProFt and 3ther com'rehensi,e income attriutale to @CI Correctly Consolidated Consolidation* / "S consolidation +ood%ill @CI Retained Earnings Eli'inate Intra >roup )rading and ;nrealiGed rots0 =&ime A''ortioned? / 27S co'pletely consolidated %ith +ood%ill and @CI on face (if e.ist) (&ime 1 IS consolidation =&ime A''ortioned AcHuisition A''ortion) A''ortioned? 1 I7S consolidate o/er ac+uisition V and ProFt3CI to @CI is sho%n on face 9isclosures area 'ro,ided and are sucient of Pn$3CI income0 IAS -!Q I=
P7 Audit and Assurance Summary IFRS -U Financial Instru'ents* ,isclosures SI>=IFICA=CE &F FI=A=CIA$ I=S)R;ME=)S I@ &ERS 3* &!E *I@A@CIA$ P3SI&I3@ A@9 PER*3RA@CE (&he accounting and 'resentation in *S) =A);RE A=, EL)E=) &F RISS ARISI@+ *R3 *I@A@CIA$ I@S&RUE@&S A@9 !34 &!E RIS5S ARE A@A+E9 (&he disclosure notes) (ualitati/e risks (uantitati/e $iHuidity Credit ar#et risks Ris#s Ris#s Ris#
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Chec# that disclosures for Fnancial instruments are in accordance %ith I*RS 7 / uantitati,e ris# disclosed 1 ualitati,e ris# disclosed
P7 Audit and Assurance Summary IFRS -Q &perating Seg'ents &perating Seg'ent deFnition: All conditions must satisfy &hat engages in usiness acti,ities from %hich it may earn re/enues and incur e1penses 4hose o'erating results are regularly re/ie8ed %y the entity>s chief operating decision 'aker (C39) to ma#e decisions aout resources to e allocated to the segment and assess its 'erformance *or %hich discrete nancial infor'ation is a,ailale0 Reporta%le &perating Seg'ents: Any one condition satisFes then !as re/enue including internal and e.ternal sales 'ore than D#V of comined sales of segments !as assets including internal and e.ternal sales 'ore than D#V of comined assets of segments !as O$ including internal and e.ternal sales 'ore than D#V of comined Pn$ of segments 4hen 3'erating Segmental information can e comined: Seg'ents are si'ilar in each of the follo%ing res'ects: &he nature of the products and ser/ices or the nature of the production processes or the custo'er %ase for their 'roducts and ser,ices or the nature of the regulatory en/iron'ent or the distri%ution process of their 'roducts or 'ro,ide their ser,ices
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C he c# fo r met hod s used y management in determining o'erating segment information Chec# that all re'ortale segments that Hualify the criteria are disclosed and re'orted in accordance %ith I*RS J I f se gm en ts are comined ma#e sure that the comination criteria is met
IAS -D resentation of Financial State'ents &/erall considerations $oo# for the Presentation of *S is fair / *air Presentation and Com'liance %ith I*RS and +oing Accrual asis of accounting is follo%ed Entity is a going concern If not then alternati,e asis rea#u' ,alues fs 'ro,ided Concern and 3setting is not done and e,ery com'onent reHuired to disclose se'arately is disclosed 1 Accrual asis of accounting and Presentation se'arately Consistency and !a,e com'arati,e *S een 'ro,ided 2 ateriality and aggregation and 3setting is not !a,e all the reHuired *S created i0e0 S3CI S3*P S3C* S3CIE @3&ES &3 *S allo%ed and Q Com'arati,e *inancial Information Pro,ided Financial State'ents Creation: S3CI S3*P S3C* S3CIE @3&ES &3 *S IAS -?! Financial Instru'ents* resentation Classication of Instru'ents: !a,e the instrument correctly classiFed Financial Asset : Cash or Contractual right to recei,e cash / Is the Fnancial asset recogniKed Financial $ia%ility : Contractual oligation to 'ay cash HualiFes the criteria of IAS 21 Co'pound Financial Instru'ent : !yrid instrument ha,ing oth eHuity and liaility com'onent 1 Is the Fnancial liaility recogniKed )reasury Shares : Issued and on uy ac# no gain or loss is recogniKe all 'roceeds to eHuity HualiFes the criteria of IAS 21 ,eri/ati/e: A Fnancial instrument or other contract %ith all three of the follo%ing characteristics0 2 Is the com'ound Fnancial / Its ,alue changes in res'onse to the change in a s'eciFed interest rate Fnancial instrument 'rice instrument recogniKed HualiFes commodity 'rice foreign e.change rate inde. of 'rices or rates credit rating or other ,ariale the criteria of IAS 21 (sometimes called the Vunderlying assetV)0 1 It reHuires no initial net in,estment or an initial net in,estment that is smaller than %ould e reHuired !a,e treasury shares correctly for other ty'es of contracts that %ould e e.'ected to ha,e a similar res'onse to changes in mar#et accounted factors0 2 It is settled at a future date0 -
