CHAPTER 5 : AUDIT REVIEW (PSP_DAT5B_GROUP 5)
CHAPTER 5 : AUDIT REVIEW
GROUP
MEMBERS :
SANTHIYA
SAGARAN 10DAT18F1078
KENNETH
BERNARD 10DAT18F1122
NOR FAIZAH
BINTI ABDUL RAHMAN 10DAT18F1100
NUR ASHIQIN
AQILLAH BINTI DERMAWI 10DAT18F1020
NUR ILLYIA
BINTI KAMAL 10DAT18F1108
1. What the subsequent event ?
Financial
statements may be affected by certain events that occur after the date of the
financial statements. Many financial reporting frameworks specifically refer to
such events. Such financial reporting frameworks ordinarily identify two types
of events:
(a) Those
that provide evidence of conditions that existed at the date of the financial
statements; and
(b) Those
that provide evidence of conditions that arose after the date of the financial
statements.
2. What the subsequent event after balance
sheet event ?
An event,
which could be favourable or unfavourable, that occurs between the end of the
reporting period and the date that the financial statements are authorised for
issue.
3. Adjusting Events and Non-Adjusting
Events
-
Adjusting
Events – Those events that provide further evidence about conditions that
existed at the end of reporting period.
-
Non-Adjusting
Events – Those events that reflect conditions that arose after the end of
reporting period.
4. Adjusting Events
´
If
any events occur after the end of the reporting period that provide further
evidence of conditions that existed at the end of reporting period (i.e.
Adjusting Events), then the financial statements must be adjusted accordingly.
5. Non - Adjusting Events
´
Entity
shall not adjust the financial statements in respect of those events after the
end of reporting period that reflect conditions that arose after the end of
reporting period (i.e. Non-Adjusting Events).
´
Examples
of Non-Adjusting Events include:
´
Declaration
of dividends after the reporting date does not indicate existence of liability
to pay dividends at the reporting date and shall not therefore trigger the
recognition of liability in financial statements in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
´
Destruction
of assets of the entity by floods occurring after the reporting period does not
indicate that the assets of the entity were impaired at the end of reporting
period. Hence, the financial statements should not be adjusted to account for
the impairment loss that arose after the end of reporting period.
´
Initiation
of litigation against the company arising out of events that occurred after the
reporting period does not indicate the existence of liability at the reporting
date and shall not therefore trigger the recognition of liability in the
financial statements in accordance with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
´
The
nature and estimate of the financial impact of material non-adjusting events
shall be disclosed in the financial statements.
´
Non-Adjusting
Events are considered material if they could influence the economic and
financial decisions of the users of financial statements.
´
Examples
of material non-adjusting events include:
´
Management’s
plan to discontinue or significantly curtail its activities in major geographic
segments.
´
Initiation
of a major litigation against the company arising out of events that occurred
after the reporting period.
´
Major
losses suffered as a result of a natural disaster occurring after the end of
reporting period
6. Effect on Financial Reporting
An entity
shall present and disclose information that enables users of the financial
statements to evaluate the effects of events after reporting period:
In the
Notes to the financial statement:
(a) An
entity shall disclose the date when the financial statements were authorised
for issue and who gavethat authorisation. If the entity’s owners or others have
the power to amend the financial statementsafter issue, the entity shall
disclose that fact.
(b) If an
entity receives information after the reporting period about conditions that
existed at the end of the reporting period, it shall update disclosures that
relate to those conditions, in the light of the additional information.
(c) In some
cases, an entity needs to update the disclosures in its financial statements to
reflect information received after the reporting period, even when the
information does not affect the amounts that it recognises in its financial
statements.
(d) If
non-adjusting events after the reporting period are material, non-disclosure
could influence theeconomic decisions that users make on the basis of the
financial statements. Accordingly, an entity shalldisclose the following for
each material category of non-adjusting event after the reporting period:
´
(i)
the nature of the event; and
´
(ii)
an estimate of its financial effect, or a statement that such an estimate
cannot be made.
7. Procedures to handle subsequent event
´
Certain
specific procedures are applied to transactions occurring after the
balance-sheet date such as:
(a) the examination of data to assure that
proper cutoffs have been made and
(b) the
examination of data which provide information to aid the auditor in his evaluation
of the assets and liabilities as of the balance-sheet date.
8. Auditors’
responsibilities upon completing the audit
´
The
auditor’s objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes the
auditor’s opinion
´
Auditor
exercises professional judgment and maintains professional scepticism
throughout the audit. The auditor also:
´
Identifies
and assesses the risks of material misstatement of the financial statements,
whether due to fraud or error, designs and performs audit procedures responsive
to those risks, and obtains audit evidence that is sufficient and appropriate
to provide a basis for the auditor’s opinion.
´
Obtains an understanding of internal control
relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s
´
Evaluates
the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
´
Concludes
on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant
doubt on the entity’s (or where relevant, the group’s) ability to continue as a
going concern
´
Evaluates
the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation
´
Where
the auditor is required to report on consolidated financial statements, obtains
sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the group to express an opinion on
the consolidated financial statements. The group auditor is responsible for the
direction, supervision and performance of the group audit. The group auditor
remains solely responsible for the audit opinion.
