ACCN3015

auditing
2014

Nadeem Mahomed
 THE CODE OF PROFESSIONAL CONDUCT
• be straight-forward and honest Engagement Acceptance
Client Acceptance
• CA shall not knowingly be associated with • consider firm’s competence
• discourages conduct which discredits • consider if there is a threat to the
information he believes: to perform engagement
the profession fundamental principles
- materially false or misleading information - capabilities, resources,
• guidelines for advertising, recruiting, • apply safeguards
- furnished recklessly time
- omission is misleading responsibility to colleagues - obtain understanding from client
- experience in +
- secure commitment to improving
Integrity Professional knowledge of industry
governance
Behaviour - if cannot reduce threat
• apply safeguards
to an acceptable
Objectivity Fundamental level, decline Professional - obtain understanding
CA shall not compromise business Principles (s100.5) Appointment (s210) of client’s business
judgement through - agree on realistic time
- bias Confidentiality frame
- conflict of interest Change in Professional Appointment
CAs should refrain from • obtain permission to speak with
- undue influence Professional Competence & - disclosing information without
 Identify threats
previous auditor
Due Care duty or legal obligation to do so • discuss reasons for not accepting client
Threat: Conflicts of  Can threats be
- using information for personal • if permission is not given, consider
Interest • CAs to maintain professional
knowledge and skill
gain
declining acceptance eliminated or
• commitment to continuous reduced?
professional development
 Apply safeguards
• financial interest in client CAs in public practice must consider:
• threats of dismissal, litigation • networks of firms
• fee dependence, concern over losing
• awarding of non-assurance work if  Conclude on
client • public interest firms
opinion is positive whether violation
• contingent fee arrangements • those charged with governance
• pressure to reduce work to reduce fees of CPC has
• discovering errors in another engagement • documentation
• engagement period occurred
Self-Interest Intimidation
• mergers Independence
Threats Familiarity
in mind and appearance
Self-Review • member of team having a close
family member in a position that Specific threats:
• auditing controls you designed Advocacy • loans
can exert influence over the
• member of team is a director or • gifts + hospitality
subject matter
had influence over subject matter • firm promoting shares • audit partner having a long • provision of non-
• firm providing services that in client association with the client assurance services
directly affect subject matter • acting as advocate in
litigation

• resign from engagement • discussing ethical issues with those charged with governance
Safeguards • external review • disclosing to those charged with governance, the nature of services provided
• rotation of senior assurance team personnel • quality control with regards to client acceptance
 THE AUDITING PROFESSION ACT Committee for Auditing Standards (s22)
Consists of:
IRBA (s4) Committee for Auditor Ethics (s21) - 5 RAs
Consists of: - 1 person with business experience
• General Functions - 3 RAs - Auditing lecturer from a university
- promote integrity of the auditing profession - 3 representatives of users - 1 representing the JSE
- protect public in dealings with RAs - 1 representing the JSE - Executive Officer of the FSB
- prescribe standards of competence, ethics, conduct - 1 advocate/attorney with 10 - Auditor General
- prescribe auditing standards yrs experience - Commissioner of SARS
• Accreditation of Professional bodies Establishment of - Registrar of Banks
• Registration of Auditors • determine what constitutes Committees
• Education, training and professional development improper conduct • develop, maintain, adopt, issue, prescribe
• Prescribe fees and charges • develops code of conduct auditing standards

Investigating and Disciplinary Committees (s24)

Registration of Individuals as RAs (s37) Registration of firms as RAs (s38)
Consists of:
must
- a chair, a retired judge or senior advocate
• have prescribed education, training, Partnership: all partners must be RAs
- non-registered auditors
competencies for an RA
- other suitably qualified people
• arrange for continuing professional Companies: if
development  all shareholders are RAs
• be a resident  all shareholders are
• be fit and proper Registration of directors and vice versa Practice
• not have been: Auditors  directors are jointly and
 removed from an severally liable for debts RAs may not:
office of trust • practice under a firm name unless every letterhead displays the RAs name
 convicted of theft, fraud, perjury • sign any document which represents an audit performed by the RA unless it
 declared by a court unable to was performed by that RA in accordance with the prescribed standards
manage own affairs • perform audits unless adequate risk management practices are in place
• share any profit from an audit with a person who is not a RA

unlawful act or omission committed by management which:

Reportable • has caused or is likely to cause material financial loss OR
Limitation of Liability (s46)
Irregularities (s45) • is fraudulent or amounts to theft OR
• represents a material breach of fiduciary duty • no liability to client or third party unless negligent or malicious
• report matter to IRBA
It is an offence to: (liable for a fine/imprisonment up • liable to third party who relied on audit opinion and suffered
• report must give particulars on RI and other matters
to 10 years) financial loss ONLY IF proved RA knew:
deemed appropriate
• fail to report a RI - opinion would be used by client to induce third party
• inform management within 3 days of reporting RI
• knowingly or recklessly express an opinion which - third party would rely on opinion
• within 30 days:
is materially false • RA may incur liability to partner, member, shareholder if RA fails
- discuss matter with management
to report a RI
- invite client to make representations
if RI is continuing, IRBA should notify the
- send IRBA another report on status of RI
relevant regulator * RA may not limit their liability incurred under this section by
* auditor has no responsibility to report agreement
to anyone else (breach of confidentiality)
 ISQC 1
QUALITY CONTROL FOR AUDITS & REVIEWS Re-inforced by:
• leadership
• education and training
• monitoring
must establish policies and procedures person responsible should have
policies + procedures to: • process for dealing with non-compliance
designed to promote an internal culture • sufficient and appropriate
recognising quality is essential experience and ability - communicate requirements
CPC
• necessary authority - report threats
Leadership • Integrity
- work must comply with - resolve threats
Responsibilities Ethical • Objectivity
professional standards
• Professional Competence
- issue reports that are * written confirmation Requirements • Professional Behaviour
appropriate of compliance with
• Confidentiality
independence requirements

