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This 8 Hour Online CPD Course covers a range of core technical topics including Audit, Financial Reporting & Company Law. For a limited time only you will get a bonus 2 Hours Tax Online CPD giving you …

This 8 Hour Online CPD Course covers a range of core technical topics including Audit, Financial Reporting & Company Law. For a limited time only you will get a bonus 2 Hours Tax Online CPD giving you 10 hours CPD for just €180.00.

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  • 1. Education & Training The Essential Advisors Mix 2011 Auditing Update 2011 and New Developments in the Profession Presenter: Des O’Neill CPA; A.C.I.S; ACCA OmniPro Education & TrainingUnit 3 South Court, Block D, Iveagh Court,Wexford Road Business Park, 5 – 8 Harcourt Road,Carlow. Dublin 2.059 9183888 01 4110000www.omnipro.ie info@omnipro.ie
  • 2. Auditing Update 2011- New Developments in the ProfessionContents PageNew Developments Affecting the Profession 1Irish Audit Resource List 2011 26Annual Firm Review Checklist 29OmniPro ISA File Review Checklist 33An Overview of Anti-Money Laundering Requirements for Firms 44European Communities (Statutory Audit) Regulations 46Principal Features of the Charities Acts 2009 52Minister Alan Shatter TD Speech on Charities November 2011 62Irish Audit Resource List 2011 70Summary of Changes to the Clarity ISA’s 73Audit Letter of Engagement 97Audit Planning Letter 107Audit Planning Meeting 111Audit Conclusion Meeting 115Audit Findings Letter 120Summary of Unadjusted Differences 124Component Materiality and Sample Size Calculation 125Accountants Resource Centre 2011 Extracts 126Letter of Representation 140
  • 3. New Developments Affecting the Profession• What is hot in Monitoring Visits?• New Anti-Money Laundering Procedures• The new EC Audit Regulations• Property Management Companies – The impact of the Multi-Unit Development Act• Charitable Company Audits – The New Charities Regulatory Authority? New Developments Affecting the Profession• Proposed changes to the Solicitors Accounts Regulations• The ODCE and indictable offences• Managing your Accountancy Practice• Practice Incorporation• The Clarity Standards Impact OmniPro Education & Training 1 of 322
  • 4. What is hot on the Monitoring Agenda?• Clarity ISAs• Updated programmes• Client communications – Letter of engagement, letter of representation, audit findings letters, client meetings• Materiality and summary of unadjusted differences• Management estimates• Group audits What is hot on the Monitoring Agenda?• Ethical threats• Planning detail• Extent of risk assessment• Documentation• Opinion justification and explanation• External confirmations What is hot on the Monitoring Agenda?• Financial statements disclosures and control procedures• ISQC1 Manuals• Annual Compliance Reviews• ODCE Reporting requirements• Modified audit opinions – Going concern, limitation in scope, adverse opinions, multiple significant uncertainties, emphasis of matter OmniPro Education & Training 2 of 322
  • 5. What is hot on the Monitoring Agenda?• Commission disclosure• Investment business procedures• CPD – IES 7 & IES 8• Client monies and client account usage• Headed paper and practice status• PII Compound firms The Focus of Monitoring in the Future!• Audit Exempt Companies• Unincorporated entities• Expanded review of Anti-Money Laundering• Taxation Reviews• Investment Business• Incorporated practices• Insolvency??? Anti Money Laundering• Criminal Justice (Money Laundering & Terrorist) Act 2010• Commenced July 2010• CCABI Guidance Issued September 2010- M42• Significant changes requiring action• New procedures• New actions• New documentation OmniPro Education & Training 3 of 322
  • 6. Anti Money Laundering• In a nutshell• Establish and implement revised procedures• Undertake a risk assessment of procedures• Implement a training regime• Verify identify of ALL clients Anti Money Laundering• Customer Due Diligence Provisions• Verify the identity of the beneficial owner• Implement enhanced or simplified due diligence procedures• Obtain information prior to establishing the relationship• Monitor dealings with clients• Report as required Anti Money Laundering• Adopt policies and procedures – Assessment and management of risks – Create and implement internal controls – Monitor and manage compliance – Undertake ongoing training• Keep records OmniPro Education & Training 4 of 322
  • 7. Anti Money Laundering• Supervision by Competent Authorities• Offences for failure to report• The reporting Obligations• Knowledge and suspicion• Requirement for an MLRO?• CCABI Guidance Document M42 Anti Money Laundering• Procedures Required – AML Procedures Manual• Systems• Risk Assessment• Record Keeping• Reporting Procedures• Communication and Training Anti Money Laundering• Firm risk assessment• How the firm manages anti money laundering and their own procedures• Type of services offered to clients• Client base review• Actual client documentation review• Reporting procedures OmniPro Education & Training 5 of 322
  • 8. EC Audit Regulations 2010• The European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010• Permitting Statutory Auditors to operate as body corporate;• Incoming Statutory Auditor afforded access to information• Requirements relating to signing of audit reports• Transparency report of Public Interest Entities EC Audit Regulations 2010• Removal of Auditor & Notification Obligations Public Register of Auditors• Independence Provisions for Auditors• Audit Committees for Public Interest Entities• Disclosure of Auditors’ Remuneration of audit & non-audit work• Statutory obligations regarding continuing education, professional ethics, independence and objectivity Property Management Companies• Multi Unit Development Act 2011• Issued January 2011• Commenced 1 April 2011• Common areas must be transferred within 6 months of enactment – 1 October 2011• Sinking fund to be established within 18 months of enactment – 1 October 2012 OmniPro Education & Training 6 of 322
  • 9. Property Management Companies• Company Law Issues• Financial Reporting Issues• Auditing Issues• ODCE Issues• Practice Management Issues• Risk Issues Property Management Companies• Transfer of Common Areas• Planning• Solicitor communication• Alternative audit evidence• Disclosures• Audit opinion modification Property Management Companies• Fixed Asset register and classification• Collectability of debtors• Related party transactions• Use of a service organisation• Company secretarial completeness and accuracy• Sinking fund and management estimates OmniPro Education & Training 7 of 322
  • 10. Property Management Companies• Quality control procedures• Independence and ethical issues• Audit planning• Shortcuts on audit programmes• Tailored audit programmes• Fee V quality of audit file V benefit to the client Charities Act 2009• Creation of ‘Charity Regulatory Authority’ (CRA)• Register of Charities• Regulation of charitable organisations• Protection of charitable organisations• Charities Appeal Tribunal• Dissolution of Commissioners of Charitable Donations and Bequests for Ireland Charities Act 2009• Statutory definition of “charitable purpose”• Accounting, audit or independent examination obligations imposed on all charities not incorporated under the Companies Acts• Reporting requirement to the authority if offence committed• Fundraising legislation changes OmniPro Education & Training 8 of 322
  • 11. Charities Act 2009• Annual Reports, Accounts & Audits• Legal Form for Charities• Relationship with other statutory bodies• Charity trustees• Organisations deemed to be registered The Charities Act and Charities Audits• S 99 commenced 1/9/09 - Mass Cards• S 4 26/06/10 – Minister may provide for any element of the act by laying them before the Oireachtas• S.90 26/06/10 – Power of court to grant relief from liability for breach of trust The Charities Act U-Turn• November 2011• Full Implementation not feasible• Extra employees• Extra cost• Focus on Fund raising codes of practice OmniPro Education & Training 9 of 322
  • 12. Auditing of Charities• Financial reporting framework• To SORP or not to SORP?• Planning issues – controls and systems• Property valuations, impairments and ownership• Completeness of income• Going concern – recession, future funding, amalgamation Proposed Changes to Solicitors Accounts Regulations• Restricting authorised signatories• Balancing dates at three six and nine months• Books of account to show the true financial position of the practice• Specific instructions where a solicitor authorised by a client not to lodge monies to a client account• Solicitors required to prepare a trial balance at each balancing date Proposed Changes to Solicitors Accounts Regulations• Breach to withdraw monies without an up to date ledger account• Register of Estates• Register of monies placed on joint deposit• Register of client files• Register of undertakings• Register of powers of attorney• Register of wills OmniPro Education & Training 10 of 322
  • 13. Proposed Changes to Solicitors Accounts Regulations• Register of deeds• Money laundering compliance file• A copy of the financial statements• Minimum monthly back ups• Prohibition on obtaining loans on behalf of clients• Prohibition on borrowing from clients• Prohibition on acting for lender to solicitor Proposed Changes to Solicitors Accounts Regulations• Three months to file the reporting accountants report• Reporting accountant to notify Society of resignation within 7 days and the reasons therefore• Compliance statement to confirm deficit has been cleared and means by which effected• Confirm that procedures in place to ensure future breaches do not occur• Credit balances on the office ledger have been cleared Proposed Changes to Solicitors Accounts Regulations• Reporting accountant to carry out his her examination in accordance with relevant procedures in international standards on auditing• Checks required immediately before and after the balancing dates• Verify that fees drawn in a timely manner• Example a sample of files that constitute a representative sample of the business• Check for compliance with Section 68 OmniPro Education & Training 11 of 322
  • 14. Proposed Changes to Solicitors Accounts Regulations• Enquire into cash payments• Provide an aged analysis• Review aged analysis for undue delays• Review compliance with Interest Regulations• Review the financial position of the practice and where it gives rise to concerns as to the solvency of the firm provide a statement of the financial position to the Law Society. Proposed Changes to Solicitors Accounts Regulations• More work for the solicitor?• More work for the accountant?• New programmes and procedures• Increased risk• Expanded remit linking process to clarity ISAs• More fees for the accountant? The ODCE and the Auditor• Reporting of indictable offences CLEA 2001• Complaints from shareholders, directors, investors• Investigation and review of own accord• No grey areas OmniPro Education & Training 12 of 322
  • 15. The ODCE and the Auditor• Incorrect formats of financial statements – FRS, SSAPs, CA – Incorrect or badly worded notes – Committed cashflows – Incorrect formats of abridged accounts• Incorrect audit opinions – Not modified when should be – Modified implying reportable indictable offence but no report – Incorrect wording of opinion The ODCE and the Auditor• Timely reporting of offences – Reason for the delay – Previous period review – The auditor should report forthwith• Communication – Verbal V written – Telephone, writing, fax, email – Timelines and deadlines• Reporting to the regulating Institute The ODCE and the Auditor• Review all files• Review all financial statements• Review all abridged financial statements• Review all audit opinions• Create action plan• Modify correct and regularise• Report on a timely basis OmniPro Education & Training 13 of 322
  • 16. Managing Accounting Practices in Difficult Times• The simple things shine always shine through - Quality of service• The biggest challenge of all - Communications internal and external• Spice Girls – What you really really want• Looking after the golden goose – the firm & the partners/principle Managing Accounting Practices in Difficult Times• Billing and Collections – In a perfect world Time worked = Time billed = Cash Collected• Optimising Team Performance• Improving Practice Efficiency• The Practice Management Dashboard• Some Lessons Learned Growing Your Practice• Efficiency• Own Clients• Referrals from Existing Clients• Marketing and business development• Winning New Clients• Merger• Acquisition OmniPro Education & Training 14 of 322
  • 17. Practice Incorporation• European Communities (Statutory Audit) Directive 2006/43/EC• Companies Act 1990• Prohibition under section 187• Change except for appointment of Public Auditors Practice Incorporation• What can you not audit• Public Auditors – Industrial and Provident Societies Acts 1893 to 1978 – Friendly Societies Acts 1896 to 1993• Credit Union Act Section 114• Building Societies Act 1989 Why Not Incorporate?• What can you not audit?• Stamp duty on the sale of goodwill• Professional Services Surcharge• Practice size• Personal borrowings and business structure• Drawing the profits• The long term plan OmniPro Education & Training 15 of 322
  • 18. Why Incorporate?• Manage risk• Crystallise a capital gain• Create tax free directors loan• Avail of retirement relief or loss relief• Pay tax on profits at reduced tax rate – Top rate income tax V CT rate (& Surcharge)• Facilitate succession and tax planning Practice Incorporation - What to watch for!!!• What is the long term plan• Stamp duty avoidance• Accounting for WIP• Transfer of debtors• Availing of retirement relief• Future and past claimed retirement relief Practice Incorporation - What to watch for!!!• Firm name• PII• IB registration and commissions• Training contracts and HRM• Letters of engagement and client communications• Resignation and IAASA notification OmniPro Education & Training 16 of 322
  • 19. Practice Incorporation - What to watch for!!!• Goodwill – Basis of valuation – Methodology of transfer• Timing of transfer Clarity Project Approach• Describing an objective for each ISA,• Separating the requirements in each ISA from the application material,• Clarifying the obligations imposed on auditors by the requirements of the ISAs, including eliminating possible ambiguity about the requirements an auditor needs to fulfil arising from the use of the present tense in the guidance to the extant ISAs,• Improving the overall readability and understandability of the ISAs through structural and drafting improvements, and Clarity Project• Reducing the complexity of the existing ISAs – this was seen as being especially important to smaller audit firms with limited technical resources – Small entities application• Increased no of requirements• Clarify obligations on auditors by replacing word “should” with “shall” where relevant• Eliminate ambiguity in existing ISAs by modifying language and clarifying requirements as opposed to information OmniPro Education & Training 17 of 322
  • 20. Clarity Project• New revised standards effective for periods ending on or after 15th December 2010 ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Clarify overall objectives of the auditor• The nature and scope of an audit• How the audit meets the objectives of the auditor• purpose of the objectives that are included in all of the other standards• Purpose of an audit – enhance the degree of confidence of intended users of the financial statements ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• To obtain reasonable assurance that the financial statements• Are free from material misstatement either due to fraud or error• Enabling the auditor form an opinion that the FS are prepared in all material respects• In accordance with the applicable financial reporting framework OmniPro Education & Training 18 of 322
  • 21. ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Complying with ISAs Relevant to the Audit• Satisfy the objectives stated in the individual ISAs• Comply with the relevant requirements• Respond appropriately when there is failure to achieve an audit objective ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Determine whether any audit procedures in addition to those required by the ISAs are necessary in pursuance of the objectives stated in the ISAs; ISA 210 – Agreeing the terms of Audit Engagements• Determine whether financial reporting framework to be applied in the preparation of the financial statements is acceptable• Obtain agreement of management that it acknowledges and understands its responsibilities OmniPro Education & Training 19 of 322
  • 22. ISA 260 – Communication with Those Charged with Governance• Where applicable, explaining why significant accounting practices are not considered most appropriate• Documenting matters communicated orally• Significant difficulties if any encountered during the audit• Significant matters that were discussed or subject to correspondence with managementISA 265 – Communicating Deficiencies in Internal Control to Those Charged with Governance and Management• New Standard• Driven by – EU Audit Directive to report – US Public Company Accounting Oversight Board (PCAOB)• Clarification of material weakness• Deficiency in internal control• Missing controlsISA 320 Materiality in Planning and Performing an Audit• Definition of materiality updated to reflect the size and nature of an item judged in the surrounding circumstances• Introducing guidance on the use of benchmarks but not introducing formulaic rules• Performance materiality and materiality for classes of transactions and account balances OmniPro Education & Training 20 of 322
  • 23. ISA 402 – Audit Considerations relating to an Entity Using a Service Organisation• Increasing use of service organisations• Need to align the standard with risk assessment standards particularly in relation to internal control• Obtaining Type 2 report from a service auditor• Performing control tests• Using another auditor to perform tests of controlISA 450 Evaluation of Misstatements Identified During the Audit• New Standard• Accumulate all misstatements identified apart from those that are clearly trivial• Re-assess materiality prior to evaluating the effect of uncorrected misstatements in the context of the actual final results• Determining materiality of misstatements – size and effect ISA 505 External Confirmations• “How” of confirmations V “When”• Maintaining control over confirmation requests• Obtain further evidence to resolve doubts about the reliability of responses• Specifying conditions that have to be present if negative confirmations are used• Linking to ISA 330 determine whether they should be used OmniPro Education & Training 21 of 322
  • 24. ISA 540 Auditing of Accounting Estimates Including Fair Value Accounting Estimates and Related Disclosures• Understanding how management identify transactions that require estimates• How management make estimates• Reviewing outcome of estimates in prior period financial statements and re- estimation if applicable• Evaluating estimation uncertainty and whether this gives rise to risks ISA 550 Related Parties• Audit team discussion in accordance with ISA 315• Obtaining an understanding of the controls – Identify, account for, and disclose related party transactions in accordance with applicable financial reporting framework – Authorise and approve significant transactions outside of normal course of business• Treating identified significant related party transactions outside of the normal course of business ISA 550 Related Parties• Specifying procedures to be preformed if previously undisclosed related party transactions are discovered• Specifying procedures for identified significant related party disclosures – Inspecting contracts – Understanding rationale – Appropriately accounted for and disclosed – Obtaining evidence to support transactions OmniPro Education & Training 22 of 322
  • 25. ISA 580 Written Representations• Over reliance on written representations• General developments• Not sufficient appropriate audit evidence in own right• Necessary audit evidence but• Must support other audit evidence ISA 600 Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors)• Group auditor takes sole responsibility when other auditors are involved in the audit group components• Acceptance• Overall audit strategy and plan• Execution• Conclusion OmniPro Services• Assist Accountants• Maximise profitability• Improve quality of customer service• Be compliant – Institute, audit company & law• Achieve success• Gain peace of mind• The Accountants Resource Centre OmniPro Education & Training 23 of 322
  • 26. Accountants Resource Centre• Large Company Audit File – Programmes and the integrated working papers and file• Small Company Audit File – Programmes and the integrated working papers and file• Audit Exempt, Sole Trader, Property Management and Charity File• ISQC1 Manual Sole Practitioner and Partner• Template letters and communications• Ongoing technical updates• Members forum OmniPro Services• OmniPro Corporate Consultants – Company Formation Services • Standard Formations for €250.00 (incl VAT) • 24 Hour Turn Around – Company Secretarial Services • Annual Compliance • All Company Secretarial Special Assignments • Company Secretarial Training • Next Door to the Companies Registration Office OmniPro Services• OmniPro Practice Support – Pre-Monitoring Visits – Strategic Planning & Implementation – Practice Development – Practice Sale, Purchase & Merger – In House Training – File Review Services• Practice Incorporation – Valuation – Taxation – General advisory OmniPro Education & Training 24 of 322
  • 27. OmniPro Services• OmniPro Education & Training – Professional CPD Seminars • Technical CPD • Personal Development Training for Accountants • Online CPD • In House Training OmniPro Supporting Irish Accountants Unit 3, South Court, Iveagh CourtWexford Road Business Park, Harcourt Road Carlow. Dublin 2 doneill@omnipro.ie mkane@omnipro.ie gwynne@omnipro.ie 059 9183888 01 4110000 OmniPro Education & Training 25 of 322
  • 28. Auditors Resource List 2011Title Description Source Download1 International Standards on Auditing 2010 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements IAASB http://web.ifac.org/publications General Principles and Responsibilities Overall Objectives of the Independent Auditor and the Conduct of an Audit in200 Accordance with the International Standards on Auditing IAASB http://web.ifac.org/publications210 Agreeing the Terms of Audit Engagements IAASB http://web.ifac.org/publications220 Quality Control for an Audit of Financial Information IAASB http://web.ifac.org/publications230R Audit Documentation IAASB http://web.ifac.org/publications240 The Auditors Responsibilities relating to Fraud in an Audit of Financial Statements IAASB http://web.ifac.org/publications250 Consideration of Laws and Regulations in an Audit of Financial Statements IAASB http://web.ifac.org/publications260 Communication With Those Charged with Governance IAASB http://web.ifac.org/publications Communicating Deficiencies in Internal Control to Those Charged with265 Governance and Management Risk Assesment and Response to Assessed Risks300 Planning an Audit of Financial Statements IAASB http://web.ifac.org/publications Identifying and Assessing the Risks of Material Misstatement through315 Understanding the Entity and Its Environment IAASB http://web.ifac.org/publications320 Materiality in Planning and Performing an Audit IAASB http://web.ifac.org/publications330 The Auditors Responses to Assessed Risks IAASB http://web.ifac.org/publications402 Audit Considerations Relating to an Entity Using a Service Organisation IAASB http://web.ifac.org/publications450 Evaluation of Misstatements Identified During the Audit IAASB http://web.ifac.org/publications Audit Evidence500 Audit Evidence IAASB http://web.ifac.org/publications501 Audit Evidence - Specific considerations for Selected Items IAASB http://web.ifac.org/publications505 External Confirmations IAASB http://web.ifac.org/publications510 Initial Engagements - Opening Balances IAASB http://web.ifac.org/publications520 Analytical Procedures IAASB http://web.ifac.org/publications530 Audit Sampling IAASB http://web.ifac.org/publications Audit of Accounting Estimates, Including Fair Value Accounting Estimates, and540 Related Disclosures IAASB http://web.ifac.org/publications550 Related Parties IAASB http://web.ifac.org/publications560 Subsequent Events IAASB http://web.ifac.org/publications570 Going Concern IAASB http://web.ifac.org/publications580 Written Representations IAASB http://web.ifac.org/publications Using the Work of Others www.omnipro.ie OmniPro Education & Training 26 of 322