9. Important
communications made by auditors
following completion of the audit and report release date.
´
Significant
Issues Discussed with Management in Connection with the Auditor's Appointment
or Retention
´
The auditor should establish an understanding
of the terms of the audit engagement with the audit committee.
´
The
auditor should inquire of the audit committee about whether it is aware of
matters relevant to the audit , but not limited to violations or possible
violations of laws or regulations.
´
The
auditor should communicate to the audit committee an overview of the overall
audit strategy, including the timing of the audit,and discuss with the audit
committee the significant risks identified during the auditor's risk assessment
procedures.
´
The
auditor should communicate to the audit committee, when applicable, the
following matters relating to the auditor's evaluation of the company's ability
to continue as a going concern.
´
The
auditor should communicate to the audit committee any disagreements with
management about matters, whether or not satisfactorily resolved, that
individually or in the aggregate could be significant to the company's
financial statements or the auditor's report.
Q&A
1. what
will auditor do after balance sheet date?
-
Check
on transaction that occur
-
Identify
any event or activity that will affect true and fair view on FS
-
Write
date on report so that consumer know auditor have taken into consideration or
impact on FS in the auditor report
2. what (2)
type of event in subsequent event ?
-
Provides
evidence of conditions that existed at the date of the FS
-
Provides
evidence of condition that arose after the date og the FS
3. List (3)
of auditor procedures in subsequent event.
-
Review
procedures management
-
Read
minutes of the meeting at shareholders
-
Read
the entity larest interim FS
-
Extend
previous oral or written aboutentity legal
-
Enquire
management whenany subsequent event affect the FS
4. what is
an attorney’s letter ?
-
An
attorney’s letter is a formal business letter sent by a certificate Public
Accountant (CPA) to a client’s attoney
5. Give (3)
an example for an adjusting event
-
Sale
of equity
-
A
business combination
-
Destraction
of company asset dll
6. What is
the purpose of the attorney’s letter ?
-
To
inform and certify to the auditor of any legal action agatract the client that
could result in an adverse financial impact on the company’s financial
statement
7. What is
the three (3) period in subsequent eb=vent ?
-
P1
active audit must be performed
-
P2
the audit completed where there is noactive work should be performance but the
auditor should remain receptive
-
P3
the financia statement have been issued which the is no active work is
necessary but if material events come to light which affect the financial
statement report
Comments
1.what will auditor do after balance sheet date?
- Check on transaction that occur
- Identify any event or activity that will affect true and fair view on FS
- Write date on report so that consumer know auditor have taken into consideration or impact on FS in the auditor report
2. what (2) type of event in subsequent event ?
- Provides evidence of conditions that existed at the date of the FS
- Provides evidence of condition that arose after the date og the FS
3. List (3) of auditor procedures in subsequent event.
- Review procedures management
- Read minutes of the meeting at shareholders
- Read the entity larest interim FS
- Extend previous oral or written aboutentity legal
- Enquire management whenany subsequent event affect the FS
4. what is an attorney’s letter ?
- An attorney’s letter is a formal business letter sent by a certificate Public Accountant (CPA) to a client’s attoney
5. Give (3) an example for an adjusting event
- Sale of equity
- A business combination
- Destraction of company asset dll
6. What is the purpose of the attorney’s letter ?
- To inform and certify to the auditor of any legal action agatract the client that could result in an adverse financial impact on the company’s financial statement
7. What is the three (3) period in subsequent eb=vent ?
- P1 active audit must be performed
- P2 the audit completed where there is noactive work should be performance but the auditor should remain receptive
- P3 the financia statement have been issued which the is no active work is necessary but if material events come to light which affect the financial statement report
1.what will auditor do after balance sheet date?
- Check on transaction that occur
- Identify any event or activity that will affect true and fair view on FS
- Write date on report so that consumer know auditor have taken into consideration or impact on FS in the auditor report
2. what (2) type of event in subsequent event ?
- Provides evidence of conditions that existed at the date of the FS
- Provides evidence of condition that arose after the date og the FS
3. List (3) of auditor procedures in subsequent event.
- Review procedures management
- Read minutes of the meeting at shareholders
- Read the entity larest interim FS
- Extend previous oral or written aboutentity legal
- Enquire management whenany subsequent event affect the FS
4. what is an attorney’s letter ?
- An attorney’s letter is a formal business letter sent by a certificate Public Accountant (CPA) to a client’s attoney
5. Give (3) an example for an adjusting event
- Sale of equity
- A business combination
- Destraction of company asset dll
6. What is the purpose of the attorney’s letter ?
- To inform and certify to the auditor of any legal action agatract the client that could result in an adverse financial impact on the company’s financial statement
7. What is the three (3) period in subsequent eb=vent ?
- P1 active audit must be performed
- P2 the audit completed where there is noactive work should be performance but the auditor should remain receptive
- P3 the financia statement have been issued which the is no active work is necessary but if material events come to light which affect the financial statement report