Acceptance &
Continuance sufficient personnel with the
competence, capabilities, commitment
Firm must be competent to perform the Firm must consider the integrity of the client to ethical principles
engagement Must consider: necessary to: Human Resources
Must consider whether: - identity + reputation of owners, key • perform engagements
- firm has sufficient personnel management in accordance with standards
- firm personnel have appropriate - nature of client’s operations • enable firm/engagement partner to * monitor workload and
knowledge, experience - attitude of client’s owners + management issue appropriate reports availability of engagement
- firm is able to complete the engagement towards application of accounting standards + partners to ensure they have
within reporting deadline internal controls sufficient time to adequately
- firm can comply with ethical - indications of inappropriate limitation of discharge their responsibilities
requirements scope
- reasons for proposed appointment of firm

Engagement Quality Control Review (QCR)

For: entities with high public interest
Extent: depends on complexity of engagement, audit risk
policies + procedures should include:
Who can do a QCR: technically competent, objective
• Matters relevant to promoting consistency in quality of
What does a QCR include:  discussion of significant matters
engagements
 review of FS + proposed report
- briefing
 consideration of appropriateness
- compliance with engagement standards
Engagement  team’s evaluation of independence Monitoring
- appropriate documentation
 consultations where necessary
- method for reviewing work performed Performance  documentation supports conclusions is system of quality control
• Supervision responsibilities
policies + procedures to ensure that relevant, adequate, operating
- tracking progress of engagement
engagements are performed in accordance effectively
- addressing significant matters
- identifying matters for consultation with professional standards and applicable
• Review responsibilities legal and regulatory requirements
 ISA 200
OBJECTIVES & PRINCIPLES OF AN AUDIT

auditor‘s opinion enhances credibility of FS • audit procedures are necessary to perform

BUT does not guarantee  future viability an audit
 effectiveness/efficiency of
management • determined with reference to:
- Statement
- APA
Objective of an audit - Legislation + Regulations Scope of
failure to achieve an (par. 11) - engagement and reporting an Audit
objective of an ISA: environment
- prevent overall objectives
of the audit? • obtain reasonable assurance about whether Inherent limitations of an audit:
- modify opinion or FS are free from material misstatements • use of testing
withdraw • express opinion on whether FS are in • inherent limitations of accounting +
accordance with applicable FR framework internal control
• report on FS • audit evidence is persuasive, not
conclusive
• auditor's work is open to subjective
judgement ito
- obtaining evidence
Ethical Requirements: - concluding based on evidence
• Independence (in mind + appearance)
• Integrity
• Objectivity Professional Scepticism:
• Professional competence  critical evaluation of evidence
• Confidentiality  be aware that circumstances may exist that
• Professional behaviour could cause FS to be materially misstated
General Principles of
• Technical standards
an Audit
should be performed
Audit Risk: risk of material according to ISAs Professional Judgement:
misstatement  apply knowledge + experience to facts
𝐴𝑅 = 𝐷𝑅 × 𝐼𝑅 × 𝐶𝑅  does judgement represent competent
not in control of application?
auditor
 auditor shall obtain sufficient evidence to
reduce risk
 ISA 210
auditor shall not accept the engagement if:
AGREEING THE TERMS OF AUDIT ENGAGEMENTS
• scope of audit is limited
• pre-conditions are not present
(unless required by law to do so) Nature of Business
- reputation
Preconditions of an audit (par. 6) Business Environment - risk of association
- stability of market - litigations against entity
- prevalence of corruption Structure
• application of acceptable FR framework - complexity
• agreement that management is responsible for: Pre-Engagement Considerations - delegation at exec. level
- preparing FS Management
- internal controls - integrity Professional & Ethical Considerations
Financial Results
• agreement to provide auditor with: - past co-operation - independence
- profitability
- access to all info mgmt is aware will be relevant - conflicts of interest
- going-concern
- additional info auditor may request - professional competence
- unrestricted access to persons within the entity - resources

Recurring Audits:
assess whether circumstances require - avoid misunderstandings
Engagement Letters - address ‘Auditor Expectation Gap’
terms to be revised OR whether there is a
need to remind client of terms (par. 13)
shall agree terms in writing
with “those charged with
governance” (par. 9)
Audit Engagement
Terms
Shall include:
• objective + scope of audit Acceptance of Change in Terms:
• inherent limitation of audit * shall not agree to change where there is
• responsibilities of auditor no reasonable justification
• responsibilities of management
• fees - if changed, need a new engagement letter
• identification of applicable FR framework - if unable to change terms, auditor shall:
• expected form + content of reports issued by • withdraw from audit
auditor • determine whether there is an obligation
to inform other parties
Auditor is concerned with fraud that causes a MM
• resulting from fraudulent financial reporting ISA 240 MANAGEMENT: detect + prevent fraud
• resulting from misappropriation of assets AUDITOR’S RESPONSIBILITIES AUDITOR: obtain reasonable assurance that FS are free
RELATING TO FRAUD from error
 risk of NOT detecting fraud is greater
∵ concealment and collusion

REQUIREMENTS

Fraud Risk Factors

Professional Scepticism • Incentive/Pressure
• Perceived Opportunity
if auditor believes documents are not authentic or Unusual Relationships • Rationalisation
management’s responses are inconsistent, the incl. those related to
auditor shall investigate futher revenue
Management & Employees
Evaluation of Audit Evidence
- assessment + response to
do analytical procedures
risks of fraud
Discussion with Engagement performed towards end of
- views on ethical behaviour
audit indicate previously-
Team unrecognised ROMM
- knowledge of actual,
particular emphasis on how + where the FS may be Risk Assessment Procedures & suspected, alleged fraud
susceptible to fraud Related Activities

Identification & Assessment of ROMM due to

fraud Responses to Assessed ROMM due to fraud
AUDITOR UNABLE TO CONTINUE WITH ENGAGEMENT • at FINANCIAL STATEMENT and ASSERTION
• determine professional + legal responsibilities level OVERALL
• appropriate to withdraw from engagement? • treat as significant risks • assign + supervise personnel of appropriate
• if withdraw: ⇓ knowledge, skill, ability
- discuss with management gain understanding of • selection of appropriate accounting policies?
- responsibility to report decision? related controls • incorporate element of unpredictability in
selection of audit procedures

AT AN ASSERTION LEVEL
DOCUMENTATION
- significant decisions reached regarding RELATING TO MANAGEMENT OVERRIDE
susceptibility of FS to MM due to fraud • test appropriateness of journal entries
- identified + assessed ROMM due to fraud • review estimates for bias
- overall responses to assessed ROMM • assess if business rationale of unusual
- communications to management transactions suggests fraud
 ISA 300
Why Planning is Essential PLANNING AN AUDIT
• identify important areas of audit
• organise and manage the engagement so that it is performed
effectively and efficiently • Identify the characteristics of engagement
• assisting in selection of engagement team of appropriate • Ascertain reporting objectives of engagement to plan timing of audit
capabilities and competence Audit Strategy • Consider factors that are significant in directing team’s efforts
• facilitating direction, supervision + review of team • Ascertain nature, timing, extent of resources necessary
• assisting in co-ordination of work done by auditors and
experts
Due to _____, consider making use of_____.