  • 29. Speicial Considerations - Audits of Group Financial Statements (Including the600 Work of Component Auditors) IAASB http://web.ifac.org/publications610 Considering the Work of Internal Auditors IAASB http://web.ifac.org/publications620 Using the work of an Auditors Expert IAASB http://web.ifac.org/publications Audit Conlusions and Reporting700 Forming an Opinion and Reporting on Financial Statements IAASB http://web.ifac.org/publications705 Modifications to the Opinion in the Independent Auditors Report IAASB http://web.ifac.org/publications Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent706 Auditors Report IAASB http://web.ifac.org/publications Comparative Information - Correpsonding Figures and Comparative Financial710 Statements IAASB http://web.ifac.org/publications The Auditors Responsibilities Relating to Other Information in Documents720 Containing Audited Financial Statements IAASB http://web.ifac.org/publications Specialised Areas Audits of Financial Statements Prepared in Accordance with Special Purpose800 Frameworks IAASB http://web.ifac.org/publications Audits of Single Financial Statements and Specific Elements, Accounts or Items of805 a Financial Statement IAASB http://web.ifac.org/publications810 Engagements to Report on Summary Financial Statements IAASB http://web.ifac.org/publications2 Ethics 2010 Handbook of Code of Ethics for Professional Accountants IFAC http://web.ifac.org/publications3 Bulletins2006-1 Auditors Reports on Financial Statements in ROI APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=1 Audit Issues when Financial Market Conditions are Difficult and Credit Facilities2008-1 may be restricted APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=12008-10 Going Concern issues during the Current Economic Conditions APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=12009-2 Auditors Reports on Financial Statements in the United Kingdom APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=14 Practice NotesPN 09 Reports by Auditors under Companies Legislation in ROI APB http://www.frc.org.uk/apb/publications/practice.cfmPN 11 The audit of Charities in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 15 The audit of Occupational Pension Schemes APB http://www.frc.org.uk/apb/publications/practice.cfmPN 16 Bank Reports for Audit Purposes in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 19 The Audit of Banks APB http://www.frc.org.uk/apb/publications/practice.cfmPN 20 The Audit of Insurers APB http://www.frc.org.uk/apb/publications/practice.cfmPN 21 Audit of Investment Businesses in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 22 Auditors Consideration of FRS 17 Retirement Benefits Defined Pension Schemes APB http://www.frc.org.uk/apb/publications/practice.cfmPN 23 Auditing Complex Financial Instruments (Interim Guidance) APB http://www.frc.org.uk/apb/publications/practice.cfmPN 24 Audit of Friendly Societies in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 25 Attendance at Stock Taking APB http://www.frc.org.uk/apb/publications/practice.cfmPN 26 Guidance on Smaller Entity Audit Documentation (Revised Dec 2009) APB http://www.frc.org.uk/apb/publications/practice.cfm www.omnipro.ie OmniPro Education & Training 27 of 322
  • 30. PN 27 The Audit of Credit Unions APB http://www.frc.org.uk/apb/publications/practice.cfm5 Miscellaneous Technical StatementsM01 Auctioneer and House Agents Acts 1947 and 1967 CCABI Institute WebsiteM09 Accouting for goods sold subject to reservation of title CCABI Institute WebsiteM21 Directors obligation under Section 40 of the Companies (Amendment) Act 1983 CCABI Institute WebsiteM22 Credit Unions - ROI CCABI Institute Website Accountants report on license applications to Department of Tourism, TransportM27 and Communications Dublin CCABI Institute WebsiteM31 Accounting for redemption and purchase of own shares by companies in ROI CCABI Institute WebsiteM32 Related party disclosures CCABI Institute WebsiteM35 Solicitors accounts Regulations 1998 - Northern Ireland CCABI Institute WebsiteM37 Restoration of companies to register - ROI CCABI Institute WebsiteM38 Solicitors accounts regulations 2001 - ROI CCABI Institute WebsiteM39 Reporting to third parties CCABI Institute Website Chartered Accountants reports on compilation of financial statements ofM41 incorporated entities CCABI Institute WebsiteM42 Anti Money Laundering Guidance in ROI CCABI Institute WebsiteM43 Compilation of alternative annual reports of certain pension schemes in ROI CCABI Institute Website Guidance reporting Guidance Notes 1 05 UCITS Publication of a simplifiedM44 prospectus issued by Financial Regulator CCABI Institute WebsiteM45 Grant claims CCABI Institute Website Reporting to Financial Regulator under Central Bank and Financial ServicesM46 Authority of Ireland Act 2004 revised January 2005 CCABI Institute Website Guidance for reporting in accordance with client money regulations issued byM47 Financial Regulator February 2004 CCABI Institute Website Chartered Accountants Reports on compilation of Historical Financial informationM48 of Unincorporated Entities CCABI Institute Website6 General ISQC1 International Standard on Quality Control IAASB http://www.ifac.org/Guidance/EXD-Details.php?EDID=0086 Guide to Using the ISAs for SMEs IFAC http://www.ifac.org/Members/DownLoads/ISA_Audit_Guide.pdf Guide to Quality Control for SMEs Applying ISAs Proportionately with the Size and Complexity of an Entity IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Audit Considerations in Respect of Going Concern in the Current Economic Environment IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Emerging Practical Issues Regarding the use of External Confirmations in the Audit of Financial Statements IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board The Role of Small and Medium Practices in providing Business Support to Small and Medium sized Enterprises IFAC http://web.ifac.org/publications/small-and-medium-practices-committee Quality Control for Small and Medium Sized Practices IFAC http://web.ifac.org/publications/small-and-medium-practices-committee www.omnipro.ie OmniPro Education & Training 28 of 322
  • 31. For Training Purposes OnlyPractice Review Reference Initials DateFile Review InformationPractice Name Year End This form is for guidance purposes only and should be tailored and amended as required, depending on the individual practice. Supporting documentary evidence should be retained as required throughout the questionnairePractice - Review Procedures Relevant Yes No Comment RefHas the firm completed an annualcompliance review in the last 12 months?Was this performed by an independent andsuitably qualified and experienced individual?Have the findings of the latest compliancereview and associated actions beenexecuted accordingly ?Is there any tailoring required for thepurposes of the current review or any issueswhich may affect the nature an focus of thereview ?Any significant changes to the structure ofthe practice?Does the firm have a current Internal ControlProcedures Manual that complies with ISQC1Is there evidence that the procedures set outin the Firms internal control proceduremanual are implemented and fully compliedwithIs the firm adequately authorised to provideall services currently being provided?Control & Ownership of the Firm Relevant Yes No Comment RefAre 51% of the voting rights and more than50% of the partners qualified individuals?Is the firm owned and controlled to matchthe public designation as a firm attaching tothe relevant Institute?Are all partners under the supervision of asuitably qualified person?Have all partners and staff completed anannual declaration of "Fit & Proper" OmniPro Firm Review Checklist 2011 OmniPro Education & Training 29 of 322
  • 32. For Training Purposes OnlyDocumentation & Procedures Relevant Yes No Comment RefAre letters of engagement issued for allengagementsAre letters of professional clearanceobtained for all new engagementsReview the communications of the firm withthe InstituteAre all these communications completed ona timely basisReview the latest annual return submitted tothe InstituteDoes the firms standard stationary fullycomply with the Institute RegulationsIs there a complaints register maintained bythe firmAre there suitable procedures for identifyingnew clients?Are there suitable anti-money launderingprocedures in place and are theseprocedures implementedIs there a letter of engagement in place withall contractors and /or external consultants?Does the firm hold Practice QualityMonitoring meetings and is there minutesand schedules to support the outcomes ofthese meetings and the associated actionsProfessional Indemnity Insurance Relevant Yes No Comment RefDoes the firm have a current valid PII Policyin placeIs there evidence of continuity of coverDoes the PII policy reflect the level of riskreflected in the client baseDoes the cover comply with the InstituteRegulationsHave there been any claims against thefirms PII PolicyAre there any complaints currently inprocess that may give rise to a claimHave these complaints been recorded andnotified to the Institute and the InsurerIs there run off and/ or alternate cover whereapplicable OmniPro Firm Review Checklist 2011 OmniPro Education & Training 30 of 322
  • 33. For Training Purposes OnlyCommissions & Client MoniesDoes the firm receive commissionsDoes the firm receive or hold clients moniesHave the clients been notified in advance ofthe fact that commissions are being retainedHave the clients given written authority toretain the commissionsHave any connections with third partyproviders been disclosed to the clientsDoes the firm have a suitably designatedclient money accountHave any client funds been passed throughnon client designated firm controlled bankaccountsIs there sufficient supporting documentationto support all transactions processedthrough the client back account?Has the client bank account beenconsistently reconciled on a timely basisthroughout the period?Ethical ObligationsAre there independence procedures withinthe firmIs there evidence demonstrating that theseprocedures have been complied with on theclient filesHave all partners and staff maintained theirprofessional competence in accordance withthe relevant Institutes CPD requirementsAre annual staff appraisals undertakenDoes the firms internal control proceduresmanual meet the relevant obligations andregulations in relation to HRMHas the firm complied fully with the HRMprocedures set out as part of their InternalControl Procedures ManualDoes the firm have an ethics partner?Are peer or external reviews undertaken aspart of the firms standard procedures?Are these reviews suitably documented andrecorded with clear evidence that therequired follow up actions have beenundertakenIs there consultation agreements in placewith suitably qualified external consultants? OmniPro Firm Review Checklist 2011 OmniPro Education & Training 31 of 322
  • 34. For Training Purposes OnlyInvestment BusinessIs the firm authorised to perform investmentbusiness?Does the firm have suitable authorisation forthe investment advice it provides to itsclientsAre there suitably documented investmentbusiness procedures?Have these procedures been complied with OmniPro Firm Review Checklist 2011 OmniPro Education & Training 32 of 322
  • 35. Practice Review Reference Initials Date File Review Information Company Name Year End Financial Information €000 Turnover Audit Fee Profit No.of Employees Balance Sheet Total Net Assets Correct Size Criteria Audit File - Initial Overview ISA Yes No Comment RefO1 Basic File StructureO2 Audit Programs & UsageO3 Lead SchedulesO4 Referencing & Sub ReferencingO5 WP Signed & DatedO6 Partner Review Evident Audit Planning ISA Yes No Comment RefP1 Dated in advance of auditP2 Audit acceptance procedures adequateP3 Ethical standards considered and safeguards appliedP4 Overall audit strategyP5 Engagement team briefedP6 Engagement team selection & budgetP7 Terms of engagement considered and tailoredP8 Letter of engagement issuedP9 Audit planning meeting with client documentedP10 Audit planning letter issuedP11 Consideration of relevant laws and regulationsP12 Initial analytical review performedP13 Client knowledge and background documentedP14 Permanent audit file updatedP15 Understanding the entityP16 Industry regulatory & Other external factorsP17 Nature of the entityP18 Objectives and strategies OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 33 of 322
  • 36. Audit Planning ISA Yes No Comment RefP19 Measurement and review of Fin PerformanceP20 Internal controls recorded and assessedP21 Accounting systems recorded and assessedP22 Audit risk assessed and identifiedP23 Inherent risk assessedP24 Specific risk assessedP25 Consideration of fraud and errorP26 Enquiries made of management in relation to fraudP27 Management oerride consideredP28 Revenue recognition consideredP29 Specific responses to risk documentedP30 Third party reporting consideredP31 Materiality SetP32 Sample size calculationP33 References made to audit evidence obtained as part of the accounting processP34 Section Scoring Max Score Sectional Audit Execution Audit Area Weighting Total 20 0E1 Fixed Assets Percentage 0%E2 Stocks 0%E3 Debtors 0%E4 Bank & Cash 0%E5 Trade Creditors 0%E6 Other Creditors 0%E7 Loans/Leasing Etc 0%E8 P&L & System Testing 0%E9 Other 0%E10 Other 0%E11 Taxation 0%E12 Company Secretarial 0% OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 34 of 322
  • 37. E2 Fixed Assets Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Fixed Asset register10 Schedule of additions11 Assets physically verified12 Vehicle registration documents13 Disposals14 Title documents inspected15 Insurance cover review16 R&R review17 Lease review18 Intangible FA existence19 Sufficient audit work on section Sectional ScoreE3 Stocks Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Final stock sheets10 Mathematical checks11 Stocktake attendance12 Count Checks13 Cut off procedures14 Analytical review15 Slow moving obsolete stock16 3rd party stocks17 Stock pricing18 Work in progress testing19 Independent valuations20 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 35 of 322
  • 38. E4 Debtors Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Aged debtors listing on file10 Mathematical checks11 Agreed to control account12 Credit balance verification13 Debtors circularisation14 Traced to post year end receipts15 Third party confirmations16 Bad debt review17 Analytical review18 Cut off testing19 Transaction testing20 Prepayments supported/vouched21 Pre/post year end trans review22 Sufficient audit work on section Sectional ScoreE5 Bank Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Bank reconciliation10 O/S Trans traced to pye BS11 Pre/post year end trans review12 Trace to original records13 Bank confirmation14 Cash count15 Disclosure review16 Presentation review17 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 36 of 322
  • 39. E6 Creditors Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Aged creditors listing on file10 Mathematical checks11 Agreed to control account12 Debit balance verification13 Reconcile to creditors statements14 Trace to post year end payments15 Third party confirmations16 Quantify reservation of title17 Analytical review18 Cut off testing19 Transaction testing20 Accruals supported/vouched21 Post year end payments traced22 Pre/post year end trans review23 Sufficient audit work on section Sectional ScoreE7 Other Creditors Weight 0% Max Score 0 ISA Yes No Comment Ref1 Supporting documentation2 Post year end payments traced3 VAT/PAYE up to date4 Control accounts prepared5 Reconciliations performed6 Directors loan accounts7 Related co loan accounts8 Sufficient audit work on section Sectional ScoreE8 Loans & Leasing Weight 0% Max Score 0 ISA Yes No Comment Ref1 Lead schedule prepared2 Calculations correct3 Supporting documentation4 Payments traced5 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 37 of 322
  • 40. E9 Profit & Loss & System Testing Weight 0% Max Score 0 ISA Yes No Comment Ref 1 Referencing & Sub Referencing 2 Up To date auitable audit programme in use 3 Audit programmes tailored 4 WP Initialed and Dated 5 Partner review 6 Section concluded 7 Policies Considered 8 Analytical review 9 Detailed analysis10 Supporting documentation11 Wages testing12 VAT testing13 Sales transactions testing14 Cash sales testing15 Timeliness of transactions16 Lifestye review17 Limitation of scope review18 Purchases transaction testing19 Cut off testing20 System Testing21 Sufficient audit work on section Sectional ScoreE10 Investments Weight 0% Max Score 0 ISA Yes No Comment Ref 1 BS @ LS 2 Referencing & Sub Referencing 3 WP Initialed and Dated 4 Partner review 5 Section concluded 6 Adequate testing performed 7 Sufficient audit work on section Sectional ScoreE11 Taxation Weight Yes Max Score ISA Yes No Comment Ref 1 BS @ LS 2 Up To date auitable audit programme in use 3 Referencing & Sub Referencing 4 WP Initialed and Dated 5 Partner review 6 Section concluded OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 38 of 322
  • 41. Taxation Weight 0% Max Score ISA Yes No Comment Ref 7 Policies Considered 8 Agree to notices of assesment 9 Prepare a tax computation10 Consider defferred tax11 Client advised on time12 Tax and cor. up to date12 Sufficient audit work on section Sectional ScoreE12 Company Secretarial Weight 0% Max Score ISA Yes No Comment Ref 1 BS @ LS 2 Up To date auitable audit programme in use 3 Referencing & Sub Referencing 4 WP Initialed and Dated 5 Partner review 6 Section concluded 7 Policies Considered 8 Meeting minutes examined 9 Reserve movements agreed10 S/H funds split eq/non equity11 Accounts format correct12 Abridged Acs @ with FS13 Statutory books up to date14 Returns filed on time15 Sufficient audit work on section Sectional Score Execution Summary ISA Yes No Comment RefES1 Opening balances agreedES2 Sample selection processES3 Results of samples testedES4 Working papers adequate support opinionES5 Lead schedules showing copmaratives acurateES6 Material balances subject to sufficient audit workES7 Reliance on work of expert appropriateES8 Sufficient conclusions reached on each section OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 39 of 322
  • 42. Audit Completion ISA Yes No Comment RefC1 Evdience of review and supervisionC2 All outstanding points clearedC3 Summary of significant mattersC4 Significant matters reviewed and dealt withC5 Internal consultation documentedC6 External consultatioin documentedC7 Subsequent events review performedC8 Going Concern consideredC9 Related Party transaction testingC10 Audit Completion ChecklistC11 File completion checklistC12 Points forward documentedC13 Audit opinion accurately reflects work performed on fileC14 External reviews consideredC15 Final analytical reviewC16 Final financial statements reviewedC17 Disclosure checklist usedC18 Letter of representation issuedC19 Forming Opinion ChecklistC20 Audit opinion supported by the WPC21 Audit conclusion meeting documentedC22 Audit findings letter issuedC23 Responses to audit findings obtainedC24 Signed financial statements on fileC25 Third party reportingC26 Audit report complies with ISA 700 Signed Documentation Signed on file DateD1 Financial StatementsD2 Date of directors reportD3 Date of auditors reportD4 Team planning meetingD5 Client planning meetingD6 Audit planning letterD7 Letter of EngagementD8 Letter of RepD9 Audit conclusion meetingD10 Audit Findings letterD11 Directors loansD12 Intercompany loan confirmationsD13 Bank LetterD14 AGMD15 EGMD16 Solicitors LetterD17 Abridged accounts agree to FS OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 40 of 322
  • 43. Final Scoring Overall Audit File Review Max ScoreBasic File StructureAudit Programs & UsageLead SchedulesReferencing & Sub ReferencingWP Signed & DatedPartner ReviewDocumentationDocumentation of Audit WorkClear Basis for Audit OpinionFinancial Statements Disclosures (See Below)Total Marks 0 OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 41 of 322
  • 44. Max ScoreFinancial Statements 10 CA/ISA Compliance 10 FRS/SSAP Compliance 2 Accuracy Yes No N/a CommentDated and NumberedInformation PageDirectors Report Yes No N/a CommentOverview /Principal ActivitiesResultsDividend declarationCo Acts 1963 - 2006Risk expansionS90 CLEADirectors ResponsibilitiesAuditors Appt/ContinuanceDirectors RotationDirectors InterestsAuditors Report Yes No N/a CommentTitle Independent Audit ReportContent Independent Audit ReportCo Acts 1963 - 2006Bannerman RulingISA 700/ Bulletin 2006/1Respective ResponsibilitiesBasis of OpinionOpinionS40 CA Act 1983Accounting Policies Yes No N/a CommentBasis of PreparationConsolidationCash Flow StatementTFA & DepreciationFinancial Fixed AssetsStocksCurrenciesLeased AssetsTaxationGovernment GrantsPensionsTurnover OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 42 of 322
  • 45. P&L Yes No N/a Comment1986 ActFRS 3 - Profit/loss on disp of FAFRS 3 - STRGLFRS 3 - Hist Cost Profit NoteBS Yes No N/a Comment1986 ActFRS 4Cashflow Statement Yes No N/a CommentFRS 1Notes Yes No N/a CommentTurnoverInt Payable and Similar Chgs1986 Act - Stat InformationDirectors RemunerationTransactions with DirectorsDirectors LoansDirectors Interests in Share CapStaff NumbersStaff CostsPensionsTaxationDefferred taxDividendsTangible Fixed AssetsIntangible Fixed AssetsFinancial Fixed AssetsStocksDebtorsCreditorsSeparate Tax HeadsReservation of TitleFRS4 - Debt Maturity AnalaysisGovernment GrantsCalled Up Share CapitalMovements on ReservesReconciliation on S/H FundsCommitmentsContingenciesFRS 8 - Related Party TransControlling PartiesOther FRSs OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 43 of 322
  • 46. Your Anti Money Laundering RequirementsThe requirements of the Criminal Justice (Money Laundering & Terrorist) Act 2010 havebeen in place for around about a year at this stage. This means that firms should, by now,have established and fully implemented appropriate procedures and policies in respect ofthe business they undertake, their clients and their business, have carried out a riskassessment of their own procedures, adopted reporting procedures and have implementedan appropriate training regime.Whilst firms were already used to verifying the identity of new clients by obtaining proof ofidentity with the requirements that were in place prior to 2010, one of the new requirementsintroduced is to verify the identity of ALL clients both new and existing. As a year haspassed since implementation firms really should have completed the majority of identificationof existing clients at this stage.Several other areas are now covered by the requirements of this Act also, for example, therequirement to have additional verification procedures for non resident clients or for thosethat the firm does not meet in person.In relation to the identification procedures which are to be used, firms have the ability underthe 2010 legislation to be able to rely on the client identification processes of a third partywhere that third party is also a designated person as outlined in the legislation, e.g. amember of another recognised accountancy body, and where that firm has grantedpermission for its identification processes to be used. A firm that is utilising a third partiesidentification processes must be confident that the third party is utilising appropriateprocedures and is confident that if it asks for a copy of identification documents that thesewill be supplied in a timely manner. A firm should be aware that they will be responsible forthe failure to properly identify a client if they rely on a third party for identification and thatidentification process is subsequently found to be flawed or inappropriate.Another of the new requirements is to introduce the concept of risk assessment across notonly the client base but also the risks that are prevalent for the firm. In respect of a firm’sclients, it should risk assess the clients, the type of business sector they are in, the type ofbusiness they do and the type of services that the firm may provide for them.Whilst the legislation does not instruct the appointment of a Money Laundering ReportingOfficer (MLRO) it is probably easier for a firm to do so to ensure that one person has theultimate responsibility to ensure that appropriate procedures are adopted and implementedand that training is undertaken.The appointed MLRO should be a senior member of staff such as a partner, or as aminimum a senior manager as this individual is responsible for: - Risk assessing the firm’s own activities; - Risk assessing the client base ; - Arranging and/or providing training for all members of staff within the firm; OmniPro Education & Training 44 of 322
  • 47. - Carrying out, or arranging to have carried out, an annual compliance review; - Implementing procedures internally; - Assessing internal reports and making external reports as required; - Providing support to staff to ensure ‘tipping off’ does not occur; and - Liaising with authorities should they require further information.In addition this person needs to have an in depth knowledge of the clients, their businesses,the business sector and more importantly the activities and transactions that would beunusual or even suspicious and which may point to money laundering or terrorist financing.It is also important to realise that your regulator has a strengthened responsibility to ensurethat the firms they regulate are complying with the legislation and as such they will beincluding an assessment of your policies and procedures and the documentation you keepon file as part of an onsite compliance monitoring visit.Prepared by Michelle Kane on behalf of OmniProOmniPro - DublinBlock D, Iveagh Court,Harcourt Road,Dublin 2.01 4110000OmniPro - CarlowUnit 3, Southcourt,Wexford Road Business Park,Carlow059 9183888OmniPro - BelfastForsyth House,Cromac House,Belfast, BT2 8LA048 90511304To assist firms with the implementation of appropriate processes and procedures OmniProPractice Support has developed an Anti Money Laundering Compliance Manual, will providetraining in the implementation of this manual within a firm and offers an Annual ComplianceReview. Should you wish to avail of any of these services then contact Michelle Kane todayfor a quote. OmniPro Education & Training 45 of 322
