Question

Question 2: Assurance and Audit Reporting
Peter Birch has approached you for advice on how to interpret the new style audit report that companies in which he has investments seem to be using. The reports all include a section labelled Key Audit Issues. He is concerned that this means that the auditors have issues with the financial statements. He also notes the audits seem to be done by individuals rather than the audit firms he has been happy to rely on in the past.
He also has questions about two audit reports he has read. One has a section labelled Emphasis of Matter and one has a Qualified Opinion due to a lack of audit evidence. He explains he is unsure what these reports mean and whether he can place any confidence in the financial reports that the audit reports relate to.
Required:
a) Briefly explain the purpose of the key audit matters section of the audit report, including whether or not these matters indicate issues with the financial statements.

b) Briefly explain to Peter what the significance of the inclusion of the individual engagement partner’s name in the audit is.

c) Briefly explain the significance of the inclusion of an Emphasis of Matter paragraph in the audit report, including whether Peter can place reliance on the financial statements.

d) Briefly explain the significance of a qualified audit opinion issued due to a lack of evidence. Include in your explanation what this means for Peter and whether he can place any reliance on the financial statements.

Answer 1

Ans:-

(a).

The evaluator will figure out which of the issues spoke with those accused of

administration are the key review matters. In making this assurance, the reviewer will take into

account territories of critical inspector consideration in playing out the review, including: (Ref: Para. A1– A14,

(an) Areas distinguished as critical dangers as per ISA 315 (Revised)1 or including

huge evaluator judgment. (Ref: Para. A15– A19)

(b) Areas in which the reviewer experienced noteworthy trouble amid the review, incorporating with

regard to acquiring adequate proper review proof. (Ref: Para. A20– A21)

(c) Circumstances that required huge alteration of the examiner's arranged way to deal with the

review, including because of the recognizable proof of a noteworthy lack in inside control. The evaluator will impart the key review matters decided as per passage 8 in

a different segment of the inspector's report under the heading "Key Audit Matters." The examiner's

report will express that:

(a) Key review matters are those issues that, in the reviewer's expert judgment, were of most

centrality in the review of the money related articulations [of the current period];

(b) Key review matters are chosen from issues spoke with [those accused of

governance], however are not planned to speak to all issues that were examined with them;

(c) The examiner's techniques identifying with these issues were planned with regards to the review of the

money related articulations all in all; and

(d) The inspector's assessment on the money related articulations isn't adjusted as for any of the key

review matters, and the evaluator does not express a sentiment on these individual issues.