NATURE “what type”

• Test of Controls
(effectiveness of controls in preventing, detecting, correcting MM)
combined

irrespective of ROMM, perform

substantive testing for material
• Substantive class of transactions, balances
(designed to detect MM at an assertion level)
• nature, timing, extent of planned risk assessment (ISA 315)
• nature, timing, extent of planned further audit procedures (ISA 330)
TIMING “when” Audit Plan • other planned audit procedures required to be carried out to comply with ISAs
if high risk – audit towards YE
if low risk – do interim audit + roll-forward testing
Due to _____, focus testing on _____.
* experts * when you can test IT systems

EXTENT “how much”

R
M
 Sample Size
 DR | AR
 ISA 315
IDENTIFYING & ASSESSING THE RISKS OF MATERIAL MISSTATEMENT

help auditor:
• plan audit
• identify types of potential misstatements
• consider factors that affect risk
• design tests of control and substantive procedures

Understanding the Entity & Its Environment Understanding the Entity’s Internal Control

• Industry, Regulatory & Financial Reporting Framework • Design & Implementation of Controls
- operations
- culture created by management
• Nature of Entity - ownership, governance • Control Environment- strengths
- structure
- identifying risks
• Accounting Policies -- selection, application
reasons for changes
• Entity’s Risk Assessment Process -- estimating significance
assessing likelihood of occurrence
- actions
• Objectives, Strategies, Business Risks • Information System relevant to Financial Reporting

• Measurement and Review of Entity’s Performance • Monitoring of Controls

Identifying & Assessing Risks of Material Misstatement

at the Financial Statement level at the Assertion level

TRANSACTIONS BALANCES PRESENTATION & DISCLOSURE

• Occurrence • Existence • Occurrence, Rights & Obligations
• Completeness • Rights/Obligations • Completeness
• Cut-off • Completeness • Classification & Understandability
• Classification • Valuation/Allocation • Accuracy & Valuation
• Accuracy
 COSO Framework
OPERATIONS COMPLIANCE FINANCIAL REPORTING

MONITORING - performed by management to assess effectiveness of internal control performance over time

Procedures + records designed to:

INFORMATION & - initiate, record, process, report transactions - account for system overrides
- resolve incorrect processing - transfer information to general ledger
COMMUNICATION - ensure disclosure is appropriate

separation of jobs, which if done by the same person could provide

Separation of Duties opportunity for fraud

Proper Authorisation
CONTROL Design (what objective
needs to be met)
Adequate Documents & pre-printed, pre-numbered , logically + simply designed, prepared at time of
transaction, designed for multiple use
Records
ACTIVITIES Implementation
Physical control over
Assets
Independent Checks on checking whether or not controls are observed and whether or not changes
Performance are necessary

- management responsible for identifying factors that may increase risk (int + ext) + determining actions necessary to manage
risks
RISK ASSESSMENT - have to consider significance + likelihood of risk
- risks affect: survival, competitiveness, financial strength, public image, quality of products + people
- cannot be eliminated, only managed

- actions, policies + procedures that reflect attitude of management about internal control and its importance
- sets tone, influences control consciousness of employees
CONTROL • communication + enforcement of ethical values
• commitment to competence
ENVIRONMENT • assignment of authority + responsibility
• HR policies + practices
 RISK  What is the RISK?
 Did it increase/decrease? Is it significant?
OVERALL ASSERTION
 Why is it a RISK? (“as a result of…”)

auditor has no control over auditor can control

AUDIT RISK = RISK OF MATERIAL + DETECTION RISK

(DR)
(AR) MISSTATEMENT
risk that auditor expresses an (ROMM) risk that auditor will not detect material misstatement
inappropriate audit opinion

- must reduce to an acceptably low level

- can never be 0:
INHERENT RISK CONTROL RISK • sampling risk
(IR) (CR) • inappropriate procedure used/procedure not
done properly
susceptibility of an risk that MM is not
assertion to MM prevented, detected,
before considering corrected by controls
controls

ideally should be inversely-related

If there are inherent risks, controls should mitigate
those risks

gives good
sufficient +
needed to used to understanding
appropriate
give determine of client limits ability of business to achieve the goals
Opinion Evidence Risk can determine
BUSINESS RISK and objectives
- operations
- compliance
- reliability of financial reporting
 ISA 320
MATERIALITY
qualitative
misstatement/omissions that, individually or in - nature of misstatement
aggregate, reasonably expected to influence
decisions of users quantitative
- amount of misstatement
shaped by auditor’s RM RM
PROFESSIONAL JUDGEMENT
on what’s important to users

CALCULATING MATERIALITY PRACTICALLY

OVERALL MATERIALITY
 Importance of SOCI and SOFP to users
 materiality of the financial statement as a whole
 Eliminate items that appear to be unstable

 Actual, Budget, Past results?