  • 48. New Audit Regulations Now Applicable – Are you complying?The European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010were signed into law on 20th May 2010 giving effect to the 8th Company Law Directive onstatutory audits of annual accounts and consolidated accounts.The Regulations impose rules and obligations regarding statutory audits, meaning an auditof individual accounts or group accounts in so far as required by Community law, onstatutory auditors and audit firms, the entities being audited and the supervisory authorities(Accounting Institutes & IAASA). Auditors and audit firms must be approved by a “competentauthority” being a recognised accountancy body before carrying out a statutory audit.The Regulations are applicable to all firms and imposes further obligations on “PublicInterest Entities”. Public Interest Entities are defined as(a) companies or other bodies corporate governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC,(b) credit institutions as defined in point 1 of Article 1 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, and(c) insurance undertakings within the meaning of Article 2(1) of Directive 91/674/EEC;The main provisions of the Regulations include:-  Permitting Statutory Auditors to operate as body corporate;  Incoming Statutory Auditor afforded access to information  Requirements relating to signing of audit reports  Transparency report of Public Interest Entities  Removal of Auditor & Notification Obligations  Public Register of Auditors  Independence Provisions for Auditors  Audit Committees for Public Interest Entities  Disclosure of Auditors’ Remuneration of audit & non-audit work  Statutory obligations regarding continuing education, professional ethics, independence and objectivityI will now address the main provisions in more detail.Body Corporate permitted to act as Statutory Auditor OmniPro Education & Training 46 of 322
  • 49. Regulation 6(b) of the Regulations deletes Section 187(20 of the Companies Act 1990 whichprevented a body corporate acting as an auditor. The legislation now provides that astatutory auditor or audit firm may undertake statutory audit work as a corporate body. Thisnew provision gives audit firms the option of operating as a limited company with all thebenefits of limited liability. If a statutory auditor or audit firm acts as auditor of a credit union,friendly society or industrial and provident society, these entities must be audited by a publicauditor then the audit firm must act under a partnership or sole practitioner so they may notbe able to set up as a body corporate or will have to maintain 2 structures. There are anumber of issues to be considered prior to setting up a limited company and these include:-  Contact your Institute advising that you intend on operating as a body corporate and that the regulations of your Institute provide for this.  Obtain legal, tax and pensions advice prior to setting up the Company.  Decide what type of company to be formed (Private Limited or Unlimited)  What name will the company trade as and will there be a requirement to register a business name. Your Institute may have rules regarding what names can be used.  Consider who will act as shareholders & directors?  If there is a Partnership agreement in place should a shareholders’ agreement be prepared  Apply to your Institute to change your registration details and obtain new registration for the body corporate  The sole practitioner or partnership will have to resign as auditor of all clients and seek appointment of the company as auditor. The correct process must be followed as the firm will either resign under Section 185 Companies Act, 1990 or be removed by the company at an EGM. New letters of engagement should be issued.  Other considerations include contacting PII provider, transfer of assets into the company, issuing new employment contracts to employees, notify the Bank, Revenue and all suppliers, new letterhead and disclosures on emails & website.Incoming Statutory Auditor afforded access to informationRegulation 47 provides that where a statutory auditor is replaced the former auditor shallgrant access to all relevant information concerning the audited entity to the incomingstatutory auditor.Requirements relating to signing of audit reportsRegulation 57 amends Section 193 of Companies Act 1990 and now requires that auditreports shall state the individual name of the auditor and be signed and dated; (i) By the statutory auditor (ii) By the statutory auditor designated by the statutory audit firm as being primarily responsible for carrying out the statutory audit on behalf of the audit firm. OmniPro Education & Training 47 of 322
  • 50. The signature on the audit report shall be the individual auditors own name “for and onbehalf of” the audit firm. This is applicable for financial years of on or after 20 May 2010.Transparency Report of Public Interest EntitiesRegulation 58 requires a statutory auditor which carries out the audit of a “Public InterestEntity” to prepare and publish a transparency report within 3 months of the financial year endof the auditor.The report must be formally approved by the statutory auditor and signed by the auditor. Thereport must be published on a website maintained by or on behalf of the auditor within threemonths of the financial year end and remain available for 3 years. (i) A description of the legal structure and ownership of the subject; (ii) Where the subject belongs to a network, a description of the network and the legal and structural arrangements of the network; (iii) A description of the governance structure of the subject; (iv) A description of the internal quality control system of the subject and a statement by the administrative or managerial body on the effectiveness of its functioning; (v) An indication of when the last quality assurance review referred to in Chapter 2 of Part 8 took place; (vi) A list of public-interest entities for which the subject has carried out statutory audits during the preceding financial year; (vii) A statement concerning the subject’s independence practices which also confirms that an internal review of independence compliance has been conducted; (viii) A statement on the policy followed by the subject concerning the continuing education of statutory auditors referred to in Regulation 39; (ix) financial information showing the significance, from the perspective of the market, of the subject, such as the total turnover divided into fees from the statutory audit of annual and group accounts, and fees charged for other assurance services, tax advisory services and other non-audit services; (x) Information concerning the basis for the remuneration of the principals or partners.This is applies to financial years of the auditor on or after 30 August 2010.Removal of Auditor & Notification ObligationsRegulation 62 inserts Section 161A of Companies Act 1963 which provides if an auditorceases to hold office during the period between the conclusion of the last annual generalmeeting and the conclusion of the next agm by virtue of Section 160 of Companies Act, 1963(removal of an auditor) or Section 185 Companies Act, 1990 (resignation of an auditor), theauditor must notify IAASA within 1 month of the cessation. The notification shall include:- OmniPro Education & Training 48 of 322
  • 51. (i) Where the auditor has resigned a copy of the resignation notice served under Section 185 Companies Act 1990; or (ii) Where the auditor has been removed at a general meeting pursuant to section 160(5) Companies Act 1963, a copy of any representations that have been sent to the members.The Regulations also restricts a company removing an auditor where there is a divergenceof opinion on accounting treatments. The removal of an auditor has to be in the bestinterests of the company which does not include any illegal or improper motive with regard toavoiding disclosures or detection by the company to comply with the Companies Acts.Public Register of AuditorsThe Companies Registration Office will maintain a register of statutory auditors and auditfirms. The accounting institutes are required to notify the CRO of any changes of statutoryauditors. Statutory auditors are required to notify within one month of any change in theinformation contained in the public register.Independence Provisions for AuditorsRegulations 70-78 set out independence requirements for statutory auditors. Statutoryauditors cannot carry out a statutory audit if there is a relationship between the statutoryauditor or audit firm and the audit entity. The statutory auditor or audit firm will be consideredto have a relationship with an audited entity where there is any direct or indirect financial,business, employment or other relationship from which an objective, reasonable andinformed third party will conclude that the statutory auditors or audit firms independence iscompromised.The statutory auditor or audit firm shall apply safeguards in order to mitigate threats (selfreview, self interest, advocacy, familiarity or trust or intimidation) to their independence.The regulations set out additional reporting and other requirement in case of public interestentities. These include (a) the statutory auditor or audit firm should document in the auditworking papers all significant threats to his/her its independence as well as the safeguardsapplied to mitigate those threats; (b)confirming annually in writing to the audit committee ofthe entity his or her independence from the public interest entity; (c) disclose annually tosuch audit committee any additional services provided to the public interest entity; (d)discuss with such audit committee the threats to the independence of the auditor or firm andthe safeguards applied to mitigate those threats as documented by him/her it; (e) The keyaudit partner(s) not engage in the audit for two years after a period of seven years’involvement and; (f) that a key audit partner not take up a key management position with theentity for two years after resigning from the audit.Audit Committees for Public Interest EntitiesRegulation 91 sets out a requirement for Public Interest Entities to establish an auditcommittee. This requirement commences on 20 November 2010.The members of the audit committee shall include not less than 2 independent directors, oneof whom must have competence in accounting or auditing. “Independent” means the OmniPro Education & Training 49 of 322
  • 52. directors must have been appointed in a non-executive capacity and at no time during the 3years preceding his or her appointment to the committee did have (a) a material businessrelationship with the public interest entity, either directly, or as a partner, shareholder,director or senior employee of a body that has such a relationship with the entity or (b) aposition of employment in the public interest entity. This may require additional directors tobe appointed to public interest entities to satisfy these criteria.The responsibilities of the audit committee shall include:- (a) the monitoring of the financial reporting process; (b) the monitoring of the effectiveness of the entity’s systems of internal control, internal audit and risk management; (c) the monitoring of the statutory audit of the annual and consolidated accounts; and (d) the review and monitoring of the independence of the statutory auditor or audit firm, and in particular the provision of additional services to the audited entity.Any proposal of the board of directors of a public-interest entity with respect to theappointment of a statutory auditor or audit firm to the entity shall be based on arecommendation made to the board by the audit committee. The statutory auditor or audit firm shall report to the audit committee of the public-interestentity on key matters arising from the statutory audit of the entity, and, in particular, onmaterial weaknesses in internal control in relation to the financial reporting process.The Articles of Association should be reviewed to in regards to the rules on setting upcommittees and may have to be amended to reflect the new provisions.Audit Committees were originally proposed in Section 42 of Companies (Auditing &Accounting) Act 2003, however this section was never enacted and it appears will not beenacted.The Listing Rules of the Irish Stock Exchange provides fo the establishment of an auditcommittee with similar requirements as these regulations. However the Listing Rules operateon a “comply or explain” basis. These Regulations will make the establishment of an auditcommittee mandatory.The Financial Regulator has recently issued a new Corporate Governance Code whichcomes into force on 1st January 2011. The Code is for Credit Institutions and Insurancefirms. The Code contains similar provisions to those in the Regulations but include additionalrequirements including that all members of the Audit Committee should be non-executivedirectors and the majority of them independent.Disclosure of Auditors’ Remuneration of audit & non-audit workRegulation 120 requires that large companies, groups and certain partnerships are requiredto make more detailed disclosures regarding auditors’ remuneration in the notes to itsfinancial statements. OmniPro Education & Training 50 of 322
  • 53. (a) The audit of individual accounts (b) Other assurance services (c) Tax advisory services (d) Other non-audit servicesThe regulations exempt small, medium-sized companies and subsidiary companiesregardless of size, from the disclosure requirement. IAASA may request medium sizedcompanies to provide the information to them. Failure to make the required disclose is anoffence.Prepared by Conor Sweeney on behalf of OmniProOmniPro - DublinBlock D, Iveagh Court,Harcourt Road,Dublin 2.01 4110000OmniPro - CarlowUnit 3, Southcourt,Wexford Road Business Park,Carlow059 9183888OmniPro - BelfastForsyth House,Cromac House,Belfast, BT2 8LA048 90511304 OmniPro Education & Training 51 of 322
  • 54. PRINCIPAL FEATURES OF THE CHARITIES ACT 2009 1. Purpose of the Act 2. Statutory definition of “charitable purposes” 3. Charities and political activities 4. The Charities Regulatory Authority 5. The Register of Charities 6. The Charity Appeals Tribunal 7. Modernisation of fundraising legislation 8. Annual reports, accounts & audits 9. Legal form for charities 10. Relationship with other statutory bodies 11. Charity trustees 12. Organisations deemed to be registeredThe Charities Bill 2007 was enacted on 28 February 2009. The Act does not comeinto force automatically on enactment however. It is to be commenced in stagesover time by Ministerial order. Details of commencement of provisions will beavailable at www.pobail.iePlease note that this guide is not a legal interpretation of the Charities Act.Purpose of the ActThe purpose of the Charities Act 2009 is to enact a reform of the law relating tocharities in order to ensure accountability and to protect against abuse of charitablestatus and fraud. It will also enhance public trust and confidence in charities andincrease transparency in the sector. The Charities Act 2009, together with theCharities Acts 1961 and 1973, and the Street and House to House Collections Act1962, will provide for a composite regulatory framework for charities through acombination of new legislative provisions and retention of existing charitieslegislation, with updating, where appropriate. OmniPro Education & Training 52 of 322
  • 55. Key aspects of the Act include: a definition of “charitable purpose” for the first time in primary legislation; a new Charities Regulatory Authority to be established to secure compliance by charities with their legal obligations and also to encourage better administration of charities; a Register of Charities on which all charities operating in the State must be entered; any organisation in receipt of charitable tax exemptions from the Revenue Commissioners on the establishment day is to be automatically deemed to be registered with the Charities Regulatory Authority; any unregistered organisation that acts in a manner that would lead the public to reasonably believe it is a charity , shall to be guilty of an offence. A requirement for charities to submit annual activity reports to the new Authority; updating of the law relating to fundraising, particularly in relation to collections by way of direct debits and sale of ‘tokens’; the establishment of a Charity Appeals Tribunal; the dissolution of the Commissioners of Charitable Donations and Bequests for Ireland (CCDB) upon establishment of the new Authority, and the transfer at that stage of its functions to the Authority; the transfer to the Authority of all jurisdictions previously vested in the Attorney General by statute or common law in relation to charities; provision for administrative co-operation by the Authority with statutory bodies on relevant regulatory and law enforcement matters, both inside and outside the State; the payment of remuneration to charity trustees for non trustee duties subject to certain conditions provisions for relief from personal liability for charity trustees in respect of any losses accruing to the charity where the trustee has acted in good faith; the establishment of consultative panels to assist the Authority in its work and to ensure effective consultation with stakeholders; 2 OmniPro Education & Training 53 of 322
  • 56. the sale of a Mass card, without an arrangement with the Catholic Church being in place, to be an offence;2. Statutory definition of “charitable purposes”Charitable status will be dependent on an organisation having charitable purposes, andbeing for the public benefit, rather than having any particular legal form.“Charitable purposes” are to be fully defined for the purposes of the law for the firsttime in primary Irish legislation, as follows: the prevention or relief of poverty or economic hardship; the advancement of education; the advancement of religion; any other purpose that is of benefit to the community, which includes: - the advancement of community welfare, including the relief of those in need by reason of youth, age, ill-health or disability, - the advancement of community development, including rural or urban regeneration, - the promotion of civic responsibility or voluntary work, - the promotion of health, including the prevention or relief of sickness, disease or human suffering, - the advancement of conflict resolution or reconciliation, - the promotion of religious or racial harmony and harmonious community relations, - the protection of the natural environment, - the advancement of environmental sustainability - the advancement of the efficient and effective use of the property of charitable organisations, - the prevention or relief of suffering of animals, - the advancement of the arts, culture, heritage or sciences, and - the integration of those who are disadvantaged, and the promotion of their full participation, in society. 3 OmniPro Education & Training 54 of 322
  • 57. The advancement of religion is considered to be of public benefit, unless the contraryis proven. The Attorney General must consent to the Authority’s declaration that agift for the purposes of religion is not of public benefit. A gift for the purposes ofreligion is not to be considered of public benefit if the organisation in questionoperates on a profit-driven basis, or if it employs oppressive psychologicalmanipulation of its followers or potential followers.The legislation will make a clear separation between: the determination of charitable status by the Authority, and the determination of entitlement to tax exemption on funds applied for charitable purposes, which is exclusively the function and responsibility of the Revenue Commissioners.The intention is that there will not be shared responsibility in relation to decisions ontax exemptions. The Charities Regulator will determine whether or not anorganisation is a charitable organisation, but it will be a matter solely for the RevenueCommissioners to determine whether or not any funds applied by such anorganisation for charitable purposes should be granted entitlement to tax exemption.3. Charities and political activitiesWhilst the Act does not allow charities to support either a political candidate or aparty, charities will be permitted to promote a political cause but only one relatingdirectly to their charitable purpose. A charity must take care not to become a politicalorganisation, however, and should always remain focused on its charitable purpose,which must be, by virtue of the statutory definition of a “charitable organisation”, itsonly purpose .4. The Charities Regulatory AuthorityA new, independent regulatory body for the charities sector, the Charities RegulatoryAuthority (in Irish, An tÚdarás Rialála Carthanas), is to be established. It is 4 OmniPro Education & Training 55 of 322
  • 58. anticipated that the Authority, though having strong powers, will operate in a mannerthat is both regulatory and supportive.The Act provides for the dissolution of the Board of the Commissioners of CharitableDonations and Bequests for Ireland (CCDB) upon establishment of the newAuthority, and the consequential transfer at that stage of its functions to the Authority,together with all jurisdictions vested in the Attorney General by statute or commonlaw in relation to charities.The Authority’s role will principally be to increase public confidence in the charitiessector through effective oversight of charitable organisations in Ireland; promotion ofcompliance by charitable organisations with their legal obligations; encouragingbetter administration of charitable trusts; and providing guidance to charitableorganisations, including through the development of codes of practice.Stakeholder consultation by the Charities Regulator is integral to its operation, inaccordance with good regulatory practice. Stakeholders would include charities,charity trustees, donors (including corporate donors), philanthropists, beneficiaries,academics, accountants, lawyers, Government Departments and agencies, etc. Tounderpin the consultative element within the regulatory structure, the Authority willbe able to set up consultative panels as a mechanism for ensuring stakeholderconsultation. Such panels may also be set up at the request of the Minister forCommunity, Equality and Gaeltacht Affairs.The Act also provides that the membership of the Authority shall include persons whohave knowledge of, and expertise in relation to the law relating to charities, thekeeping of accounts by and the funding of, charitable organisations, and themanagement of charitable organisations.The Authority will have the power to institute investigations; to call for documentsand search records; to enter premises on foot of a search warrant; to impose sanctions,including intermediate sanctions; and to co-operate on an administrative basis withforeign statutory bodies on law enforcement matters. There will also be significantpenalties in place for offences under the legislation. 5 OmniPro Education & Training 56 of 322
  • 59. 5. The Register of CharitiesAt present, there is no central public register of charities in Ireland. A key function ofthe Authority will be the establishment and maintenance of a register of charitableorganisations that will be accessible to the general public. Registration will bemandatory for all charities operating within the State. However, any organisation inreceipt of charitable tax exemptions from the Revenue Commissioners on the day theRegister is established will be automatically entered in the register of charities.Every registered charitable organisation will have a unique registration number.The requirement to register will apply whether a charity had been established withinthe State and had its administrative centre here, or whether it is a foreign charity witha presence in the State, established in another jurisdiction and having itsadministrative centre outside the State.The Authority will have the power to remove a body from the register where theorganisation ceases to be a charitable organisation, though such decisions will besubject to independent appeal (see No. 6 following).It will be an offence for a body not on the register to claim that it is a charity or tooperate or fundraise as a charity in Ireland. The key purpose of the Register will be topromote transparency. The register will enable the public to confirm the bona fides ofgenuine charities, thereby limiting the scope for abuse.Certain types of organisations will be excluded from being charitable organisations: apolitical party, or a body, the principal object of which is, to promote a political party,or candidate ; a trade union or a representative body of employers; a chamber ofcommerce; a body that promotes purposes that are unlawful, contrary to publicmorality, in support of terrorism or terrorist activities, or for the benefit of anorganisation, membership of which is unlawful. Sporting bodies, as defined under theTaxes Consolidation Act 1997, are also being excluded as they are the subject of a 6 OmniPro Education & Training 57 of 322
  • 60. separate tax exemption regime operated by the Revenue Commissioners which willnot be affected by this Act.In the interests of maximising effiecient use of available resources, the Authority asdirected by the Minister, may use material from other relevant electronic databases,including any that have or are being supported in whole or in part by public funds, inmaintaining the Register.6. The Charity Appeals TribunalThe legislation will provide for an extra-judicial mechanism in relation to appeals andapplications for review concerning decisions made by the Authority. The CharityAppeals Tribunal, which will be independent, part-time and which will meet only asrequired, will provide an alternative, particularly for smaller charities, to going tocourt, and should facilitate keeping disputes out of the courts system to the greatestextent possible. The option of appealing to the High Court will remain. The Tribunalmay share resources with existing appeals bodies.7. Modernisation of fundraising legislationFundraising is complex because of the wide range of methods it encompasses and thevariety of organisations within the sector involved. It has evolved considerably sincethe passing of the primary legislation on collections, the Street and House to HouseCollections Act 1962.The approach proposed in the Act is to develop a three-pronged approach through: a) modernising aspects of the 1962 provisions to reflect changes in methods of collection, revising the definition of “collection” itself and, in particular, introducing a permit regime for recently developed fundraising methods such as collection by way of direct debit or other “promises of money”; b) conferring the requisite powers on the Charities Regulator to require charities to provide information concerning their fund-raising activities, e.g. in their applications for registration, as well as in their annual accounts and annual returns; and 7 OmniPro Education & Training 58 of 322