 Calculate materiality ranges for the remaining figures:

0.5% - 1% of Revenue
1% - 2% of Gross Profit
PERFORMANCE MATERIALITY 5% - 10% of Profit before tax
1% - 2% of total Assets
 set to reduce, to an acceptably low level, the probability 2% - 5% of Shareholders’ Equity
that the aggregate of uncorrected and undetected
misstatements exceed overall materiality  Consider significant risks when deciding on whether materiality
should be pitched at the lower or upper ends of the respective
 PM  work  DR | AR = appropriate opinion ranges

* can have specific PM for specifically risky assertions or  Conclude with your estimate of materiality
accounts
 Compute the Performance Materiality
 ISA 540 OBJECTIVE obtain sufficient evidence that
- accounting estimates are reasonable
AUDITING ACCOUNTING ESTIMATES - related disclosures are adequate

Obtain an understanding of:

Obtain an understanding of how management makes estimates
- requirements of RF relevant to estimates
- how management identifies conditions that Model/Method
give rise to need for estimates Use of experts
Assessment of
Change in method estimation
Underlying
Risk Assessment Procedures & uncertainty
assumptions
Relevant Controls
Related Activities
Evaluate whether estimates are
Review outcome of previous period’s REASONABLE or MISSTATED
estimates and subsequent re-estimation

• The auditor shall obtain sufficient audit evidence about

whether the disclosures in the FS are in accordance with
Further Substantive Procedures the RF and whether adequate disclosure of the
for Significant Risks estimation uncertainty is made

• The auditor shall identify whether there are indicators of

possible management bias
Estimation Uncertainty Recognition & Measurement Criteria

The auditor shall evaluate: The auditor shall obtain sufficient

• how management has considered evidence about whether: DOCUMENTATION
alternative assumptions or • management‘s decision to (or not - Basis for auditor’s conclusions about the
outcomes to) recognise the estimate in the FS reasonableness of accounting estimates and their
• whether significant assumptions • the selected measurement basis disclosure
used are reasonable are in accordance with requirements of - Indicators of possible management bias
the applicable RF
* if management has not addressed
effects of estimation uncertainty, the
auditor shall develop a range with
which to evaluate the reasonableness
of the estimates
 persons responsible for
ISA 260 overseeing strategic
COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE direction of the entity and
accountable for the entity

Planning Phase Completion

Communication with a Sub- Auditor’s Responsibilities Significant Findings from the Audit
group - the auditor is responsible for - significant qualitative aspects of
- auditor must determine if expressing an opinion on FS accounting practices
it is necessary to - audit does not relieve - significant difficulties encountered
communicate with management or TCwG of their during audit
governing body Those Charged with responsibilities - matters raised with management
Governance - written representations requested
the auditor shall determine Matters to be
When all are involved in
the appropriate persons with Communicated
Management whom to communicate Auditor Independence
- do not need to
for listed entities
communicate to same Planned Scope & Timing
- engagement team has complied with
person in their governance of Audit
ethical requirements regarding
role
independence
- must be satisfied that
- all relationships that may reasonably
communication to
thought to bear on independence
management adequately
- safeguards that have been
informs TGwC
implemented to eliminate/reduce
identified threats to independence

Forms of Communication
Timing of Communication
- in writing if, in the auditor’s
- communication should be made on a
professional judgement, oral
ISA 265
timely basis COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL
communication would be inadequate
Communication The auditor shall communicate, in writing, significant
Process deficiencies in internal control identified to TCwG
the auditor shall - inform management of intention to communicate
communicate to TCwG the significant deficiencies to TCwG
form, timing, expected
Adequacy of Communication - communicate to management other deficiencies that merit
content of communications
- evaluate whether there has been management’s attention
adequate two-way communication
- evaluate the effect on auditor’s Communication should make it clear that:
assessment of ROMM and ability to • purpose of audit was to express opinion over FS
obtain evidence • audit included consideration of control to design procedures
• matters reported are limited to those identified
 AUDIT EVIDENCE
Procedures for obtaining evidence

External Analytical
Inspection Observation Re-calculation Re-performance Inquiry
Confirmation Procedures

Reliability of Provides evidence * need permission Checking of Independent Analysis of plausible Seeking of
documents depends about performance of mathematical execution of a relationships among information in
on: a process/procedure Not restricted to accuracy of procedure that were non/financial data formal/informal form
• nature BUT only at that time account balances only calculations already performed - evaluation of
• source - must first evaluate responses is
• effectiveness of accuracy of inputs integral
controls

NATURE OF AUDIT EVIDENCE SUFFICIENCY OF AUDIT EVIDENCE

impacts quantity and quality needed
Conclusion Analytical Procedures
* affected by NATURE
TYPE Risk Assessment Analytical comparisons between CY and PY
physical, electronic Quality Quantity Procedures to make sure movements are
comparisons between CY and understood and have been
SOURCE * affected by MATERIALITY/ROMM PY to identify risks audited
internally generated, independent
Materiality ROMM Quantity
HOW evidence is obtained
directly, indirectly through client/inference On Opening Balances
Auditor should obtain evidence
Analytical Procedures
Audit Evidence on:
• opening balances b/f correctly
EVALUATION OF AUDIT EVIDENCE APPROPRIATENESS OF AUDIT EVIDENCE • appropriate application of Substantive Analytical Procedures
accounting policies  verify source data
BASED ON RELEVANCE  develop expectation
• Materiality - logical connection between purpose of
Auditor should perform one of:  determine threshold
• ROMM procedure and assertion
• Risk of Fraud - reviewing working papers of  compare to actual
• Nature, Sufficiency, Appropriateness previous auditor
RELIABILITY - procedures performed in CY if doesn’t match:
* auditor should evaluate if ROMM has - influenced by source, nature, that will provide evidence on  inquire with management
been reduced to an acceptable level circumstances under which it was OB  corroborate representations through
obtained - specific procedures - auditor’s understanding of entity
regarding evidence on OB - additional procedures
 • confirm availability
• Credit Application
 •
•
order is uniquely numbered
SO agrees with CO
• Credit Bureau Report
• Authorised Order • credit-worthiness check
• Customer order • SO authorised
 • Authorised Price List  • order compared to credit limit,
outstanding balance, payment history
• Sales Order • Credit Controller
• unable to carry out order 
• Sales, Warehouse,

• Sales Department  •
•
items ordered not processed
fictitious orders
Dispatch, Debtors

• sales made without credit
authorisation
• incorrect pricing Credit Granting

• Warehouse Foreman
Ordering

• Dispatch
• Order Form • Security Guard

• Policy Documents
• Delivery Note
• GL • Gate Register


 • Senior Manager Delivery
• authorisation
REVENUE CYCLE • compare goods to order form and
delivery note
• regular review of age Bad Debts • goods checked at gate against
analysis  register
• follow up on long overdue
 balances
• recon of stock on hand and stock
delivered
• adjustment of credit limit • access/security to warehouse
• provision policy
consistently applied • goods never reach customer
• orders shipped incorrectly
• sales made to doubtful debtor Returns & Invoicing &  • orders received not delivered
 • inadequate provision Allowances Recording • customer claims goods never
received

• Credit Note • match documents (SO → DN → Inv) for details

• GRN • Sales Order • follow up on unmatched documents
 • Sales Returns journal
• discounts approved by FM
 • Delivery Note (signed)  • recorded immediately
•
•
•
Debtors sub-ledger
GL
 • match documents
• Invoice independent recon btwn subsidiary ledger and
control account

• Debtors Dept. • invalid returns/discounts •• Debtors

 Dept.
Accounting
•
•
goods delivered not invoiced
fictitious sales

 • Receiving Dept.  • credit note incorrect  • customer invoiced but goods not delivered
• Financial Manager • no goods actually returned • incorrect amount, period, classification,
posting
 • compare goods to PO
 •• approved after agreeing to budget
approval of PO by HoD
• [Delivery Note]
• GRN  • sign delivery note and attach GRN
• Purchase Requisition
• Preferred Supplier List • items ordered aren’t needed
• Warehouse
• Purchase Order 
• Ordering Dept. • received less/more than what was
 • order not approved
• purchase is over-priced
• Creditors Dept.  ordered

•• Manager
 Creditors Dept.

Receiving
Ordering
• [Invoice]
 • Creditor Sub-ledger
• [Credit Note]
• Remittance Advice 
• Creditors Dept.

PURCHASING & PAYMENTS CYCLE • quantity agreed to
GRN and price agreed
• processed against sub-
 ledger Returns &  to PO
• recon of statement
• deducted from
Refunds Recording and sub-ledger +
remittance advice
review

• invoice not recorded

• statements not
 reconciled regularly

Payment

• clearly mark invoices that

 •• [Invoice]
Remittance Advice  have been presented for
payment
• send to signatories

• Creditors Dept.
• Authorised Signatories
• EFTs not reviewed
 properly
• payments not reconciled
 • Employment Contract
 file
• background check
• Clock cards
• only 1 entry/exit
 • unused clock cards locked away
• Deduction  • changes to salary structure made
with reference to budget • signature of foreman on cards
amendment form
• restrict access once dismissed

• Foreman • overtime is not approved
• Employment/deductions w/o
authorisation
 • overtime is not reasonable
 • dismissal not ito law
• dismissed employees still on
payroll
Time-keeping
Appointment &
Dismissal

• Clock cards
 • Authorised Overtime forms
 • Unclaimed Wage register • Payroll journal

• cards must match register

• unclaimed pay packets
PAYROLL CYCLE • authorisation of payment
should agree with payroll  by signatories
register Unclaimed • cheque requisition
 • unclaimed packets locked
Wages Preparation of prepared
away Payroll
• recon btwn packets on hand
and unclaimed wage register
 • untimely
taxes
payment of

Pay-out

 • Payroll register • presentation of IDs

 • signing of register to
acknowledge receipt
• count cash immediately
•• 2Security
 employees
company
 Assertion-level Risks
Balance-Related Assertions Transaction-Related Assertions

does inventory actually O was purchase/sale valid

E exist PAYMENT CYCLE Receiving
right/obligation to C are all valid p/s recorded
R inventory
C p/s relate to correct period
C is all stock counted
C classified in correct account
ito IFRS
V recoverability A details, acc policy, calc

 • safe-guarding of assets
Purchase Order
Raw Materials
Storing

REVENUE CYCLE

INVENTORY CYCLE
Shipping 𝐶𝑂𝑆𝑇 = 𝑃𝑅𝐼𝐶𝐸 × 𝑄𝑈𝐴𝑁𝑇𝐼𝑇𝑌

Finished RM OH
L
Goods Stock Count
Processing
• obsolescence, damage
 (NRV)
• incorrect application of
accounting policy
Storing  •• complex accounting for manufacturers
standard costing
• safe-guarding of assets PAYROLL CYCLE • Labour: completeness, occurrence
 • Insurance • calculation of overheads to be absorbed
• stock count (design important)
- movement halted
- consignment stock considered
- sufficient staff
- counted stock tagged
- diff followed up on
- adjustments made
 Dividends
• verify validity of authorisation
- recorded dividends validly occurred
• Inspect for payment of debts outstanding in PY, debts not recorded O - paid to shareholders that exist
• confirm existence, due dates, interest rate, security with institution
• trace cash received to deposit slip - existing dividends recorded
 • determine reasonableness of interest expense in relation to principal amount
C - dividends payable recorded
• re-calculate computations of interest expense
• evaluate compliance with debt provisions A dividends and dividends payable are accurately recorded
• evaluate disclosure (current portion, restrictions imposed by agreement,
security pledged etc.) • authorisation of transactions
 • record-keeping and segregation of duties
•• proper authorisation
understatement of debt
• shares issued in accordance with Companies Act

• proper approval if listed

Liabilities
Owner’s Equity
Shares
• Listed: confirm with STRATE Recon Confirmation
 • inspect share certificates/register
• agree dividends received to DETAIL EXISTENCE
investment schedule
COMPLETE-
CUT-OFF
NESS
Fair Values
• obtain understanding of process INVESTING & FINANCING CYCLE ACCURACY

for determining FVs

• method applied consistently  transactions are relatively few in number
 • use of an expert  each transaction is highly material in amount
• procedures relating to estimates  •• Bank Recon
Interbank Transfer Schedule

Investing • preparation of bank recon

• signing of register to acknowledge
Property, Plant & Equipment
Cash receipt
• review of productivity of assets  • count cash immediately
•
 •
review of depreciation methods
impairment tests
• omission of outstanding
Use of Experts cheques in recon
• classification of expenditure
• consider expertise, knowledge, qualifications,
 • cash received recorded in
• theft incorrect period
professional membership
 • complexity of transactions  • verify relevance, completeness, accuracy of
Proof of Cash
• all receipts/payments were deposited/paid by bank
• valuation challenges
source data used • all receipts/payments were recorded
• estimates wrt UL, RV etc
• evaluate reasonableness of assumptions,
methods, findings
 • balance on BS = balance in GL at BOY and EOY
• recon of receipts deposited with CRJ
• OB in GL agrees to prior working • obtain written agreement outlining nature, Interbank Transfers
papers
 • reasonableness of depreciation
scope, objective of work; nature, timing,
extent of communication with auditor; need to
• verify accuracy of schedule
• transfers recorded by both banks in same year
• physically inspect assets observe confidentiality • receipts + payments correctly accounted for in recon
• examine title deeds and contracts
System CAATS: auditing through computer (ToC)
Data CAATS: auditing with computer (Subst)
COMPUTER AUDITING
need to rely on GENERAL to be able to test APPLICATION