  • 61. c) implementing agreed Codes of Good Practice in relation to the actual fund- raising operations, while retaining reserve powers for the Minister, after consultation with the Authority, to make statutory regulations on the manner and conduct of fundraising if such an approach proves ineffective.Work on the agreed Codes of Good Practice has already advanced significantly, inpartnership with the charities sector.8. Annual reports, accounts and audit requirementsThe Act makes provision in relation to the keeping of proper books of accounts, aswell as the provision of annual statements of accounts, by charitable organisationsthat are not companies and in relation to the audit, or examination, of such accounts.In recognition of the fact that many charitable organisations are small with limitedresources, both financial and otherwise, a key principle of the Act is to provide forregulation in a proportionate manner. There are varying reporting and auditrequirements depending on whether a charity’s income or expenditure is above orbelow a level to be prescribed by the Minister, that level not to be more than€500,000. The Act provides that the Companies Acts will continue to apply tocharities that are registered as companies insofar as accounting requirements areconcerned. The Act minimises the potential for dual filing by charitable organisationsthat are incorporated, in that the same documentation will not have to be filedseparately with both the CRO and the Authority. The CRO will pass on financialinformation it receives under the companies acts to the new Authority.The Act also provides that all charitable organisations will be required to make annualreports on their charitable activities to the Authority. These reports will be accessibleto the public, except those in respect of private trusts that are not funded by donationsfrom the public. The Department will be consulting with the sector in relation to theannual reports. 8 OmniPro Education & Training 59 of 322
  • 62. Finally, the Act provides that educational bodies are exempt from the accounting andaudit provisions of the Act, as those bodies are already subject to separate scrutiny.9. Legal form for charitiesCharities have the choice of a number of different legal forms, e.g. unincorporated,such as a trust or an unincorporated association, or incorporated, such as a company(usually limited by guarantee, rather than shares). The Act is not prescriptive asregards the legal form that charitable organisations should take. It is felt that thisshould be a matter for the organisation itself to decide.10. Relationship with other statutory bodiesThe Authority will be empowered to co-operate on an administrative basis withstatutory bodies, both inside and outside the State.For example, given that there are charitable organisations in Ireland which alsooperate in other nearby common law jurisdictions, administrative co-operationbetween the Authority and the regulatory bodies in those jurisdictions could beforeseen as a matter of good practice in the exercise of regulatory functions, e.g. toexchange information, to address issues of common concern, to ensure consistencyand to avoid duplication.The global fight against terrorism, including prevention of the misuse of charities forterrorist financing, would provide a further, specific context for administrative co-operation arrangements at international (including, in particular, FATF, arising fromSpecial Recommendation VIII) and EU levels. Accordingly, the Act provides a basisfor administrative co-operation with foreign statutory bodies on law enforcementmatters. 9 OmniPro Education & Training 60 of 322
  • 63. 11. Charity trusteesThe Act sets out the circumstances in which a person ceases to be qualified for, orceases to hold, the position of charity trustee. A register of disqualified persons willbe kept by the Authority. The Act will also make it an offence to act, or purport to act,as a charity trustee while not qualified to do so. It will also be an offence for a charitytrustee or member of staff of a charity to comply with a direction of another trustee, ifhe or she knew, or had reasonable grounds for knowing, that the other trustee wasdisqualified. Charity trustees will be permitted to receive remuneration from thecharity in respect of work unrelated to their trusteeship. Charity trustees may also beindemnified by their charity against liability for actions undertaken in good faith onbehalf of the charity, and there is provision for the Court to grant relief to charitytrustees from personal liability for a breach of trust where the trustee has actedhonestly and reasonably in good faith.Department of Community, Equality and Gaeltacht Affairs June 2010 10 OmniPro Education & Training 61 of 322
  • 64. Check against delivery Minister Alan Shatter, TD, Minister for Justice, Equality and Defence ICTR Annual Conference Thursday 10th November 2011Ladies and Gentlemen,I was very pleased to be invited to the ICTR Conference today.Indeed, this is probably the first opportunity I’ve had to speakpublicly at any length on the subject of charities regulation since thetransfer of the function to my Department earlier this year.In taking on the charities regulation function, in the context of thereorganisation of Government Departments in May this year, Irecognised that, as it involves the provision of a new service, it wouldpresent a particular challenge. In difficult times such as we areexperiencing, one’s natural instinct is to batten down the hatches,retrench, and focus only on what has to be done, rather than on whatought to be done.Indeed, I have had to make some very hard decisions since myappointment. There are many projects - worthy initiatives, in anideal world - that it is simply not possible to support at the presenttime because of resource limitations.So where does charities regulation fit into the overall scheme ofthings in 2011? OmniPro Education & Training 62 of 322
  • 65. Well, firstly, I am aware that this regulatory initiative has been longawaited. I also know that the consultative, open, approach taken inthe development of the legislation, resulted in the passing of an Actthat was welcomed by all parties in the Oireachtas, and by the Irishcharities sector. I also know that many representatives of the sector,including ICTR, have been calling for regulation for many years.The Act provides for a comprehensive statutory regulatoryframework for Irish charities. It is a fine piece of legislation of itstype. It must be recalled however that the drafting of the Bill and thepassage of Act coincided with a time of extraordinary growth in theeconomy, and it was not envisaged that putting in place the resourcesto implement would be a major obstacle. Given that context, inhindsight, it could, perhaps not too unfairly, be described as an“idealised” regulatory framework.But the world has changed since early-2009 when the Charities Actwas passed. The Irish Government, under the agreement with theTroika, is committed to reducing public service numbers, notincreasing them. It is committed to increasing the efficiency of servicedelivery, which the Government is doing, for example, in the case ofthe legal and medical professions. It is committed to reducingbureaucracy, and reducing the number of State bodies andeliminating duplication.The Charities Act must now be considered in that context. As mustthe future regulation of the Irish charities sector! We must be honestand consider what we can practicably achieve in the current climate. 2 OmniPro Education & Training 63 of 322
  • 66. Charities are already subject to scrutiny from a number of sources,such as the Director of Corporate Enforcement, Revenue, and are ofcourse subject to wider criminal and fraud legislation, so it is not thecase that the sector is unregulated.However, in my view, dedicated regulation of the Irish charitiessector, if feasible, would be a welcome development. It is a significantindustry! A significant employer, a fact which is often forgotten whenwe speak of the “not-for-profit” sector, but which is of greatimportance in times such as these!It provides many important services, particularly to those on thefringes of Irish society, those who may perhaps never have seen thebenefits of the boom, but who are now suffering. There is a hugesocial dividend to what Irish charities, and the many thousands ofvolunteers who give so generously and selflessly of their time, do.The anomaly is that it is at times such as these, when resources aretight, that charities themselves need public support more than ever asthe demands for their services increase. I am mindful, in that context,that the Charities Act would, if fully commenced, place an additionalburden of compliance in charities and their trustees.But there is a pay-off, a “win-win”, from regulation, for the sectoritself, for the State, and of course for the public, and I include bothdonors and beneficiaries in the latter. 3 OmniPro Education & Training 64 of 322
  • 67. The Irish charities sector – thankfully - has the confidence of theIrish public at the moment. But what is this confidence based upon?Is it based on a general perception that because of the very fact thatthey are “charities”, it follows that they must inherently be “good”?Whilst I expect that this is probably the case in most instances, it is afact that an unregulated sector, any unregulated sector, is potentiallyopen to abuse, to practices such as money laundering and fraud,particularly when neighbouring jurisdictions have regulation inplace, and when there is essentially freedom of movement across theEU for charities.I know that there are many Irish charities that efficiently andeffectively utilise their resources to maximise the achievement oftheir objectives, but there are probably others, as in any other sector,that do not!However, realistically, I simply cannot see that we are in a position tofully implement the Charities Act on a statutory basis at the moment.Just by way of comparison, the Scottish Charities Regulator, which isperhaps the closest comparator to this jurisdiction, has almost 50staff to fulfil its statutory functions, as one of my fellow speakerstoday can readily attest! In our current circumstances, there is noreal likelihood of us matching the Scottish model.Of course, the option is there in the Act for the Authority to impose afiling fee on charities to enable it to offset some of its costs. However,given the fact that most Irish charities are very small organisationswith extremely limited resources, particularly these days, this wouldnot be my preferred option. Whilst the small number of large Irish 4 OmniPro Education & Training 65 of 322
  • 68. charities probably wouldn’t have an issue with such a fee, the samecould not be said perhaps for the vast majority of much smallercharities. However, this is an option we must keep on the table shouldother approaches not prove possible.But I think at this time, we need to be pragmatic. We need to go backto the basics. What were the principles behind the Act? What was itintended to achieve? And how can we best achieve this in the currentcircumstances?I think we can sum it up the objectives of the Act quite simply.It was intended to enhance public confidence in the Irish charitiessector by increasing the transparency of Irish charities through aproportionate regulatory framework.So what can we do to protect the sector, prevent abuse, and maintainpublic confidence?I am currently taking legal advice in terms of what might practicablybe done within available resources, but, subject to this legal advice,and particularly given the long-stated desire across the sector forregulation, I would hope that we will be in a position to take steps toenhance the regulation of the sector.However, I believe that this regulation must involve, in the firstinstance, much greater participation from the sector in the charitablefundraising Codes of Practice project. Although I am hopeful myDepartment will be in a position to continue to support the Codes 5 OmniPro Education & Training 66 of 322
  • 69. project in 2012, if this is to happen, I would have to be convinced thatthere will be greater buy-in from the sector so as to ensure value formoney, and a measurable return for the State’s considerableinvestment.Despite the considerable efforts and groundwork undertaken byICTR, and the substantial investment to date from the Exchequer,the number of charities that have actually signed up so far for theCodes is disappointing. Whilst I would like to publicly acknowledgethe fundraising charities that have signed up, the overall level oftake-up thus far does not demonstrate the genuine hunger forregulation that representatives of the sector have always assertedexists. Regulation through codes of practice has always been seen as akey element of this regulatory process, no less than statutoryregulation.An effective interface between charities and donors in the context ofcollections is hugely important to ensuring that public confidence ismaintained. That is why I believe that buy-in to the codes will have ahugely positive outcome for fundraising charities. I certainly do notsee any negative aspect to getting involved in terms of enhancing thereputation of your charity and sending out a clear signal that, firstly,you are committed to regulation and, secondly, you are committed tooperating to the highest standards. As a member of the public, Iwould be much more likely to support a charity that can tangiblydemonstrate its commitment to fundraising in an acceptable manner,than one that hasn’t. 6 OmniPro Education & Training 67 of 322
  • 70. Indeed I would see involvement with the codes of practice as an idealforerunner to the development of a better governed, moretransparent charities sectorWhen my Department has obtained and considered the legal adviceas regards what we can feasibly do in the short to medium term,pending hopefully, when resources permit, the implementation of theCharities Act in due course, we look forward to working with theIrish charities sector. Ultimately, we all want the same outcome. Wehave a shared vision of a professional, highly regarded, andtransparent charities industry.However, individual charities will have to stand up and be countedand demonstrate that this long stated desire for regulation is genuineand will be translated into action on their part. Regulation will notwork without buy-in from the Irish charities sector. And I stress thatbuy-in begins with signing up to the fundraising codes of practice.Indeed, I am exploring ways under which adherence to the Codesmight potentially be a requirement for collection permit applicants.To reflect on the theme of today’s conference “Whither or WitherCharities? – that is the question”, we must do the best we can toensure that charities do not wither. We will always need charities andit is in the State’s interests, the public interest, and in the bestinterests of charities themselves, that we ensure that we have aconfident, transparent Irish charities sector. I would see that bodiessuch as ICTR will have a critical role to play in achieving thisoutcome. 7 OmniPro Education & Training 68 of 322
  • 71. I would like to congratulate and thank ICTR for 20 years ofconstructive and successful input on behalf of Irish charities.I hope you enjoy today’s programme, and wish you all every successwith your future charitable endeavours. I would particularly urge allthe ICTR members here today, and charities generally, to sign up tothe fundraising codes of practice without delay.Go raibh maith agaibh!ENDS 8 OmniPro Education & Training 69 of 322
  • 72. Auditors Resource List 2011Title Description Source Download1 International Standards on Auditing 2010 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements IAASB http://web.ifac.org/publications General Principles and Responsibilities Overall Objectives of the Independent Auditor and the Conduct of an Audit in200 Accordance with the International Standards on Auditing IAASB http://web.ifac.org/publications210 Agreeing the Terms of Audit Engagements IAASB http://web.ifac.org/publications220 Quality Control for an Audit of Financial Information IAASB http://web.ifac.org/publications230R Audit Documentation IAASB http://web.ifac.org/publications240 The Auditors Responsibilities relating to Fraud in an Audit of Financial Statements IAASB http://web.ifac.org/publications250 Consideration of Laws and Regulations in an Audit of Financial Statements IAASB http://web.ifac.org/publications260 Communication With Those Charged with Governance IAASB http://web.ifac.org/publications Communicating Deficiencies in Internal Control to Those Charged with265 Governance and Management Risk Assesment and Response to Assessed Risks300 Planning an Audit of Financial Statements IAASB http://web.ifac.org/publications Identifying and Assessing the Risks of Material Misstatement through315 Understanding the Entity and Its Environment IAASB http://web.ifac.org/publications320 Materiality in Planning and Performing an Audit IAASB http://web.ifac.org/publications330 The Auditors Responses to Assessed Risks IAASB http://web.ifac.org/publications402 Audit Considerations Relating to an Entity Using a Service Organisation IAASB http://web.ifac.org/publications450 Evaluation of Misstatements Identified During the Audit IAASB http://web.ifac.org/publications Audit Evidence500 Audit Evidence IAASB http://web.ifac.org/publications501 Audit Evidence - Specific considerations for Selected Items IAASB http://web.ifac.org/publications505 External Confirmations IAASB http://web.ifac.org/publications510 Initial Engagements - Opening Balances IAASB http://web.ifac.org/publications520 Analytical Procedures IAASB http://web.ifac.org/publications530 Audit Sampling IAASB http://web.ifac.org/publications Audit of Accounting Estimates, Including Fair Value Accounting Estimates, and540 Related Disclosures IAASB http://web.ifac.org/publications550 Related Parties IAASB http://web.ifac.org/publications560 Subsequent Events IAASB http://web.ifac.org/publications570 Going Concern IAASB http://web.ifac.org/publications580 Written Representations IAASB http://web.ifac.org/publications Using the Work of Others www.omnipro.ie OmniPro Education & Training 70 of 322
  • 73. Speicial Considerations - Audits of Group Financial Statements (Including the600 Work of Component Auditors) IAASB http://web.ifac.org/publications610 Considering the Work of Internal Auditors IAASB http://web.ifac.org/publications620 Using the work of an Auditors Expert IAASB http://web.ifac.org/publications Audit Conlusions and Reporting700 Forming an Opinion and Reporting on Financial Statements IAASB http://web.ifac.org/publications705 Modifications to the Opinion in the Independent Auditors Report IAASB http://web.ifac.org/publications Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent706 Auditors Report IAASB http://web.ifac.org/publications Comparative Information - Correpsonding Figures and Comparative Financial710 Statements IAASB http://web.ifac.org/publications The Auditors Responsibilities Relating to Other Information in Documents720 Containing Audited Financial Statements IAASB http://web.ifac.org/publications Specialised Areas Audits of Financial Statements Prepared in Accordance with Special Purpose800 Frameworks IAASB http://web.ifac.org/publications Audits of Single Financial Statements and Specific Elements, Accounts or Items of805 a Financial Statement IAASB http://web.ifac.org/publications810 Engagements to Report on Summary Financial Statements IAASB http://web.ifac.org/publications2 Ethics 2010 Handbook of Code of Ethics for Professional Accountants IFAC http://web.ifac.org/publications3 Bulletins2006-1 Auditors Reports on Financial Statements in ROI APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=1 Audit Issues when Financial Market Conditions are Difficult and Credit Facilities2008-1 may be restricted APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=12008-10 Going Concern issues during the Current Economic Conditions APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=12009-2 Auditors Reports on Financial Statements in the United Kingdom APB http://www.frc.org.uk/apb/publications/bulletins.cfm?Start=14 Practice NotesPN 09 Reports by Auditors under Companies Legislation in ROI APB http://www.frc.org.uk/apb/publications/practice.cfmPN 11 The audit of Charities in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 15 The audit of Occupational Pension Schemes APB http://www.frc.org.uk/apb/publications/practice.cfmPN 16 Bank Reports for Audit Purposes in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 19 The Audit of Banks APB http://www.frc.org.uk/apb/publications/practice.cfmPN 20 The Audit of Insurers APB http://www.frc.org.uk/apb/publications/practice.cfmPN 21 Audit of Investment Businesses in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 22 Auditors Consideration of FRS 17 Retirement Benefits Defined Pension Schemes APB http://www.frc.org.uk/apb/publications/practice.cfmPN 23 Auditing Complex Financial Instruments (Interim Guidance) APB http://www.frc.org.uk/apb/publications/practice.cfmPN 24 Audit of Friendly Societies in UK APB http://www.frc.org.uk/apb/publications/practice.cfmPN 25 Attendance at Stock Taking APB http://www.frc.org.uk/apb/publications/practice.cfmPN 26 Guidance on Smaller Entity Audit Documentation (Revised Dec 2009) APB http://www.frc.org.uk/apb/publications/practice.cfm www.omnipro.ie OmniPro Education & Training 71 of 322
  • 74. PN 27 The Audit of Credit Unions APB http://www.frc.org.uk/apb/publications/practice.cfm5 Miscellaneous Technical StatementsM01 Auctioneer and House Agents Acts 1947 and 1967 CCABI Institute WebsiteM09 Accouting for goods sold subject to reservation of title CCABI Institute WebsiteM21 Directors obligation under Section 40 of the Companies (Amendment) Act 1983 CCABI Institute WebsiteM22 Credit Unions - ROI CCABI Institute Website Accountants report on license applications to Department of Tourism, TransportM27 and Communications Dublin CCABI Institute WebsiteM31 Accounting for redemption and purchase of own shares by companies in ROI CCABI Institute WebsiteM32 Related party disclosures CCABI Institute WebsiteM35 Solicitors accounts Regulations 1998 - Northern Ireland CCABI Institute WebsiteM37 Restoration of companies to register - ROI CCABI Institute WebsiteM38 Solicitors accounts regulations 2001 - ROI CCABI Institute WebsiteM39 Reporting to third parties CCABI Institute Website Chartered Accountants reports on compilation of financial statements ofM41 incorporated entities CCABI Institute WebsiteM42 Anti Money Laundering Guidance in ROI CCABI Institute WebsiteM43 Compilation of alternative annual reports of certain pension schemes in ROI CCABI Institute Website Guidance reporting Guidance Notes 1 05 UCITS Publication of a simplifiedM44 prospectus issued by Financial Regulator CCABI Institute WebsiteM45 Grant claims CCABI Institute Website Reporting to Financial Regulator under Central Bank and Financial ServicesM46 Authority of Ireland Act 2004 revised January 2005 CCABI Institute Website Guidance for reporting in accordance with client money regulations issued byM47 Financial Regulator February 2004 CCABI Institute Website Chartered Accountants Reports on compilation of Historical Financial informationM48 of Unincorporated Entities CCABI Institute Website6 General ISQC1 International Standard on Quality Control IAASB http://www.ifac.org/Guidance/EXD-Details.php?EDID=0086 Guide to Using the ISAs for SMEs IFAC http://www.ifac.org/Members/DownLoads/ISA_Audit_Guide.pdf Guide to Quality Control for SMEs Applying ISAs Proportionately with the Size and Complexity of an Entity IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Audit Considerations in Respect of Going Concern in the Current Economic Environment IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Emerging Practical Issues Regarding the use of External Confirmations in the Audit of Financial Statements IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment IFAC http://web.ifac.org/publications/international-auditing-and-assurance-standards-board The Role of Small and Medium Practices in providing Business Support to Small and Medium sized Enterprises IFAC http://web.ifac.org/publications/small-and-medium-practices-committee Quality Control for Small and Medium Sized Practices IFAC http://web.ifac.org/publications/small-and-medium-practices-committee www.omnipro.ie OmniPro Education & Training 72 of 322
  • 75. APB Staff PaperSummary of the Main Changes in the NewISAs (UK and Ireland)This paper has been prepared to assist those seeking to understand the main changes thathave recently been made to the International Standards on Auditing (ISAs) (UK andIreland). Revised ISAs (UK and Ireland) were issued in October 2009 and apply toaudits of financial statements for periods ending on or after 15 December 2010.The description of the changes made is not exhaustive and reference to the ISAs (UK andIreland) themselves is necessary to obtain a full understanding of them.October 2009 OmniPro Education & Training 73 of 322
  • 76. APB Staff PaperThis paper has been prepared by the staff of the Auditing Practices Board (APB) and doesnot constitute an authoritative or official pronouncement of the APB. The paper does notamend or override the ISAs (UK and Ireland), the texts alone of which are authoritative,and does not provide a substitute for reading them.The APB is part of the Financial Reporting Council (FRC). Neither the APB nor the FRCaccepts any liability to any party for any loss, damage or costs howsoever arising,whether directly or indirectly, whether in contract, tort or otherwise from any action ordecision taken (or not taken) as a result of any person relying on or otherwise using thisdocument or arising from any omission from it. OmniPro Education & Training 74 of 322