GENERAL CONTROLS APPLICATION CONTROLS

• establishes overall framework of controls for computer environment • relevant to a specific task within the accounting function
• must be in place before processing begins
• spans across all applications INPUT
- transactions recorded correctly + completely
- IT rep on Board Data Capture Controls - unauthorised transactions flagged for follow up
Control Environment & - mgmt attitude towards importance of controls - transactions only recorded once
Security - sound internal controls
- logging - limit, range, sign tests
- sequence checks
- clear levels of authority
Data Validation Controls - existence test
Organisational Structure - segregation of duties - check-digit verification
- recruitment policies
& Practices
- user privileges PROCESSING - file/volume labels
- training + development - control totals (financial, hash, record counts)
- reasonable tests
Standard Operating - pre-determined protocols, standards
- procedures for day-to-day operations OUTPUT - controls over reports, documents, displayed info
Procedures
PREVENTION,
- project approval DETECTION &
System - user requirements CORRECTION
Development - testing
- final approval, training, review

- ToC (possible, necessary, desirable)

- BCP: ensure continuity in event of loss/corruption of NATURE
Continuity of - possible use of IT expert
data (back-ups, testing)
Operations - use of CAATs
- DRP: esnure business runs in spite of IT disaster

- system change – during change

Effect on - ToC before year-end
Access - physical: over physical assets TIMING
Audit Plan - tight deadline, roll forwards?
Controls - logical: access to applications - may not have access to real-time systems

- system descriptions - data CAATs, testing of program logic,

- instructions to users, operators EXTENT reliance on prior controls testing can
Documentation - error recovery procedures reduce extent
- implementation + conversion of new systems
Ethical Leadership
• sustainable strategy + operations
CORPORATE GOVERNANCE
• consider impact on all stakeholders
• ensure strategy + conduct is aligned to values Role & Function
Company Ethics
• ensure directors adhere to duties • builds ethical culture • focal point for +
- charter of responsibilities
• integrate ethical risk + custodian of corporate - meet at least 4x Composition
opp in RM governance
• assess, monitor, report on “balance of power”
Ethical Leadership & ethical performance • act in best interests of - adhere to legal standards • majority non-exec
Corporate Citizenship company - disclose + manage conflicts • maj of non-exec indep
• min 2 exec: CEO, CFO
Responsibility • consider business rescue if financially distressed • at least 1 3 of non-exec to
Responsible Corporate Citizen Transparency rotate annually
- lead indep if chair is exec
• consider impact on society, environm Accountability • disclose indep in IR
- justification in IR
• protect well-being of economy, society, Fairness • chair: indep non-exec - CEO cannot be chair until
environm after 3 yrs
• implement corporate citizenship programmes Board Appointment
Company Secretary • NC (all non-exec, maj indep)
“competent, suitably qualified, experienced” should assist
• not a director Board & Directors • background + checks
• assist NC, director induction • through formal letter of app
• guide Board on duties
Board Responsibility • assist with evaluation of committee + Director Development
• directors should have understanding of laws, directors • formal induction programme
rules, code, standard
Performance Assessment
• compliance should form part of RM Remuneration
• performed every year
• delegate to management • RC: all non-exec, maj indep
• overview of process in IR
• fair + responsible, aligned to strategy
• disclosure in IR
Compliance
Laws
IR should report on material or repeated Codes
instances of non-compliance Standards Integrity
• AC to evaluate sustainability disclosures
• prepared annually, convey adequate info
• based on substance over form

Governing Stakeholder Integrated Reporting

Relationships
• achieve balance between stakeholders’ interests Integrated with financial reporting
Independently assured
• ensure equitable treatment of stakeholders • disclose if going-concern
• AC should ensure IR is reliable,
• transparent + effective communication • convey +ve and –ve impacts of
does not contradict FS
• ensure disputes are resolved effectively operations
 Functions
• oversee IR Board Responsibility
• monitor relationship btwn ext+int audit • develop policy + plan for RM
• satisfy itself with skills + resources of • disclose effectiveness of RM in IR
Composition finance • review implementation at least once p.a.
• all indep non-exec • oversee Internal Audit • set limits of risk tolerance
• at least 3 members - appoint, assess, dismiss CAE • appoint Risk Committee (can be AC)
• chair of Board cannot chair AC - approve int audit plan
• chair must be present at AGM Risk Process
- subject IA to indep quality review • Assessment
Governance of
Audit Committee • Response
Risk • Monitoring
• risk management • Assurance
requirement for Ltd. + SOCs
• recommending appointment of ext auditor • Disclosure
- approve terms of engagement Risk Committee (can be AC)
- monitor + report on indep consider risk mgmt policies + monitor risk
- be informed of RIs mgmt process
• report to Board and SHs on duties - at least 3 members
- exec, non-exec, mgmt, experts (unless
the AC)
Role
• evaluate governance processes
• assess effectiveness of RM
Status
• analyse + evaluate business processes
• indep from management Board Responsibility
• assist in investigating fraud + corruption
• CAE invited to all executive committee • establish IT policies
Internal Audit • promote ethical IT governance
• integrate IT strategy with co. strategy
• monitor + evaluate IT investments + expenditure
Approach • integral part of RM
* RISK BASED *
• informed by strategy Governance of IT
• consider
- risks that hinder goals
- controls to mitigate risks Audit Risk
- opp that promote realisation of goals Committee
Committee
• report at all AC meetings
should consider IT should obtain
∵ relates to financial assurance that IT
reporting + going- controls are effective
concern status
 Authorised Shares (s36)
Accounting Records (s28) COMPANIES ACT MOI must:
- set out classes, number of authorised shares
must keep accurate + complete
- set out rights/restrictions of each class
accounting records in one official
* can only be changed by SR
language at the registered office Shareholder approval (s41)
Access to company records (s26) SHs must approve, by SR, issues
any SH is allowed to inspect, for free: - to directors (present/future) Shares & Consideration for shares (s40)
• MOI - to related parties
• records of directors - if ≥ 30% of voting rights before issue Securities shares are issued only when
Company consideration is fully received
• notices + minutes of AGM
• share register Records - held in trust until consideration is
received