  • 77. Summary of the Main Changes in the New ISAs (UK and Ireland)Contents PageBackground 2The Auditor’s Reporting Standards 3Standards that have been ‘Clarified’ but not Revised 4Standards that have been Revised 4Appendix: List of Auditing Standards and Whether Revised as well as 18Clarified 1 OmniPro Education & Training 75 of 322
  • 78. BackgroundNew International Standards on Auditing (ISAs) (UK and Ireland) were issued in October2009 and apply to audits of financial statements for periods ending on or after 15December 2010.The new ISAs (UK and Ireland) incorporate the clarified ISAs issued by the InternationalAuditing and Assurance Standards Board (IAASB). Where necessary, APB hasaugmented the international standards with additional requirements to address specificUK and Irish legal and regulatory requirements 1 ; and additional guidance that isappropriate in the UK and Irish national legislative, cultural and business context. Thisadditional material is clearly differentiated from the original text of the internationalstandards by the use of grey shading. A list of the ISAs is given in the Appendix.The IAASB’s “Clarity Project” was designed to improve the overall readability andunderstandability of ISAs through structural and drafting improvements, including:x Describing an objective for each ISA,x Separating the requirements in each ISA from the application material,x Clarifying the obligations imposed on auditors by the requirements of the ISAs, including eliminating possible ambiguity about the requirements an auditor needs to fulfil arising from the use of the present tense in the guidance to the extant ISAs,x Improving the overall readability and understandability of the ISAs through structural and drafting improvements, andx Reducing the complexity of the existing ISAs – this was seen as being especially important to smaller audit firms with limited technical resources.There is an increase in the number of requirements in the clarified standards as some ofthe material that was previously included as ‘present tense guidance’ is now elevated torequirements.As part of the process the APB undertook when consulting on whether the new ISAsshould be adopted it performed an evaluation of the impacts of them on audit workeffort 2 . This suggested that the new ISAs that were likely to have the greatest impactsoverall on auditor work effort were the revised versions of:1 APB’s supplementary regulatory requirements are mostly included in two supplementary standards: ISA (UK and Ireland) 250 Section B, “The Auditor’s Right and Duty to Report to Regulators in the Financial Sector,” and ISA (UK and Ireland) 720 Section B, “The Auditor’s Statutory Reporting Responsibility in Relation to Directors’ Reports.” Two other regulatory supplementary requirements are included in ISA (UK and Ireland) 402, “Service Organisations,” paragraph 9(e) relating to consideration of statutory reporting responsibilities in respect of accounting records; and ISA (UK and Ireland) 570, “Going Concern,” paragraph 17-1 relating to disclosure of the period considered by those charged with governance when assessing whether the entity is a going concern.2 The results of this evaluation are presented in more detail in the APB’s October 2008 Consultation Paper, “Consultation on Whether UK and Irish Auditing Standards Should be Updated for the New 2 OmniPro Education & Training 76 of 322
  • 79. ISA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related DisclosuresISA 550 Related PartiesISA 600 Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors)Both revised ISA 540 and ISA 550 have an increased focus on management’s processesand stipulate audit procedures that are not in the extant ISAs.The revised ISA 600 clarifies how the risk model underpinning the ISAs applies in agroup context. In particular, there are significant new requirements relating to therelationships between the ‘group engagement team’ and ‘component auditors’ andcommunications between them. Consequently the impact is expected to be mostsignificant on audits where group components are audited by different teams, particularlyfor large transnational group audits. Because of this the impact on small group audits islikely to be small as the same engagement team often audits all group components.Staff PaperThis paper has been prepared by the staff of the APB to assist those seeking to understandthe main changes that have been made in the ISAs (UK and Ireland). The description ofthe changes made is not exhaustive and reference to the standards themselves isnecessary to obtain a full understanding of them.The Auditor’s Reporting StandardsAPB has not adopted ISA 700, “Forming an Opinion and Reporting on FinancialStatements,” as issued by the IAASB. It has instead issued a clarified version of therecently revised ISA (UK and Ireland) 700, “The Auditor’s Report on FinancialStatements,” which addresses the requirements of company law and also provide for amore concise auditor’s report, reflecting feedback to APB consultations. The main effectof this is that the form of UK and Ireland auditor’s reports may not be exactly alignedwith the precise format of auditor’s reports required by ISA 700 issued by the IAASB.However, ISA (UK and Ireland) 700 has been designed to ensure that compliance with itwill not preclude the auditor from being able to assert compliance with the ISAs issuedby the IAASB (see paragraph 5 of ISA (UK and Ireland) 700).For the UK and Ireland, requirements and guidance relating to modification of theauditor’s report are currently included in ISA (UK and Ireland) 700 (Revised). Thosematters are excluded from the clarified version of that standard as they are covered in: International Auditing Standards.” This is available in the Publications/Exposure Drafts section of the APB’s website (www.frc.org.uk/apb). 3 OmniPro Education & Training 77 of 322
  • 80. ISA 705 Modifications to Opinions in the Independent Auditor’s Report, andISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s ReportThe APB has adopted ISAs 705 and 706 with a small amount of supplementary guidance(e.g. to draw attention to the auditor’s legal obligations with regard to making a statementwhen ceasing to hold office). This is not expected to lead to a significant change inpractice regarding modifications of auditor’s reports.Standards that have been ‘Clarified’ but not RevisedIt is not practicable to set out here a detailed analysis of all the specific changes and‘new’ requirements elevated from the current guidance material. For some auditors thesechanges will not necessarily translate directly into changes in audit procedures to beperformed as:- some audit firms have taken the view that the current ISA (UK and Ireland) guidance reflects the proper application of the existing standards, and have accordingly already incorporated it in their audit methodologies,- some audit teams will already be undertaking procedures that correspond to the new requirements added as ‘improvements’ to the existing ISAs (UK and Ireland), and- many of the additional requirements are conditional and will not apply to all audits.However, auditors should not assume that their current approaches will necessarily becompliant with the standards that have been clarified but not revised. It is important tohave an understanding of all the clarified ISAs (UK and Ireland) and to consider whetherchanges to the audit approach are needed.Standards that have been RevisedIn addition to clarifying all of the ISAs, 12 of the ISAs underlying the ISAs (UK andIreland) have also been revised and two new ISAs introduced (ISA 265 which addressescommunicating deficiencies in internal control, and ISA 450 which addresses theevaluation of misstatements).A summary of the main changes in the revised standards that are expected to impact auditprocedures is set out below. This is not a comprehensive analysis of all the changes tothe standards and auditors need to read the standards themselves and obtain anunderstanding of all the requirements. 4 OmniPro Education & Training 78 of 322
  • 81. 200 Overall objectives of the Independent Auditor and the Conduct of an Audit inAccordance with International Standards on AuditingAs explained above, the IAASB Clarity Project introduced significant structural changesto the ISAs and these are reflected in the ISAs (UK and Ireland), including:x Describing an objective for each ISA, andx Separating the requirements in each ISA from the application material.ISA 200 has been revised to set out the overall objectives of the independent auditor, andexplains the nature and scope of an audit designed to enable the independent auditor tomeet those objectives. It also explains the scope, authority and structure of the ISAs, andincludes requirements establishing the general responsibilities of the independent auditorapplicable in all audits, including the obligation to comply with the ISAs.New requirements in ISA 200 make clear the purpose of the objectives that are nowincluded in each of the other ISAs. These are that the auditor uses the objectives inplanning and performing the audit, having regard to the interrelationships among theISAs, to:(a) Determine whether any audit procedures in addition to those required by the ISAs are necessary in pursuance of the objectives stated in the ISAs; and(b) Evaluate whether sufficient appropriate audit evidence has been obtained. (Paragraph 21)ISA 200 also includes material explaining important concepts related to an audit offinancial statements. These include the premise on which an audit is conducted (includingmanagement’s responsibilities), professional skepticism, professional judgment, and theinherent limitations of an audit, an understanding of which is necessary for a properunderstanding of the conduct of an audit.210 Agreeing the Terms of Audit EngagementsISA 210 was not subject to a revision project in its own right but, nevertheless, has beensignificantly revised as a result of conforming changes stemming from the revision ofother ISAs. In particular the auditor is required to perform specific procedures in order toestablish whether the preconditions for an audit are present. These procedures include:(a) Determining whether the financial reporting framework to be applied in the preparation of the financial statements is acceptable. (Paragraph 6(a))(b) Obtaining the agreement of management that it acknowledges and understands its responsibility (paragraph 6(b)): (i) For the preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair 5 OmniPro Education & Training 79 of 322
  • 82. presentation; (ii) For such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and (iii) To provide the auditor with: a. Access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; b. Additional information that the auditor may request from management for the purpose of the audit; and c. Unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain audit evidence.The revised ISA 580, Written Representations, requires the auditor to obtain writtenrepresentations from management concerning the fulfillment of these responsibilities (seebelow).260 Communication with Those Charged with GovernanceThe revision of ISA 260 is intended to reflect significant regulatory and auditingstandards developments in several jurisdictions, and shifts in the expectations of thosecharged with governance and other stakeholders.The IAASB drew heavily on the APB’s extant ISA (UK and Ireland) 260 and many ofthe current APB supplementary requirements have now been adopted in substance in therevised standard. While the revision of ISA 260 brought it closer to the extant ISA (UKand Ireland) 260 there are several additional requirements that are currently covered insubstance by guidance text in the extant ISA (UK and Ireland), including:x Where applicable, explaining why significant accounting practices that are acceptable under the applicable financial reporting framework are not considered the most appropriate in the particular circumstances of the entity. (Paragraph 16(a))x Documenting matters communicated orally. (Paragraph 23)In addition there are new explicit communication requirements for the auditor, including:x Significant difficulties, if any, encountered during the audit. (Paragraph 16(b))x Significant matters, if any, arising from the audit that were discussed, or subject to correspondence with management (unless all those charged with governance are involved in managing the entity). (Paragraph 16(c)) 6 OmniPro Education & Training 80 of 322
  • 83. 265 Communicating Deficiencies in Internal Control to Those Charged withGovernance and ManagementThis is a new standard which is intended to enhance the quality of the auditor’scommunication of deficiencies in internal control identified by the auditor. Thedevelopment of the standard was undertaken originally to clarify the meaning of“material weakness” in the light of:x The requirement under the European Union’s Statutory Audit Directive for auditors to report identified material weaknesses in internal control (“material weaknesses”) to audit committees; andx The U.S. Public Company Accounting Oversight Board’s (PCAOB’s) issuance of an auditing standard addressing an audit of internal control over financial reporting.As the project evolved, new considerations emerged and the original aim of defining“material weakness” was shifted to a focus on developing a clear definition of thethreshold of significance at which a “deficiency in internal control,” including controlsthat are “missing,” should be communicated to those charged with governance.A “deficiency in internal control” exists when (paragraph 6(a)):(i) A control is designed, implemented or operated in such a way that it is unable to prevent, or detect and correct, misstatements in the financial statements on a timely basis; or(ii) A control necessary to prevent, or detect and correct, misstatements in the financial statements on a timely basis is missing.The standard includes requirements for the auditor to:x Determine, on the basis of the audit work performed, whether, individually or in combination, identified deficiencies in internal control constitute ‘significant deficiencies’. A significant deficiency is a deficiency or combination of deficiencies in internal control that, in the auditor’s professional judgment, is of sufficient importance to merit the attention of those charged with governance. (Paragraphs 6(b) and 8)x Communicate in writing all significant deficiencies to those charged with governance, including a description of the deficiencies and an explanation of their potential effects. (Paragraphs 9 and 11(a))x Communicate to management: o in writing, significant deficiencies that the auditor has, or intends, to communicate to those charged with governance; (paragraph 10(a)) and o other deficiencies, that have not been communicated by other parties, that in the auditor’s professional judgment are of sufficient importance to merit management’s attention. (Paragraph 10(b)) 7 OmniPro Education & Training 81 of 322
  • 84. 320 Materiality in Planning and Performing an AuditSince the issuance of the original ISA 320, “Audit Materiality,” several national standardsetters had revised and expanded their existing standards and guidance. In particular,there was increased recognition of the need for greater consideration not only of the sizeof an item, but also of its nature and of the circumstances of the entity when determiningmateriality and evaluating misstatements. Work undertaken by APB on aggressiveearnings management also highlighted audit materiality as an important area.Key areas the IAASB sought to address in the revision were:x Updating the definition of materiality to make clearer that materiality depends on the size and nature of an item judged in the surrounding circumstances.x Introducing guidance on the use of benchmarks for the initial determination of materiality (but not setting formulaic rules);x Indicating that during the audit the auditor is alert for possible bias in management’s judgments. When evaluating whether the financial statements as a whole are free of material misstatement, the auditor is required to consider both the uncorrected misstatements and the qualitative aspects of the entity’s accounting practices.Following that initial exposure, the IAASB concluded that the clarity and flow of therequirements and guidance would be enhanced by addressing materiality andmisstatements in separate ISAs. This led to the creation of ISA 450, Evaluation ofMisstatements Identified During the Audit (see separate section below).With respect to materiality, the revision has introduced more requirements relating to thedetermination of materiality and related amounts, but does not specify a methodology(e.g. percentages) that should be applied.The definition of materiality is replaced by a description of the common characteristics ofmateriality covered in financial reporting frameworks. It is made clearer that materialitydepends on the nature of an item as well as its size.The new requirements include:x Determining a lower amount, ‘performance materiality,’ for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures. (Performance materiality is the amount, or amounts, set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. If applicable, performance materiality also refers to the amount or amounts set by the auditor at less than the materiality level or levels for 8 OmniPro Education & Training 82 of 322
  • 85. particular classes of transactions, account balances or disclosures.) (Paragraphs 9 and 11) How much less performance materiality is than materiality for the financial statements as a whole is a matter of judgment, affected by the auditor’s understanding of the entity and the nature and extent of misstatements identified in previous audits and thereby the auditor’s expectations in relation to misstatements in the current period.x Determining whether a materiality amount lower than the materiality level for the financial statements as a whole is applicable for particular classes of transactions, account balances or disclosures (paragraph 10). For example, in the UK and Ireland, statutory disclosures related to directors’ remuneration might be a particular class of transaction and disclosure where lower levels of materiality and performance materiality might be used.x Revising materiality in the event of becoming aware of information that would have caused the auditor to determine a different amount initially. If the auditor concludes that a lower materiality for the financial statements as a whole than that initially determined is appropriate, the auditor is also required to determine whether it is necessary to revise performance materiality, and whether the nature, timing and extent of the planned procedures remain appropriate. (Paragraphs 12 and 13)x Specific documentation requirements for the amounts determined and any changes made during the audit. (Paragraph 14)402 Audit Considerations Relating to an Entity using a Service OrganizationThe revision of ISA 402 was intended to respond to relevant developments, including:(a) The increasing use of service organizations by entities and increasing complexity of such relationships; and(b) The need to align the standard with the risk assessment standards, in particular those dealing with obtaining an understanding of internal control and the assessment of identified risks.The revised ISA 402 is also intended to enhance the consistency of auditor performancein an audit of financial statements through more specific requirements and expandedguidance.In addition to aligning the standard with the risk assessment standards, the revisionincreases the focus on, and expands the requirements and guidance, when the auditorintends to use a service auditor’s report as audit evidence (in particular ‘Type 2’ reports,which cover the operating effectiveness of controls at a service organisation). 9 OmniPro Education & Training 83 of 322
  • 86. Requirements include:x Specifying matters included in the understanding of how the user entity uses the services of a service organisation. (Paragraph 9)x When the user auditor’s risk assessment includes an expectation that controls at the service organization are operating effectively, specifying procedures the user auditor performs to obtain audit evidence about the operating effectiveness of those controls, including: (paragraph 16) (a) Obtaining a Type 2 report, if available; (b) Performing appropriate tests of controls at the service organization; or (c) Using another auditor to perform tests of controls at the service organization on behalf of the user auditor.x Specifying procedures to be performed if the user auditor plans to use a report from a service auditor as audit evidence, including: o being satisfied as to the service auditor’s professional competence and independence from the service organization, and the adequacy of the standards under which the report was issued; (paragraph 13) and o in relation to Type 2 reports, procedures to determine whether the service auditor’s report provides sufficient appropriate audit evidence about the effectiveness of the controls to support the user auditor’s risk assessment. (Paragraph 17)450 Evaluation of Misstatements Identified During the AuditAs explained above, ISA 450 a new standard that has been derived from the revision ofISA 320 on audit materiality. There are a number of new requirements, although formost audits these are not expected to give rise to significant changes in current practice inthe UK and Ireland. These include:x Accumulating all misstatements identified other than those that are clearly trivial. (Paragraph 5)x Prior to evaluating the effect of uncorrected misstatements, reassessing materiality determined in accordance with ISA 320 to confirm whether it remains appropriate in the context of the entity’s actual financial results. (Paragraph 10)x Determining whether uncorrected misstatements are material, with consideration given to the nature of the misstatements as well as their size and to the effect of uncorrected misstatements related to prior periods. (Paragraph 11)x Specific documentation requirements (paragraph 15): (a) The amount below which misstatements would be regarded as clearly trivial; (b) All misstatements accumulated during the audit and whether they have been corrected; and 10 OmniPro Education & Training 84 of 322
  • 87. (c) The auditor’s conclusion as to whether uncorrected misstatements are material, individually or in aggregate, and the basis for that conclusion.505 External ConfirmationsThe revision of ISA 505 was intended to respond to the concerns of some stakeholdersthat more rigorous requirements governing the use of external confirmations by theauditor were required.The revised standard relates to the ‘how’ of confirmations, not the ‘when’. The newrequirements are unlikely to result in significant changes of substance to current practicein the UK and Ireland. Compared to the extant ISA 505 there is more specification, inparticular in relation to:x Maintaining control over the confirmation requests. (Paragraph 7)x Obtaining further evidence to resolve doubts about the reliability of responses. (Paragraph 10)x Specifying conditions that have to be present if negative confirmations are used as the sole substantive audit procedure. (Paragraph 15)A conforming change has been made to ISA 330, paragraph 19, to require that auditorsconsider whether external confirmation procedures are to be performed as substantiveprocedures, but, in substance, this is no change from the requirement in the extant ISA505.540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, andRelated DisclosuresDue to changes in accounting frameworks, financial statements contain more estimatedamounts than when the ISAs were originally issued. The revision of ISA 540 wasundertaken to improve the rigor of the auditing of estimates. The revision has also takenaccount of work undertaken by APB on aggressive earnings management that highlightedthat management may be motivated to choose accounting estimates that affect thecarrying amount of assets or liabilities as a means of managing earnings. Suchmotivation may result in financial statements that lack neutrality, or freedom from bias.The principles and techniques for auditing estimates also apply to auditing fair values,and, indeed, it can be difficult to distinguish an estimate from a fair value. Followinginitial exposure, a decision was therefore made by IAASB to merge ISA 545, AuditingFair Value Measurements and Disclosures, into ISA 540.This revision introduces a number of new requirements which may cause current practicein the UK and Ireland to change. The revised standard: 11 OmniPro Education & Training 85 of 322