Financial Statements (s29/s30)

- prepared within 6 months of year end
- must satisfy financial reporting standards Financial Assistance/Loans to Directors (s45)
- must fairly present the state of affairs of the business • SR within previous 2 years Financial Assistance to buy shares (s44)
- display whether audited/reviewed/neither • Satisfaction of solvency + liquidity test • SR within previous 2 years
- bear name of preparer • Terms must be fair + reasonable to company • Satisfaction of solvency + liquidity test
- disclose remuneration of directors • Additional requirement in MOI • Terms must be fair + reasonable to company
• Additional requirement in MOI
if Board adopts resolution
• written notice to SHs and TUs within 10 b.days if
loan > 0.1% of net worth
• else within 30 b.days after financial year SOLVENCY + LIQUIDITY TEST:
AGM (s61(7))
• A > L, fairly valued
must occur Restricted • appears company will be able
- within 18 months of incorporation Transactions to pay debts as they become
- within 15 months from previous AGM Resolutions (s65) Distributions (s46) due for 12 months
• Board resolution authorising distribution
minimum business to be transacted: OR: 50% • Satisfaction of solvency + liquidity test after
• presentation of directors’ report, AFS, SR: 75% distribution
audit committee report • Board resolution that it applied S+L test Share Buy-Backs (s48)
• election of directors can be altered • same requirements for distribution – s(46)
• appointment of auditor MUST be 10% difference S+L test must be re-performed if not paid within 120
and audit committee b.days - no more than 10% of shares in a holding
• matters raised by SHs Shareholders company may be held by its subsidiaries
Meetings - no voting rights to shares S holds in H

Notice of Meeting (s62) Quorum (s64)

- delivered at least 15 days before meeting – Ltd., NPC 25% of voting rights
(10 days in any other case) AND if total SHs > 2, at least 3 SHs

• must be in writing • if after an hour, quorum is not met, meeting is

• state date, time, place adjourned
• general purpose • those present at postponed meeting constitute quorum
• resolutions to be considered
 Directors Auditors
PIS = 1 for every employee
Board, Directors, Prescribed Officers (s66) Ineligibility & Disqualifications (s69) Appointment (s90) + 1 for every R1 million debt
Upon incorporation and every year at + 1 for every R1 million revenue
Minimum number: • juristic persons its AGM, a Ltd and SOC must appoint + 1 for every shareholder
- Pty Ltd, Inc: 1 • unemancipated minor auditor
- Ltd, NPC: 3 • does not meet criteria in MOI COMPULSORY AUDIT:
• unrehabilitated insolvent • must be a registered auditor • Ltd and SOC
Election • removed from office of trust (due • must not be: • Company that holds assets in fiduciary
at least 50% must be elected by SHs misconduct, dishonesty) - a director or prescribed officer capacity
• convicted for fraud, perjury - Employee/consultant engaged for • Companies with PIS > 350
> 1 year in the maintenance of • Companies with PIS > 100, if AFS are
Board Meetings (s73) internally compiled
financial records or preparation of
Directors’ Personal Financial Interests (s75) FS
* can be called by a director at any time VOLUNTARY AUDIT:
- person who performs duties of
MUST be called if ≥ 25% (if Board of 12) • MOI requires it
* for s75: being on Board = Related person accountant
or 2 directors require it • Shareholders Resolution
- person related to or who, at any
Director must: time during the preceding 5 • Board Resolution
Resolutions
• majority approves a resolution • disclose interest and nature financial years was, a person
• disclose material info known by him above COMPULSORY REVIEW:
• must be dated and sequentially • by auditor, if PIS > 100 + AFS not
numbered • leave the meeting before matter voted on
internally compiled
* if personal interest acquired after, must Resignation & Vacancies (s91) • by accounting office, if PIS < 100
Liability of Directors (s77) disclose details Resignation is effective when filed
Personally liable if: NO AUDIT OR REVIEW
• acted without authority • Board must appoint new auditor • if directors hold all interests in securities
• authorised FS/prospectus that were within 40 days AND not subject to Compulsory Audit
misleading/unture - propose to AC within 15 days of
• was party to decision to: vacancy
- trade recklessly - may make appointment if AC does Rotation of Auditors (s92)
- issue shares, provide financial assistance, not give written rejection within 5 Auditor cannot be the same individual
declare distribution, acquire shares in days fore more than 5 consecutive years
holding company in contravention of Act
* if after 2 years, auditor ceases – can
Appointment (s86) only become the auditor again after 2
- must have requisite knowledge/experience of relevant laws years
- must be resident of the Republic

• must be appointed within 40 days after incorporation by Board Duties (s88)

or OR • provide guidance to directors on duties
• vacancies must be filled within 60 days • bring to attention any law affecting co.
Company • reporting to director of failure in complying with MOI
• ensuring minutes of meetings (directors, SHs, AC) are recorded properly
Secretary • certifying that returns, notices are correct
Resignation or Removal (s89)
if removed, may request to have contention requirement for Ltd., SOCs • sending AFS to all entitled to it
about removal disclosed in FS
Audit Procedures for identifying CONCLUDING THE AUDIT
• Read minutes of meetings of TCwG
• Review contracts, loan agreements, leases
• Review tax returns, reports
• Confirm/document guarantees and letters
FYE
of credit • discussion with mgmt events must be
• Inspect other documents for possible E • minutes of meetings recorded/disclosed
guarantees • legal expense accounts Audit
O ISA 560
Contingency • SAAPS4 Subsequent Events no obligation, but: Report
Liabilities C • minutes of meetings • discuss with mgmt
• discussion with mgmt
Audit Procedures specifically for near- • determine if FS need
conclusion of audit
FS issued
• ISA540 (Estimates) to be adjusted
• Inquiry + discussion with mgmt about V • SAAPS4 • audit adj/disclosure
policies and procedures for identifying, • issue new report
evaluating, accounting for contingencies
• action to prevent
• Examine documents in entity’s records
• Obtain legal letter (SAAPS4) reliance on report
• Obtain mgmt rep letter that all litigation,
claims have been disclosed