  • 88. x Introduces requirements for greater rigor and skepticism into the audit of accounting estimates, including the auditor’s consideration of indicators of possible management bias. It also conforms the approach taken to the audit of accounting estimates with the audit risk and fraud standards.x Provides standards and guidance on the auditor’s determination and documentation of misstatements and indicators of possible management bias relating to individual accounting estimates.x Focuses the requirements and guidance on auditing estimates on areas of estimation uncertainty and risk.x Aligns the requirements and guidance on auditing fair values with the audit risk model, and improves them for matters covered as part of the revision of ISA 540 (e.g., use of ranges, indicators of possible management bias, etc.).New requirements include:x More specification regarding matters the auditor obtains an understanding of for the purpose assessing risks, including how management identifies those transactions, events and conditions that may give rise to the need for accounting estimates, and how management makes the accounting estimates. (Paragraph 8)x Reviewing the outcome of accounting estimates included in prior period financial statements or, where applicable, their subsequent re-estimation for the purpose of the current period. (Paragraph 9)x Evaluating estimation uncertainty and determining whether estimates with high levels of uncertainty give rise to significant risks. (Paragraphs 10 and 11)x Requiring substantive procedures to respond to significant risks, including: o Evaluating how management has considered alternative assumptions or outcomes and why it has rejected them, or how it has otherwise addressed estimation uncertainty. (Paragraph 15(a)) o Obtaining sufficient appropriate audit evidence about whether management’s decisions to recognise, or not recognise, the estimates in the financial statements, and the selected measurement basis, are in accordance with the applicable financial reporting framework. (Paragraph 17) o Evaluating the adequacy of the disclosure of estimation uncertainty in the context of the applicable financial reporting framework. (Paragraph 20)x Reviewing management’s judgments and decisions to identify whether there are indicators of possible management bias. (Paragraph 21)550 Related PartiesThe IAASB was encouraged to update ISA 550 in response to a number of developments.In particular: 12 OmniPro Education & Training 86 of 322
  • 89. x The major corporate scandals of the recent past have highlighted that fraudulent financial reporting often arises through the involvement of related parties.x Following the issue of the audit risk standards, there was a need to revise the extant ISA 550, which is mainly procedural, to focus more on the identification and assessment of risks of material misstatement associated with related party relationships and transactions, and performing appropriate procedures to respond to such risks.The revised ISA places greater emphasis on a risk based approach to the consideration ofrelated parties. It also seeks to improve auditor performance with the difficult task ofidentifying related party relationships and transactions not disclosed to them bymanagement.New requirements include:x Specifying that the audit team discussion required by ISA 315 shall include consideration of the susceptibility of the financial statements to material misstatement due to fraud or error that could result from the entity’s related party relationships and transactions. (Paragraph 12)x Obtaining an understanding of the controls, if any, that management has established, including to (paragraph 14): o Identify, account for, and disclose related party relationships and transactions in accordance with the applicable financial reporting framework; o Authorize and approve significant transactions and arrangements outside the normal course of business.x Treating identified significant related party transactions outside the entity’s normal course of business as giving rise to ‘significant risks.’ (Paragraph 18)x Specifying procedures to be performed if the auditor identifies related parties or significant related party transactions that management has not previously disclosed to the auditor. (Paragraph 22)x Specifying procedures to be performed for identified significant related party transactions outside the entity’s normal course of business, including (paragraph 23): o Inspecting the underlying contracts or agreements, if any, and evaluating whether: ƒ the business rationale, or lack thereof, of the transactions suggests that they may have been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets ƒ the terms of the transactions are consistent with management’s explanations; and ƒ they have been appropriately accounted for and disclosed in accordance with the applicable financial reporting framework 13 OmniPro Education & Training 87 of 322
  • 90. o Obtaining audit evidence that the transactions have been appropriately authorised and approved.x If management has made an assertion in the financial statements to the effect that a related party transaction was conducted on terms equivalent to those prevailing in an arm’s length transaction, the auditor shall obtain sufficient appropriate audit evidence about the assertion. (Paragraph 24)x Communicating with those charged with governance about significant matters identified arising during the audit in connection with the entity’s related parties. (Paragraph 27)x Documenting the names of identified related parties and the nature of related party relationships. (Paragraph 28)580 Written RepresentationsThe revision of the extant ISA 580, “Management Representations,” was intended torespond to relevant developments, including concerns that auditors may be over relyingon written representations.The revised standard introduces a number of significant changes. To address the originalconcern that auditors may be over relying on written representations it is made clearerthat, although written representations provide necessary audit evidence, they supportother audit evidence obtained and do not on their own provide sufficient appropriate auditevidence about any of the matters with which they deal.Changes include:x Requiring auditors to obtain written representations about management’s responsibilities, including: o that management has fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair presentation, as set out in the terms of the audit engagement; (paragraph 10) o that management has provided the auditor with all relevant information and access as agreed in the terms of the audit engagement; (paragraph 11(a)) and o all transactions have been recorded and are reflected in the financial statements. (Paragraph 11(b))x If management does not provide the written representations acknowledging its responsibilities the auditor is required to disclaim an opinion on the financial statements. (Paragraph 20(b))To support these new requirements conforming changes have been made to ISA 210establishing preconditions for an audit, including obtaining management’s agreement that 14 OmniPro Education & Training 88 of 322
  • 91. it understands and acknowledges its responsibility for the matters to which theserepresentations relate (see above).600 Special Considerations – Audits of Group Financial Statements (Including theWork of Component Auditors)The IAASB revised ISA 600, “Using the Work of Another Auditor,” in response torequests from several bodies for guidance on the audit of group financial statements,including the European Commission, the International Organization of SecuritiesCommissions, the former Panel on Audit Effectiveness in the United States, and theInternational Forum on Accountancy Development. The revision establishesrequirements and guidance on matters relevant to the audit of group financial statementsthat were not covered in existing ISAs.The IAASB concluded that increased specification of procedures to be performed isnecessary to achieve greater consistency in group audit practices where the group auditortakes sole responsibility and consequently the revised ISA introduces a number of newrequirements that the group auditor needs to undertake, particularly when other auditorsaudit group components. These requirements strengthen the direction of the audit by thegroup auditor and the group auditor’s involvement in the work of component auditors.However, the impact of the new requirements will be less for the audit of groups withonly a small number of components and where the audit work on these is undertaken bythe same engagement team – in such cases the requirements applying when other auditorsundertake the work on a component and many of the conditional requirements will notapply.Matters covered by the requirements include:x Acceptance and continuance as group auditor (including, where component auditors will be involved, consideration of whether the group engagement team will be able to be involved in the work of the component auditor to the extent necessary to obtain sufficient appropriate audit evidence). (Paragraphs 12-14)x Overall audit strategy and audit plan. (Paragraphs 15-16)x Obtaining an understanding of the group, its components, and their environments, including group-wide controls, and assessing the risks of material misstatement of the group financial statements. The existence of strong group-wide controls can lead to a reduced need for audit evidence on components that are not individually significant. (Paragraphs 17-18)x Obtaining an understanding of component auditors, including their professional competence and whether they understand, and will comply with, the ethical requirements that are relevant to the group audit. (Paragraphs 19-20)x Materiality (paragraphs 21-23). The group engagement team is required to determine (paragraph 21): o The materiality level for the group financial statements as a whole; and 15 OmniPro Education & Training 89 of 322
  • 92. o If the group auditor determines that in the specific circumstances of the group, there are particular classes of transactions, account balances or disclosures in the group financial statements for which misstatements of lesser amounts than the materiality level for the group financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the group financial statements, the materiality levels to be applied to those particular classes of transactions, account balances or disclosures. o Component materiality for those components where component auditors will perform an audit or a review for purposes of the group audit (unless the auditor intends to rely on a statutory audit), and o The threshold above which misstatements cannot be regarded as clearly trivial to the group financial statements.x Responding to assessed risks (paragraphs 24-31), including determining: o the work to be performed on the financial information of components. ƒ For a component that is of individual financial significance an audit of the financial information, using component materiality, is required. (Paragraph 26) ƒ For a component that is significant because it is likely to include group level significant risks one or more of the following is required (paragraph 27): (a) An audit of the financial information of the component using component materiality. (b) An audit of one or more account balances, classes of transactions or disclosures relating to the likely significant risks of material misstatement of the group financial statements. (c) Specified audit procedures relating to the likely significant risks of material misstatement of the group financial statements. ƒ For non-significant components analytical procedures at group level are required. Further procedures are specified if more audit evidence needs to be obtained on which to base the group audit opinion. (Paragraphs 28 and 29) o the level of involvement of the group engagement team in the work performed by component auditors. For significant components the group engagement team is required to be involved in the component auditor’s risk assessment to identify significant risks of material misstatement of the group financial statements. (Paragraph 30)x Consolidation process. (Paragraphs 32-37)x Subsequent events. (Paragraphs 38-39)x Communication with component auditors (including details of matters to be covered). (Paragraphs 4041) 16 OmniPro Education & Training 90 of 322
  • 93. x Evaluating the sufficiency and appropriateness of audit evidence obtained. (Paragraphs 42-45)x Communication with group management and those charged with governance of the group. (Paragraphs 46-49)x Documentation, including (paragraph 50): o An analysis of components, indicating those that are significant, and the type of work performed on the financial information of the components. o The nature, timing and extent of the group engagement team’s involvement in the work performed by the component auditors on significant components including, where applicable, the group engagement team’s review of relevant parts of the component auditors’ audit documentation and conclusions thereon. o Written communications between the group engagement team and the component auditors about the group engagement team’s requirements.620 Using the Work of an Auditor’s ExpertThe IAASB revised ISA 620 in response to developments including:(a) A concern that the extant ISA 620 mainly focuses on the use of experts with respect to substantive procedures regarding the measurement of account balances, whereas experts may be used for other purposes during the audit, for example, to assist in identifying and assessing the risks of material misstatement; and(b) The possibility that the wider use of fair value accounting may require more frequent use of experts by the auditor.During the project, the IAASB considered matters, including whether the auditor’s reportshould refer to the expert, and how the nature, timing and extent of audit proceduresvaries depending on such matters as: the nature of, and risks of material misstatement in,the matter to which the expert’s work relates; the significance of the expert’s work in thecontext of the audit; the auditor’s knowledge of and experience with previous workperformed by the expert; and whether the expert is subject to the auditor’s firm’s qualitycontrol policies and procedures.The scope of the revised standard is restricted to consideration of the auditor’s use of thework of an expert, employed or engaged by the auditor, possessing expertise in a fieldother than accounting or auditing. Conforming amendments have been made toparagraph of ISA 500, “Audit Evidence,” so that it addresses use of management’sexperts. Considerations where a member of the engagement team with expertise in aspecialized area of accounting or auditing is used are addressed in paragraph A20 of ISA220, “Quality Control for an Audit of Financial Statements.” 17 OmniPro Education & Training 91 of 322
  • 94. Compared to the extant ISA there is more specification of audit procedures, in particularregarding the agreement of work to be performed (paragraph 11) and evaluating thereasonableness of the expert’s findings (paragraphs 12 and 13). 18 OmniPro Education & Training 92 of 322
  • 95. AppendixList of Auditing Standards and Whether Revised as well as ClarifiedThe new ISAs (UK and Ireland) incorporate the clarified ISAs issued by the InternationalAuditing and Assurance Standards Board (IAASB), with the exception of ISA 700 (seepage 3 above).Standard Revised as well as clarifiedInternational Standard on Quality Control1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services EngagementsInternational Standards on Auditing200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing 9 (UK and Ireland)210 Agreeing the Terms of Audit Engagements 93220 Quality Control For an Audit of Financial Statements230 Audit Documentation240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements250A Consideration of Laws and Regulations in an Audit of Financial Statements250B The Auditor’s Right and Duty to Report to Regulators in the Financial Sector260 Communication with Those Charged with Governance 9265 Communicating Deficiencies in Internal Control to Those Charged New with Governance and Management standard3 ISA 210 was not subject to a revision project in its own right but, nevertheless, has been significantly revised as a result of conforming changes stemming from the revision of other ISAs. 19 OmniPro Education & Training 93 of 322
  • 96. 300 Planning an Audit of Financial Statements315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment320 Materiality in Planning and Performing an Audit 9330 The Auditor’s Responses to Assessed Risks402 Audit Considerations Relating to an Entity Using a Service Organization 9450 Evaluation of Misstatements Identified During the Audit New standard500 Audit Evidence501 Audit Evidence – Specific Considerations for Selected Items505 External Confirmations 9510 Initial Audit Engagements – Opening Balances520 Analytical Procedures530 Audit Sampling540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures 9550 Related Parties 9560 Subsequent Events570 Going Concern580 Written Representations 9600 Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors) 9610 Using the Work of Internal Auditors620 Using the Work of an Auditor’s Expert 9 20 OmniPro Education & Training 94 of 322
  • 97. 700 Forming an Opinion and Reporting on Financial Statements 4705 Modifications to Opinions in the Independent Auditor’s Report 95706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report 95710 Comparative Information – Corresponding Figures and Comparative Financial Statements720A The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements720B The Auditor’s Statutory Reporting Responsibility in Relation to Directors’ Reports4 APB has not adopted ISA 700, “Forming an Opinion and Reporting on Financial Statements,” as issued by the IAASB. It has instead issued a clarified version of the recently revised ISA (UK and Ireland) 700, “The Auditor’s Report on Financial Statements” (see page 3 above).5 ISAs 705 and 706 separate and revise the requirements and guidance in current ISA 701, “Modifications to the Independent Auditor’s Report.” APB has not adopted ISA 701 – for the UK and Ireland, requirements and guidance relating to modification of the auditor’s report are currently included in ISA (UK and Ireland) 700 (Revised). As explained on page 4 above, APB is now adopting ISAs 705 and 706. 21 OmniPro Education & Training 95 of 322
  • 98. NOTICE TO READERSThis document has been obtained from the website of the Financial Reporting Council(FRC) and its operating Boards, which includes the Auditing Practices Board (APB). Useof the website is subject to the WEBSITE TERMS OF USE, which may be viewed in aseparate section of the website. Readers should be aware that although the FRC and itsBoards seek to ensure the accuracy of information on the website, no guarantee orwarranty is given or implied that such information is free from error or suitable for anygiven purpose. 22 OmniPro Education & Training 96 of 322
  • 99. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLEThe Directors,XYZ LimitedXYZ Address Line 1,XYZ Address Line 2,XYZ Address Line 3.DATEDear SirsXYZ LIMITEDAUDIT PERIOD ENDED 30th June 2011The purpose of this letter is to set out the basis on which we are to act as auditors of theabove company and the respective areas of responsibility of the directors and of ourselves.AUDITDUTIES & RESPONSIBILITIES OF DIRECTORS Our audit will be conducted on the basis that [management and, where appropriate, those charged with governance] acknowledge and understand that they have responsibility: a) For maintaining proper accounting records and preparing financial statements which give a true and fair view and comply with the Companies Acts 1963 to 2009; b) For the preparation and fair presentation of the financial statements in accordance with [International Financial Reporting Standards] or [the accounting standards issued by the Accounting Standards Board (Generally Accepted Accounting Practice in Ireland)]; c) For such internal control as [management] determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and d) To provide us with: i. Access to all information of which [management] is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; ii. Additional information that we may request from [management] for the purpose of the audit; and iii. Unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence. As part of our audit process, we will request from [management and, where appropriate, those charged with governance], written confirmation concerning representations made to us in connection with the audit. You are also required to inform us of any material event occurring between the date of our report and that of the AGM which may affect the financial statements. OmniPro Education & Training 97 of 322
  • 100. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE We look forward to full cooperation from your staff during our audit.DUTIES AND RESPONSIBILITIES OF AUDITORS:OPTION 1 We are registered for audit purposes with the Chartered Accountants Ireland /Institute of Chartered Certified Accountants and this registration extends to audits carried out in both the Republic of Ireland and the United Kingdom.OROPTION 2 We are registered for audit purposes in the Republic of Ireland with Certified Public Accountants or the Institute of Incorporated Public Accountants. We have a statutory responsibility to report to the members whether in our opinion the financial statements give a true and fair view and whether they have been properly prepared in accordance with the Companies Acts 1963 to 2009. In arriving at our opinion, we are required to consider the following matters and to report on: o whether proper accounting records have been kept by the company; o whether the company balance sheets and profit and loss accounts are in agreement with the accounting records and returns; o whether we have obtained all the information and explanations which we consider necessary for the purposes of our audit; o whether the information given in the directors’ report is consistent with the financial statements; and o whether there existed at balance sheet date a financial situation which, under section 40(1) of the Companies (Amendment) Act 1983, would require the convening of an extraordinary general meeting of the company. In addition, there are certain other matters which, according to the circumstances, may need to be dealt with in our report. For example, where the financial statements do not give full details of directors’ remuneration or of their transactions with the company, the Companies Acts, 1963 to 2009 require us to disclose such matters. We have a responsibility under the Companies Act, 1990 (the “Act”) to serve notice on the company if we form the opinion that the company is contravening Section 202 of the Act in relation to the maintenance of proper books of account. Where, following receipt of notice of such contravention, you do not take steps within 7 days to ensure that proper books of account are kept, we have a duty to notify the Registrar of Companies. We have a professional responsibility to report if the financial statements do not comply in any material respect with applicable accounting standards, unless in our opinion the non-compliance is justified in the circumstances. In determining whether or not the departure is justified we consider: o whether the departure is required in order for the financial statements to give a true and fair view; and OmniPro Education & Training 98 of 322
  • 101. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE o whether adequate disclosure has been made concerning the departure. Our report will be made solely to the company’s members, as a body, in accordance with Section 193 of the Companies Act, 1990. Our audit work will be undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. In those circumstances, to the fullest extent permitted by law, we will not accept or assume responsibility to anyone other than the company and the company’s members as a body for our audit work, for the audit report, or for the opinions we form. The form and content of our report may need to be amended in light of our audit findings. We will express an unqualified opinion when the financial statements give a true and fair view in accordance with the financial reporting framework. Any modification to this unqualified audit opinion will be expressed in our auditor’s report and in the audit findings letter. Our professional responsibilities also include: o stating in our report a description of the directors’ responsibilities for the financial statements where the financial statements or accompanying information do not include such a description; and o considering whether other information in documents containing audited financial statements is consistent with those financial statements.SCOPE OF AUDIT We have been requested to audit the financial statements of XYZ Limited, which comprise the balance sheet as at 30 June 2011, the profit and loss account, a statement of total recognised gains and losses and a cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements. We will conduct our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs) issued by the Auditing Practices Board and will have regard to relevant Auditing Guidelines, regulations and recommendations issued by the Auditing Practices Board and other professional bodies. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not OmniPro Education & Training 99 of 322
  • 102. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE be detected, even though the audit is properly planned and performed in accordance with ISAs. In making our risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements 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 internal control. However, we will communicate to you in writing concerning any significant deficiencies in internal control relevant to the audit of the financial statements that we have identified during the audit. We appreciate that the present size of your business renders it uneconomic to create a system of internal control based on the segregation of duties for different functions within each area of the business. In the running of the company we understand that the directors are closely involved with the control of the companys transactions. In planning and performing our audit work we shall take account of this supervision. We may ask additionally for confirmation in writing that all the transactions undertaken by the company have been properly reflected and recorded in the accounting records. As part of our normal audit procedures, we may request you to provide written confirmation of certain oral representations which we have received from you during the course of the audit on matters having a material effect on the financial statements. In connection with representations and the supply of information to us generally, we draw your attention to Sections 193(3), 196 and 197 of the Companies Act 1990, under which it is an offence for an officer of the company to mislead the auditors. In order to assist us with the examination of your financial statements, we shall request early sight of all documents or statements, which are due to be issued with the financial statements. We are also entitled to attend all general meetings of the company and to receive notice of all such meetings. We shall not be treated as having notice, for the purposes of our audit responsibilities, of information provided to members of our firm other than those engaged on the audit. Once we have issued our report we will have no further direct responsibility in relation to the financial statements for that financial year. However, we expect that you will inform us of any material event occurring between the date of our report and that of the annual general meeting which may affect the financial statements. As noted above, our report will be made solely to the company’s members, as a body, in accordance with Section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.DETECTION OF FRAUD, ERROR AND NON-COMPLIANCE WITH LAWS ANDREGULATIONS Responsibility for the companys compliance with company law and other laws and regulations rests with you, including the particular responsibility of each director (and the company secretary) to ensure that the company complies with the requirements of the OmniPro Education & Training 100 of 322
  • 103. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE Companies Acts, 1963 to 2009. You are also responsible for safeguarding the assets of the company and for the prevention and detection of fraud or error. However, we shall endeavour to plan our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements or books of account (including any material misstatements resulting from fraud, error or non- compliance with law or regulations), although our examination should not be relied upon to disclose all such material misstatements or frauds, errors or instances of non- compliance as may exist.ACCOUNTING SERVICES/COMPANY SECRETARIAL (SPECIFYEXACTLY YOUR ROLE) We have agreed that we shall, as your agents, prepare the financial statements based on accounting records maintained by yourselves on the basis that you will make full disclosure to us of all relevant information. In providing the agreed services for you, our relationship will be that of professional person and client, save where we are instructed to negotiate tax liabilities with the Revenue Commissioners. We have also agreed to provide assistance to the company secretary by preparing and lodging returns with the Registrar of Companies and to deal with any other routine secretarial matters that may arise. To allow is to carry out these services all books, records and explanations requested by us must be submitted on a timely basis. To allow us to assist you in preparing returns for the Registrar of Companies it is necessary that the directors of the company have taken the steps to ensure that the audited (abridged if appropriate) accounts will be available to be annexed to the relevant returns It is agreed that the directors of the company are primarily responsible to ensure that the company complies with the provisions of the Companies Acts 1963 to 2009 and will if necessary seek proper legal advice and record all decisions of the directors and members in minute books maintained for that purposeTAX COMPLIANCE SERVICES (SPECIFY EXACTLY YOUR ROLE) We have agreed to prepare, in respect of each accounting period, a computation of the companys profits, adjusted in accordance with the provisions of the Taxes Acts. Subject to your approval, this will be submitted to the Inspector of Taxes with the companys formal return. We shall advise you each year before the due date of the amount of Corporation Tax payable. You will be responsible, unless otherwise agreed, for all other returns, including returns relating to employee taxes under PAYE/PRSI and returns of employee expenses and benefits and VAT returns. We shall also be pleased to advise you on other matters relating to taxation, such as the implications of particular business transactions and on other taxation matters, which you refer to us, such as value added tax, etc. OmniPro Education & Training 101 of 322
  • 104. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLEADDITIONAL REPORTING RESPONSIBILITY UNDER LEGISLATIONCOMPANY LAW  The Company Law Enforcement Act, 2001, as amended the Companies Act, 1990, requires us to notify the Director of Corporate Enforcement ("the Director") forthwith where, in the course of, and by virtue of, our audit, we form the opinion that there are reasonable grounds for believing that the company, or an officer or agent of it, has committed a reportable indictable offence under the Companies Acts and to provide the Director with details of the grounds on which we formed that opinion.  The Companies Act, 1990, also requires us, as auditors, to notify the company if we form the opinion that the company is failing or has failed to keep proper books of account and, in the event that the directors do not take steps to rectify the situation within seven days, to notify the Registrar of Companies who is obliged to then notify the Director of Corporate Enforcement.  Our professional or legal duties to you are not contravened by reason of our compliance with either of the above obligations and no liability to the company, its shareholders, creditors or other interested parties shall attach to us by reason of such compliance.CRIMINAL LAW  The Criminal Justice (Theft and Fraud Offences) Act, 2001 (the “2001 Act”) requires us to report to the Garda Siochána where the accounts of the company indicate that an offence specified by the 2001 Act may have been committed by the company, or in relation to the affairs of the Company by its directors, secretary, managers or employees. The term accounts in this context may include any information, or any declaration, return, account or other document which we know will be, or is likely to be, used for the purpose of keeping or auditing the accounts of the company. The offences specified by the 2001 Act include theft, unlawful use of a computer, false accounting, forgery and counterfeiting. We are required to make such a report notwithstanding any professional obligation of privilege or confidentiality and such a report made in good faith shall not be treated as a breach of any restriction imposed by statute or otherwise and will not involve us in liability of any kind.  We are required to notify the Director of Corporate Enforcement directly and report to the Garda Siochána directly in the circumstances set out above and may do so without the knowledge and consent of the directors.  We have responsibilities under the Criminal Justice (Terrorism Offences) Act 2005, to report suspicions of the financing of terrorism. We are also obliged to adopt measures to prevent and detect the commission of an offence of financing terrorism and are obliged to train employees for the purpose of enabling them to identify transactions which may relate to the commission of an offence of financing terrorism.ANTI- MONEY LAUNDERING  The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (Section 25) designates accountants, auditors and tax advisors for the purposes of the anti- money laundering provisions. The provisions of this Act require us to implement OmniPro Education & Training 102 of 322
  • 105. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE certain procedures to establish client identity and impose reporting obligations in respect of suspicions regarding offences under the money laundering legislation.  Accountants, auditors and tax advisors are required to, amongst other things, carry out Customer Due Diligence under Section 33 to: o Verify the identity of new clients, including that of any beneficial owners who are connected with the client or the service they provide; o Establish and retain records of identification for at least five years from the date of last doing business with the client; o Retain original documentation relating to transactions for a period of at least five years following the execution of the transaction; o Establish measures to prevent and detect money laundering; o Report suspicions of money laundering to the Garda Siochana and the Revenue Commissioners; o Establish procedures to ensure all transactions connected with certain designated states and territorial units are reported; o Ensure adequate control over client monies.ADDITIONAL LEGAL RESPONSIBILITIES REGARDING TAXATION  We must report material relevant offences, as defined in Section 1079 of the Taxes Consolidation Act 1997, to the directors of the company in writing, requesting them to rectify the matter or notify an appropriate officer of the Revenue Commissioners of the offence within 6 months. In the event that our request is not complied with, we must cease to act as auditor to the company or to assist the company in any taxation matter. We must also send a copy of our notice of resignation to an appropriate officer of the Revenue Commissioners within 14 days.  The responsibility for detection of error or non-compliance with law or regulations in relation to taxes and in relation to information in respect of which you have collection, filing and / or payment obligations rests with you. Unless otherwise expressly agreed between us as a separate engagement, we shall not have any obligations for the preparation, accuracy or filing of returns or the discharge of liability for any taxes or duties, including corporation tax, VAT, PAYE / PRSI, DIRT, subcontractor’s tax, stamp duty, customs or excise duties or for the preparation and filing of third party information returns (e.g. Forms 46G). We will of course be happy to provide, on terms to be agreed between us, suggestions and advice on how best to satisfy your obligations under these particular headings.REPORTING TO THIRD PARTIES  There may be situations for example in relation to loan agreements, where a third party seeks to require us, in our capacity as auditors, to report to them. Any contractual arrangements between you and a third party which seek to impose such requirements upon us will not, as a matter of law, be binding on us. However, depending on the circumstances we may agree to provide reports to third parties, but not in our capacity as auditors. Any such possible requirements must be discussed with us at the earliest opportunity and well before the loan agreement or other arrangement is finalised. In this regard, however, it is our policy not to extend our duty of care in respect of our audit report in the financial statements. OmniPro Education & Training 103 of 322
  • 106. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE  As noted above, our opinion will be prepared for and only for the companys members in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. In those circumstances, we will not, in giving our opinion, accept or assume responsibility (legal or otherwise) or accept liability for or in connection with any other purpose for which our report or opinion may be used, or to any other person to whom our report is shown or into whose hands it may come, and no other persons shall be entitled to rely on our opinion save where they have obtained our prior written consent that they may do so.  In accordance with the Auditing Practice Board’s International Standard on Quality Control 1 and our firms internal control procedures our audit files and working papers may be subject to an external review by our Institute.ELECTRONIC COMMUNICATIONS  In the course of the engagement we may communicate with you electronically. However, as you are aware the electronic transmission of information cannot be guaranteed to be secure or error free and such information could be intercepted, corrupted or lost, destroyed, arrive late or incomplete or otherwise be adversely affected or unsafe to use. Accordingly whilst we will use commercially reasonable procedures to check for the then most commonly know viruses before sending information electronically and notwithstanding any collateral contract, warranty or representation, neither we nor our partners, employees, agents or servants shall have any liability to you on any basis, whether in contract, tort (including negligence) or otherwise, in respect of any error or omission arising from or in connection with the electronic communication of information to you and your reliance on such information and including (but not limited to) the acts or omissions of our service providers. Such exclusion of liability shall not apply to us in the event of such acts, omissions or misrepresentations which are in any case criminal, dishonest or fraudulent on the part of our partners, employees, agents or servants.  If the communication relates to a matter of significance on which you wish to rely and you are concerned about the possible effects of electronic transmission you should request a hard copy of such transmission from us. If you wish us to password protect all or certain documents transmitted you should discuss this with us and we will make appropriate arrangements.FEES  Our fees are computed on the basis of time spent on your affairs by the partners and our staff and on the levels of skill and responsibility involved. Unless otherwise agreed, fees will be charged separately for each main class of work at appropriate intervals during the course of the year and will be due on presentation. It is our usual practice to provide estimates of our fees in advance of the work commencing.  Any costs in terms of time spent by Compliant Accountant & Co. partners and staff, incurred in complying with the requirements set out in the section entitle Additional Reporting Responsibility Under Legislation will be payable by the company.CONFIDENTIAL INFORMATION  We shall not disclose, to third parties, confidential information acquired in the course of our professional work without your consent unless there is a legal right or duty to OmniPro Education & Training 104 of 322
  • 107. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLE disclose. We are obliged under the regulations of our Institute to make all files available for inspection in the course of a routine practice review.APPLICABLE LAW  This engagement letter shall be governed by, and construed in accordance with Republic of Ireland Law. The courts of the Republic of Ireland shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning the engagement letter and any matter arising from it. Each party irrevocably waives any right it may have to object to an action being brought in those courts, to claim that the action has been brought in an inconvenient forum, or to claim that those courts do not have jurisdiction.AGREEMENT OF TERMS  Please be advised that as auditors we are obliged under the APB Ethical Code of Conduct when performing taxation, company secretarial, accounting or other services and investment advice that we cannot actively make key management or judgement decisions on your behalf. While we will endeavour to provide you with the best information in order for you to make such decisions we must remain independent and objective in the conduct of the audit and this also includes informing you of any threat that may impair the perceived quality of our audit report. We will notify you separately if any such threat arises and where appropriate reconsider our involvement in the audit process.  Once it has been agreed, this letter will remain effective, from one audit appointment to another, until it is replaced. We should be grateful if you would confirm in writing your agreement to these terms by signing and returning the enclosed copy of this letter, or let us know if they are not in accordance with your understanding of our terms of engagement.  The terms and conditions of the firm’s services and engagements included as an Appendix to this letter should also be read in conjunction with this letter. Yours faithfully _________________________ Compliant Accountant & Co XXX Type of Accountants OmniPro Education & Training 105 of 322
  • 108. LTD CO AUDIT LETTER OF ENGAGEMENT EXAMPLEACCEPTANCEWe agree with the Terms of Engagement set out above.For and on behalf of The Board of Directors of XYZ Ltd_______________ _______________Director DirectorDATE OmniPro Education & Training 106 of 322
  • 109. LTD CO AUDIT PLANNING LETTERThe Board of DirectorsCompliant ClientAddressDateRe: Audit Planning LetterDear SirsWe are writing in connection with the audit due to start on ……… Further to our meetingwe now set out below some matters in relation to our audit planning.International Auditing Standards (UK & Ireland) require us to communicate ourmutual understanding of the audit and the respective responsibilities of the auditorsand the directorsIn addition to providing our formal audit report on your financial statements, we willcommunicate in our audit findings letter those matters, which we believe to berelevant to the directors that come to our attention as a result of the performance ofour audit of the financial statements.Independence and objectivityAuditing Practice’s Board Ethical Standard 1, "Integrity, objectivity andindependence" requires me as audit engagement partner to ensure that thosecharged with the governance of the audit client are appropriately informed on a timelybasis of all significant facts and matters that bear upon us, the auditors objectivityand independence.The aim of these communications is to ensure full and fair disclosure by the auditor tothose charged with governance of the audit client on matters in which they have aninterest. These will generally include the key elements of the audit engagementpartners consideration of objectivity and independence such as:  The principal threats, if any to objectivity and independence identified by the auditor, including consideration of all relationships between the audit client, its affiliates and directors and the audit firm.  Any safeguards adopted and the reasons why they are considered to be effective.  Any independent partner review.  The overall assessment of threats and safeguards.  Information about the general policies and processes within the audit firm for maintaining objectivity and independence.OPTION 1In this regard we confirm that in our opinion there are no threats with regard to ourobjectivity and independence. Should such a threat exist we will implementsafeguards in accordance with Ethical Standards and our firms Internal Controlprocedures which include the following © OmniPro OmniPro Education & Training 107 of 322
  • 110. LTD CO AUDIT PLANNING LETTER  Independent external quality control review.  External review of the significant subjective audit issues before the audit report is signed off  Involving an additional partner not involved on the audit engagement to review the work done by the audit partner and to advise as necessary (in the case of practices with one partner this could involve a reciprocal arrangement with a partner from another audit firm).  Consultation on subjective matters with an independent external third party (e.g. partner under reciprocal arrangement, expert) or with the Institute before the audits signed offWe confirm that, in our professional judgement and having regard to the safeguardsin place, the firm is independent within the meaning of the Auditing Practices Board’sEthical Standards and the objectivity of the audit engagement partner and staff is notimpaired. Therefore, we are pleased to proceed in accordance with our appointment.OPTION 2 (INCLUDE AS RELEVANT)Potential threats to objectivity and independence have been identified during ouraudit planning process. In this regard we have implemented effective safeguards asdetailed below to ensure we remain objective and independent in carrying out theaudit of your company.Ethical Standard 3 -Long-Term Association ( if applicable)Compliant Accountant & Co has been the auditor of Compliant Client for the last ????of years.In accordance with the Ethical Standards and the firms Internal Control proceduressafeguards should be implemented in a situation where Compliant Accountant & Cois the auditor for more than ten yearsTo this end Compliant Accountant & Co will obtain an independent external review asa safeguard against long association combined with performing internal peer reviewsand consulting on any relevant technical issues.Ethical Standard 4 –Provision of Non Audit Services ( if applicable)Compliant Accountant & Co. provides outsourced financial control services in theform of basic bookkeeping to Compliant Client.In our professional opinion these activities of providing bookkeeping andmanagement accounting services do not present a serious danger in terms ofindependence objectivity and integrity. The provision of non- accounting servicesenables us obtain a better understanding of the client and assists us form our auditopinion due to our extensive review of transactions in preparing the accounts of thecompany.We consider that despite providing these non-audit services as described in theEthical Standards to the client that none of the following threats exist to the extentthat we should resign the audit engagement or cease providing non audit services:- © OmniPro OmniPro Education & Training 108 of 322
  • 111. LTD CO AUDIT PLANNING LETTER o Self interest threat o Self review threat o Management threat o Advocacy threat o Familiarity threat o Intimidation threatEthical Standard –Provisions Available to Small Entities ( if applicable)In accordance with the Ethical Standards Compliant Accountant & Co is entitled toavail of the Ethical Standards Provisions Available to Small Entities when providingnon-audit services to a small entity audit client. This entitlement allows the auditorexemption from having to apply safeguards to address a self-review threat provided: o The audit client has "informed management” o Compliant Accountant & Co will ensure independent cyclical inspection of completed engagements for quality control purposes.In our professional opinion Complaint Client has informed management and weconfirm that we will extend independent cyclical inspection of completedengagements for quality control.ALL OPTIONSWe confirm that, in our professional judgement and having regard to the safeguardsin place, the firm is independent within the meaning of the Auditing Practices Board’sEthical Standards and the objectivity of the audit engagement partner and staff is notimpaired. Therefore, we are pleased to proceed in accordance with our appointment.Nature and scope of the auditWe set out below an outline of the nature and scope, including where relevant, anylimitations thereon, of the work we propose to undertake and the form of the reportwe expect to make.We have a duty to form an opinion on the financial statements at the end of the audit.We must give an opinion on whether the financial statements give a true and fair viewat the year-end, whether the financial statements have been properly prepared inaccordance with the Companies Acts 1963 to 2009, we must also state whether allthe information and explanations which we consider necessary for the purpose of theaudit have been obtained, whether proper books of account have been kept by thecompany and whether the information given in the Directors’ Report is consistent withthe financial statements. We must also state whether the financial situation underSection 40(1) of the Companies (Amendment) Act 1983 exists (i.e. the net assets ofthe company are less than half of the called up share capital) and this would requirethe convening of an extraordinary general meeting.We will express an unqualified opinion when the financial statements give a true andfair view in accordance with the financial reporting framework. Any modification tothis unqualified audit opinion will be expressed in our auditor’s report and in the auditfindings letter.We will conduct our audit in accordance with the International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includes an © OmniPro OmniPro Education & Training 109 of 322
  • 112. LTD CO AUDIT PLANNING LETTERexamination on a test basis of evidence relevant to the amounts and disclosures inthe financial statements.We will also document the internal controls and the systems of your company. Wewill review internal and external operational, financial, compliance and other risksfacing the company, which might affect the financial statements, including thelikelihood of those risks materialising and how they are managed.We will also document and review the control environment within the company,including the attitude of management to controls and whether management have aprocess for keeping under review the effectiveness of the system of internal controland, where a review of the effectiveness of internal control has been carried out andthe results of that review.We will also review the actions that the directors’ plan to take in response to matterssuch as developments in law, accounting standards and other developments relevantto the Company’s financial statements.Findings from the auditAt the end of the audit we will draft an audit findings letter for the attention of thedirectors of the company.The audit findings letter will include our views and comments on the following: Our views as auditors regarding the quality and acceptability of the entities internal controls and accounting systems with a description of any suggested improvements Our views as auditors regarding the quality of the entity’s accounting practices and financial reporting with a description of any suggested improvements A description of the significant audit risks that have impacted on our audit report A description of any fraud/information that indicates that a fraud may exist or breaches in laws or regulations noted during our audit Any potential modifications to the auditor’s report, including to description of any suggested qualification or explanatory paragraphs Any matters of governance interest A description of any unadjusted misstatements (uncorrected errors and omissions) Any other issues required to be communicated to those charged with governance in accordance with the ISA’s This letter was prepared for the sole use of the company; the content must not be disclosed to any third party, without our prior written consent and we assume no responsibility to any other person. Yours faithfully ______________________ Compliant Accountant & Co © OmniPro OmniPro Education & Training 110 of 322