Evaluating Effect of Uncorrected Misstatements

re-evaluate materiality based on ACTUAL results
Consideration of Misstatements as the Audit Progresses
The auditor shall determine effect on overall audit plan shall consider:
if: • size and nature of misstatements
• nature + circumstances of identified mis/s indicate • effect of uncorrected mis/s related to prior periods
other mis/s exist that could be material
• aggregate of mis/s identified approaches materiality shall communicate to TCwG:
• uncorrected mis/s and effect on audit opinion
• request for material mis/s to be corrected
• effect of uncorrected mis/s in prior period
Communication & Correction of Misstatements ISA 450
• communicate to mgmt on a timely basis UNLESS
prohibited by law to do so (e.g. if under investigation)
Misstatements
• obtain understanding of mgmt’s refusal to correct and Documentation
the auditor shall accumulate misstatements
evaluation whether FS are free from material mis/s • amount below which mis/s are considered trivial
identified that are not trivial
• mis/s accumulated during audit and whether they have
been corrected
FACTUAL
• conclusion if uncorrected mis/s are material individually
JUDGEMENT: arise because of estimates
or in aggregate
made by mgmt which auditor
believes are unreasonable
PROJECTED: auditor’s best estimate of
misstatements in population
RATIO ANALYSIS ALTMAN Z SCORE
ISA 570
𝐶𝑂𝑆
• Inventory Turnover: Going Concern 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝐼𝑛𝑣 𝐴=
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐴𝑐𝑐 𝑅𝑒𝑐 𝑅𝐸
• Debtors Turnover: × 365 𝐵 =
𝑆𝑎𝑙𝑒𝑠 Responsibility for Assessment of Going Concern 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝐵𝐼𝑇
𝐶 =
𝐶𝑎𝑠ℎ+𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
• Cash Position: Management 𝐸𝑞𝑢𝑖𝑡𝑦
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝐷 = (book values)
• assess entity’s ability to continue as a going concern 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝑎𝑠ℎ+𝑀𝑟𝑘𝑡𝑏𝑙 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 𝑆𝑎𝑙𝑒𝑠
• Short-term liquidity: - degree of uncertainty increases further into future 𝐸 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
- judgement based on info available at the time.
𝑁𝑃𝐵𝐼𝑇 Z-score
• ROI: Auditor
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
• evaluate appropriateness of management’s use of going concern assumption 1,2𝐴 + 1,4𝐵 + 3,3𝐶 + 0,6𝐷 + 𝐸
𝐿𝑜𝑛𝑔−𝑡𝑒𝑟𝑚 𝑑𝑒𝑏𝑡 • whether material uncertainties about ability to continue as a going concern exist and
• Debt-equity Ratio:
𝐸𝑞𝑢𝑖𝑡𝑦 should be disclosed
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 • impact on audit report
• Capital Turnover:
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠+𝑊𝐶
Evaluating Management’s Assessment
RED FLAGS
• Cash flow from Operations < Cash flow • remain alert for evidence that casts doubt over the ability to continue as a going concern
from Investing • auditor must use same period as mgmt’s assessment (must cover at least 12 months) FINANCIAL
• Net Income , Cash  • inquire if mgmt has knowledge of events beyond period of assessment that will affect the
OPERATING
• Special Purpose Entities going-concern
• determine if mgmt has identified events that may cast doubt over going-concern OTHER
• Discretionary Accounting policy changes
- if mgmt did not perform assessment, discuss basis of mgmt’s assumption

Additional Audit Procedures when events are identified Audit Conclusions & Reporting
need to determine if material uncertainty exists:
• analyse in detail mgmt’s assessment must determine whether material uncertainty exists to cast material uncertainty exists when magnitude of
• obtain cash flow forecast (ISA 540 – Use of Estimates) doubt over going-concern potential impact and likelihood of occurrence makes
• evaluate mgmt’s plans to improve the situation disclosure necessary
• request written representations over plans where there is a delay in issuing FS: for
indication that new info has come to attention of mgmt • FS to be a fair representation
casting doubt over the going-concern ⇒ need to do • FS not to be misleading
procedures again

Audit Procedures Foreign Creditors

• is agreement valid/authorised (date, signed) • does creditor exist?
Subordination ⟹ must be disclosed • is agreement legally binding • has agreement complied with foreign legislation?
Agreements • value of agreement is sufficient enough to assist company • can creditor claim immunity?
• intention of creditor
 AUDIT OPINIONS

UNMODIFIED MODIFIED ISA 705

prepared, in all respects, in not free from MM
accordance with IFRS or
Modifications to Audit Opinion
unable to obtain sufficient evidence
‘BASIS FOR [MODIFIED] OPINION’ paragraph
ISA 700 - description of matter giving rise to modification material, but material and
in accordance with
Forming An Opinion - before Opinion paragraph not pervasive pervasive
applicable FS are not free from MM Qualified Adverse
framework? conclusion must take into account:
• evidence obtained in response to risks Unable to obtain sufficient evidence Qualified Disclaimer
• evaluation of uncorrected mis/s
• accounting policies – disclosure,
free from MM?
consistency, qualitative aspects
• whether FS achieve fair presentation

Auditor’s Report ISA 706

TITLE Emphasis and Other Matter
[Addressee] Paragraphs
Report on the Financial Statements * does not affect Auditor’s Opinion
Introductory Paragraph * after Opinion paragraph
- what was audited
Management’s Responsibility for Financial Statements ‘EMPHASIS OF MATTER’ ‘OTHER MATTER’
- preparation paragraph paragraph
- internal control draws users’ attention to to communicate matter that is
Auditor’s Responsibility
matter presented/disclosed not disclosed but that the
- express opinion
- conduct audit in accordance with ISAs
that auditor believes matter is auditor believes is relevant to
- consideration of internal control, not expressing opinion on effectiveness fundamental to users’ users’ understanding
Auditor’s Opinion understanding

Report on Other Legal and Regulatory

Signature of Auditor
Date of Report
Address of Auditor