  • 113. Compliant Client B931 December 2008 Initials Date Prepared by: CC 27-May-10Index Reviewed by: CC 27-May-10Audit Planning Meeting with those Chargedwith GovernanceNote: Commentary should consist of a brief outline of the discussion held with theclient under each of the headings. N/A or No answers will not suffice_____________________________________________________________________TimingThe audit planning meeting was held on the morning of the 15th of XX XXAttendeesEngagement partner,Audit Manager, senior accountant and X,Y and Z representingthe board of directors were present at the meetingTopics of Discussion/Minutes of MeetingThe following areas were discussed and the directors assessments and commentswere recorded accordinglyAudit TimescaleThe timescale of the audit is XXXXX weeks commencing on XXX 2011 and has beenChanges in Audit TimescaleThe engagement partner has extended the timescale from XXX 2011 to xxxx 2011 due(eg, technical issues)Provision of Non Audit ServicesAn external "hot" file review and OR( another firm) has agreed to conduct a review andThe audit firm do not take decisions that are the responsiblity of managemenProvision of Non- Audit Services has been outlined clearly in the Planning LetteMisstatements in Opening BalancesCOMMENTPredecessor Auditor - Modification to the auditors opinionCOMMENTChanges in the business since last auditCOMMENTChanges in accounting standards since last auditCOMMENTUnderstanding of Engagement/Acceptance and Continuance © OmniPro OmniPro Education & Training 111 of 322
  • 114. Compliant Client B931 December 2008 Initials Date Prepared by: CC 27-May-10Index Reviewed by: CC 27-May-10Audit Planning Meeting with those Chargedwith GovernanceNote: Commentary should consist of a brief outline of the discussion held with theclient under each of the headings. N/A or No answers will not suffice_____________________________________________________________________COMMENTEthical issues and applied safeguardsCOMMENTConsideration of laws and regulationsCOMMENTConsideration of FraudManagement do not believe that there is any risk of fraud within the financialstatements. They monitor the staff closely. They have established appropriate qualitycontrol procedures for a company of this size and complexity and implement them tothe full of their capacity. © OmniPro OmniPro Education & Training 112 of 322
  • 115. Compliant Client B931 December 2008 Initials Date Prepared by: CC 27-May-10Index Reviewed by: CC 27-May-10Audit Planning Meeting with those Chargedwith GovernanceNote: Commentary should consist of a brief outline of the discussion held with theclient under each of the headings. N/A or No answers will not suffice_____________________________________________________________________Consideration of Business RiskCOMMENTIdentification of specific areas of Risk and potential FraudThe directors are not aware of any actual or suspected fraud committed during theperiod. Based on our initial analytical review detailed above there are no unexplainedinconsistent relationships that suggest the possibility that a fraud has been committed.The companys control environmentManagement feel that the current control system is capable of identifying any fraudwithin the company. Management have personal knowledge of all the customers,suppliers and transactions undertaken by the company. As the company develops ifmanagement identify a scope for a potential fraud they amend and update theirsystems accordingly.Internal controls and the information systemCOMMENT DISCUSS IF ANY INTERNAL CONTROL WEAKNESSES WERENOTED IN THE PRIOR YEAR AND WHETHER THESE WERE ADDRESSED BYMANAGEMENTPotential areas of weakness in the companys information systemCOMMENTConsideration of related party transactionsName of the Related Parties and Relationships & TransactionsDetails of authorisation and approval of significant transactionsDetails of authorisation and approval of signiciant transactions outsidethe normal course of businessGoing ConcernCOMMENTInitial Analytical Review/Review of Results to DateCOMMENTReview of Engagement Letter and Audit Planning Letter © OmniPro OmniPro Education & Training 113 of 322
  • 116. Compliant Client B931 December 2008 Initials Date Prepared by: CC 27-May-10Index Reviewed by: CC 27-May-10Audit Planning Meeting with those Chargedwith GovernanceNote: Commentary should consist of a brief outline of the discussion held with theclient under each of the headings. N/A or No answers will not suffice_____________________________________________________________________COMMENTSigned: CCDate: 27/05/2010 (Engagement Partner) © OmniPro OmniPro Education & Training 114 of 322
  • 117. Compliant Client A 1131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Audit Conclusion Meeting with Those Charged withGovernanceNote:Commentary should consist of a brief outline of the discussion held with theclient under each of the headings.N/A or No answers will not sufficeThe audit conclusion meeting was held on the morning of the 15th of XX XX,Engagement partner, senior accountant and X,Y and Z representing the board of directorswere present at the meetingAll schedules relating to the knowledge and background of the business were reviewed withthose charged with governance. The engagement partner reviewed and commented on theinitial engagement planning meeting and issues identified at that time.The following areas were discussed and the directors assessments and comments wererecorded accordingly on the working papers of the file.TOPICS OF DISCUSSIONAudit OpinionFollowing on from our discussions documented on WP B10 we will issue aXXXXX Audit OpinionLitigation and ClaimsCOMMENTNew Commitments, Borrowings, GuaranteesCOMMENTSales or Acquisitions of AssetsCOMMENTMeasurement of Estimates or ProvisionsCOMMENTReview of significant matters arising/issues outstandingCOMMENTDiscussion regarding significant difficulties amounted during the auditCOMMENT © OmniPro OmniPro Education & Training 115 of 322
  • 118. Compliant Client A 1131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Audit Conclusion Meeting with Those Charged withGovernanceConsideration of laws and regulations including reporting obligations of the auditor andaccountantCOMMENTConsideration of FraudCOMMENTConsideration of RiskCOMMENTConsideration of materiality levels appliedCOMMENT © OmniPro OmniPro Education & Training 116 of 322
  • 119. Compliant Client A 1131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Audit Conclusion Meeting with Those Charged withGovernanceEvidence gathered in relation to specific areas of Risk and potential FraudCOMMENTAreas of weakness in the companys information system/internal controlsCOMMENTConsideration of related party transactionsCOMMENTDetected errors / fraudsCOMMENTReview of statement of unadjusted differencesCOMMENTReview of material adjustmentsCOMMENTGoing ConcernCOMMENTPost balance sheet eventsCOMMENTFinal Analytical ReviewCOMMENTBudget V FeeCOMMENTContents of letter of representation © OmniPro OmniPro Education & Training 117 of 322
  • 120. Compliant Client A 1131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Audit Conclusion Meeting with Those Charged withGovernanceCOMMENT © OmniPro OmniPro Education & Training 118 of 322
  • 121. Compliant Client A 1131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Audit Conclusion Meeting with Those Charged withGovernanceContents of audit findings letterCOMMENTModifications to the audit reportCOMMENTANY OTHER ISSUES TO BE INCLUDEDCOMMENTSigned: PartnerDate: 31/01/2009 (Engagement Partner) © OmniPro OmniPro Education & Training 119 of 322
  • 122. LTD CO AUDIT FINDINGS LETTER EXAMPLEDirectorsCompliant ClientCompliant Address DATERe: Audit Findings LetterDear Directors,International Auditing Standards (UK & Ireland) (ISA) require us to communicate our audit findings tothose charged with governance, including the following  Our views as auditors regarding the quality and acceptability of the entities internal controls and accounting systems with a description of any suggested improvements;  Significant deficiencies in internal control identified during the audit;  Our views as auditors regarding the quality of the entity’s accounting practices and financial reporting with a description of any suggested improvements;  A description of the significant audit risks that have impacted on our audit report;  A description of any fraud/information that indicates that a fraud may exist or breaches in laws or regulations noted during our audit;  Any potential modifications to the auditor’s report, including to description of any suggested qualification or explanatory paragraphs;  Any matters of governance interest;  A description of any unadjusted misstatements (uncorrected errors and omissions);  Significant difficulties, if any, encountered during the audit;  Other deficiencies, that have not been communicated by other parties, that in the auditor’s professional judgment are of sufficient importance to merit management’s attention; and  Any other issues required to be communicated to those charged with governance in accordance with the ISA’s.Thus we are writing to inform the directors of key issues arising from our audit of Compliant Clientfinancial statements for the period ended [date].During the course of the audit of the Company’s financial statements for the period ended DATE, therewere a number of issues that came to our attention that need to be reported to you as directors of thecompany.ORNo issues came to our attention that in our professional opinion, in the context of an audit findings letter,need to be reported to you as directors of the company.  Our views regarding the Entity’s Internal controls Note: A deficiency in internal control exists when o A control is designed, implemented or operated in such a way that is unable to prevent, or detect and correct, misstatements in the financial statements on a timely basis or o A control necessary to prevent, or detect and correct, misstatements in the financial statements on a timely basis is missing OmniPro Education & Training 120 of 322
  • 123. LTD CO AUDIT FINDINGS LETTER EXAMPLE The following issues were identified, during the course of our audit, as material weaknesses in internal controls and accounting systems. Segregation of Duties Description of Issue Recommendation Management Comments Timely Reconciliations of Creditors Description of Issue Recommendation Management Comments  Our views regarding the Entity’s Accounting Practices & Financial Reporting The following issues were noted during the audit Non Disclosure of Related Party transactions Description of Issue Recommendation Management Comments  Significant audit risks that have an impact on the audit report The following key audit risks were identified at the planning stage of our audit Existence of Stock Description of Issue Recommendation Management Comments OmniPro Education & Training 121 of 322
  • 124. LTD CO AUDIT FINDINGS LETTER EXAMPLE  Description of fraud/breach of laws and regulations (ISA 240 Fraud ISA 250 A (250B if required) Laws & Regulations) During the course of our audit work the following information came to light that may suggest a breach in laws and regulations/potential indication of fraud Un-vouched payments Description of Issue Recommendation Management Comments  Modifications to Audit Report Based on our audit work performed and information and evidence obtained we recommend the following audit opinion  Matters of Governance During the course of our audit work the following came to our attention Inadequate Governance structure in place Description of Issue Recommendation Management Comments  Significant difficulties encountered during the audit EG’s  Significant delays in management providing required information  An unnecessarily brief time within which to complete the audit  Extensive unexpected effort required to obtain sufficient appropriate audit evidence  The unavailability of expected information  Restrictions imposed on the auditor by management  Management’s unwillingness to make or extend its assessment of the entity’s ability to continue as a going concern when requested. (Optional) Significant Matters Discussed  Business conditions affecting the entity, and business plans and strategies that may affect the risks of material misstatement.  Concerns about management’s consultations with other accountants on accounting or auditing matters.  Discussions or correspondence in connection with the initial or recurring appointment of the auditor regarding accounting practices, the application of auditing standards, or fees for audit or other services. OmniPro Education & Training 122 of 322
  • 125. LTD CO AUDIT FINDINGS LETTER EXAMPLE  Other deficiencies, that have not been communicated by other parties  Matters specifically required by other ISAs (UK and Ireland) to be communicated to the directors’ INCLUDED ONLY IF ANY ISSUES ARISE Other than the items referred to above and during our audit conclusion meeting there are no other issues which we are aware of that should be communicated to the directors of the company. In this section specific ISA’s to be aware of include If there are issues identified under the following ISAs (UK and Ireland), then these issues need to be reported to the directors’:  ISA 220 – Terms of Audit Engagements  ISA 315 – Understanding the Entity and its Environment and Assessing the Risks of Material Misstatements  ISA 320 – Audit Materiality  ISA 550 – Related Parties  ISA 560 - Subsequent Events  ISA 570 – Going Concern  ISA 580 – Management Representations  ISA 720 – Other Information  Unadjusted errors or omissions There were no unadjusted errors or omissions noted This letter was prepared for the sole use of the company, the content must not be disclosed to any third party, without our prior written consent and we assume no responsibility to any other person. Finally we would like to thank you and your staff for the assistance offered to us during the course of our work. If you have any queries in relation to the above, please contact us at any time. Yours faithfully Compliant Accountant & Co _______________________ Compliant Accountant & Co OmniPro Education & Training 123 of 322
  • 126. Compliant Client A 7.130 June 2011 Initials Date Prepared by: Staff 1-Jan-09Unadjusted Errors Reviewed by: Partner 31-Jan-09Index IMPACT ON PROFIT & LOSS BALANCE SHEET BALANCE SHEET PROFIT & LOSS A/C DESCRIPTION OF ERROR W/P Potential Potential Actual Actual REF DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT INCREASE DECREASEProfit & Loss - admin expenses 400Creditors - Accruals 400Being under - accrual for telephoneProfit & Loss - admin expenses 350Creditors - Accruals 350Being under accrual for ESBCreditors - Taxation 2000Profit & Loss Taxation 2000Being adjustment to tax computation 2000 750 750 2000 1250CONCLUSIONAll misstatements noted during our audit with a value below €500 have been excluded from the listing above as they are clearly trivial. These misstatements noted above have notbeen corrected in the financial statements as these amounts are clearly immaterial both individually and in aggregate. Materiality was reassessed and the materiality levels set outat the planning stage of the audit remain appropriate in the context of the entitys actual financial results © OmniPro OmniPro Education & Training 124 of 322
  • 127. Compliant Client B 4.230 June 2011 Initials Date Prepared by: CC 27-May-10Index Reviewed by: CC 27-May-10Materiality & Sample Selection by Section Basic Sample Size (no of Inherent/ Combined Suggested Expected Materiality % items) 1 Specific Control Risk Overall risk MinimumREF SECTION Population in € for Section Materiality € /3 Risk Factor factor Sample Size Commentary 1 2 3 3/4*5*6 High =1 High =1 High =1 Low = 5 Low = 5 Low = 5C Tangible Fixed Assets 100,000 2% 2,000 50 5 5 5 10D Intangible Fixed Assets 2,000 2% 40 50 5 3 4 13E Investments 1,000 2% 20 50 5 3 4 13F Stock and Work in Progress 40,000 2% 800 50 5 1 3 17G Debtors 200,000 2% 4,000 50 5 5 5 10H Bank Balances and Cash in Hand 20,000 2% 400 50 5 5 5 10I Creditors & Accruals 100,000 2% 2,000 50 5 5 5 10J Taxation 50,000 2% 1,000 50 5 5 5 10 Statutory Matters, Share Capital and 2% 0 50 5 5 10K Reserves 2 5L Salaries and Wages 100,000 2% 2,000 50 5 5 5 10M Sales and Income 1,000,000 1% 10,000 100 5 5 5 20N Purchases and Expenditure 500,000 1% 5,000 100 5 5 5 20O Related Parties 20,000 2% 400 50 5 5 5 10NOTEExplanation regarding using the aboveThe population for each Section is included in Column CThe Materiality % as chosen @ WP Ref 4.1 should be included in Column DColumn E & F are calculated based on the figures inserted in other ColumnsColumn G -A factor between 1 & 5 (1=High, 5=Low) is chosen for the Specific risk of each section based on the perceived risk of the particular areaColumn H- A factor between 1 & 5 (1=High, 5=Low) is chosen for the Inherent/Control risk of each section based on the perceived risk of the particular areaColumn I- Based on the information populated in Column G & H a decision factor between 1 & 5 (1=High, 5=Low) is chosen for the Combined Overall risk factorof each section based on the overall perceived risk of the particular areaColumn J are calculated indicating the Suggested Minimum Sample SizeCommentary Column to be used where using your professional judgement you wish to override the figures as calculated © OmniPro OmniPro Education & Training 125 of 322
  • 128. Compliant Client C031 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Tangible Fixed Assets Section ConclusionOPTION 1 If this section is not applicableOn a final review of the accounts there are no Tangible Fixed Assets in the FinancialStatements therefore we have not performed any work in this Section and no WPs have beenincluded on file for this SectionOPTION 2 Where work has been completed on the fileIn our professional judgement sufficient appropriate audit evidence has been obtained and noother audit procedures need to be performed in pursuance of the audit objectives. Based onthis audit evidence we conclude that Tangible Fixed Assets are materially correct and in ouropinion they are presented in accordance with the applicable financial reporting framework inthe financial statementsSpecifically the following assertions have been adequately tested C Completeness O Ownership A Accuracy CO Cut Off V Valuation CL Classification R&O Rights & Obligations E Existence PD Presentation & DisclosureUnadjusted ErrorsThe following errors noted during the audit were not adjusted in the accounts due to their immateriality ACTUAL ERRORS JOURNAL POTENTIAL ERRORS TOTALWP REF DESCRIPTION DEBIT CREDIT DEBIT CREDIT DEBIT CREDITJournals The following journal adjustments were made to the accounts upon agreement with the client JOURNAL ADJUSTMENTSWP REF DESCRIPTION DEBIT CREDITName: Staff Accountant in ChargeDate 1-Jan-09Name Partner ReviewerDate 31-Jan-09 © OmniPro OmniPro Education & Training 126 of 322
  • 129. Compliant Client C131 December 2008 Type In Initials Date Prepared by: Staff 1-Jan-09 Reviewed by: Partner 31-Jan-09IndexTangible Fixed Assets Audit Programme Assertion Schedule/ Comment Initials Date1 Prepare lead schedule @WP Ref C2 and agree to balance sheet. Agree last years ALL C2 Staff 01-Jan-09 closing balances to this years opening balances. Cross reference all figures to WPs. Perform analytical review and make commentary re same2 Obtain or prepare schedule of additions within each category and vouch as appropriate C, A, E, V C5 Staff 01-Jan-09 including copies of significant invoices on file. Enquire if any fixed assets have been improved or constructed during the period3 Obtain or prepare schedule of disposals within each category and vouch as C, A, E, V C6 Staff 01-Jan-09 appropriate including copies of significant invoices on file. Ensure correct profit/loss has been recorded in the Financial Statements. Consider possible unrecorded disposals (e.g. assets scrapped)4 Detail revaluations and obtain copies of relevant documents for file. Ensure that V, PD C7 Staff 01-Jan-09 historical cost information is available for disclosure purposes in accordance with FRS 15.5 Consider carrying out an impairment review in accordance with FRS 11. V, PD C7 Staff 01-Jan-096 Ascertain location of title deeds and inspect or confirm details with third party. O C7 Staff 01-Jan-097 Inspect vehicle registration documents and agree details to company records and O C7 Staff 01-Jan-09 ensure that vehicles are registered in the company’s name.8 Physically inspect a sample of items contained in fixed assets and document on file. O, E C7 Staff 01-Jan-099 Consider treatment of any grants received or receivable. V, E C7 Staff 01-Jan-0910 Review nominal ledger accounts for repairs and renewals (or similar) for items which CL, E C7 Staff 01-Jan-09 should have been capitalised.11 Review lease costs expensed and consider whether the accounting treatment is PD, V C10 Staff 01-Jan-09 correct.12 Obtain or prepare schedule of net book value and depreciation of assets held under PD C10 Staff 01-Jan-09 hire purchase contracts and finance leases.13 (a) Consider reasonableness of provision of all depreciation in accordance with V, A FRS 15 with regard to: (i) Estimated useful lives; and C8 Staff 01-Jan-09 (ii) Residual value. C8 Staff 01-Jan-09 (b) Test check depreciation calculations. C, A, V C8 Staff 01-Jan-09 (c) Agree total to Profit and Loss Account charge. C8 Staff 01-Jan-0914 Ensure that any capital commitments have been identified: from for example board PD C10 Staff 01-Jan-09 minutes, after-date review, and enquiries. (See also Creditors Programme).15 Assess the appropriateness of the accounting policy for this area. Ensure that the PD, V C10 Staff 01-Jan-09 accounting policy is in accordance with accounting standards and applicable law.16 Ensure that the accounting treatment and disclosures in the financial statements PD, V C10 Staff 01-Jan-09 comply with the appropriate legislation and applicable accounting standards in particular FRS 15 & FRS 11.17 Should the Work of an Expert be deemed necessary the Checklist and WPs @ Q Q1 Staff 01-Jan-09 should be completed18 Further tailored tests or audit procedures should be added where the tests above do Staff 01-Jan-09 not adequately address all audit objectives © OmniPro OmniPro Education & Training 127 of 322
  • 130. Compliant Client C531 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed Asset Additions To ensure additions of Fixed Assets exist, are recorded accurately, areObjective complete and valued correctly in the Financial StatementsAudit Sample 10SelectionMethod of Sample Sample size was calculated using the formula set out in Section 8 of theCalculation audit planning memorandum 5 items were selected because they exceeded the materiality level for thisMethod of Sample section of the file. 5 items were selected at random to facilitate theSelection reasonable expectation of detection of fraud aswell as designing a sample that accurately reflects the attributes of the populationTest Details Obtain or prepare schedule of additions within each category and vouch as (I) appropriate including copies of significant invoices on file. Enquire if any fixed assets have been improved or constructed during the periodResultsXX% of Additions were agreed to back up documentations including invoicesetc see WP Ref C 100 Ref C 100All amounts were correctly capitalised. There were no amounts identified whichshould not have been capitalisedI discussed the fixed asset additions with the client who informed us that therewere no further additions made during the period. An inspection was alsocarried out of the clients premises to identify any further additionsBank statements, the creditors ledger and the repairs and maintenance nominalledger were reviewed to ensure that the completeness of additions in theaccounts. No further potential additions were noted during this review In our professional judgement sufficient appropriate audit evidence has been obtained and no other audit procedures need to be performed in pursuance of the audit objectives. Based on this audit evidence weConclusion conclude that Tangible Fixed Asset additions are materially correct and in our opinion they are presented in accordance with the applicable financial reporting framework in the financial statements The sample size selected accurately reflects the attributes of the population. There is no need to extend the sample selection beyond the sample calculated above © OmniPro OmniPro Education & Training 128 of 322
  • 131. Compliant Client C631 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed Asset Disposals To ensure disposals of Fixed Assets have occurred, are recorded accurate,Objective are complete and valued correctly in the Financial StatementsAudit Sample Sample selection not applicable as all material items identified will be testedSelection on a substantive basisTest Details Obtain or prepare schedule of disposals within each category and vouch as appropriate including copies of significant invoices on file. Ensure correct (I) profit/loss has been recorded in the Financial Statements. Consider possible unrecorded disposals (e.g. assets scrapped)ResultsAll material disposals have been agreed to back up documentation includinginvoices and bank statements (lodgement book) where appropriate see WP RefC 101 Ref C 101I have recalculated the profit/loss on each material disposal and agreed theprofit/loss made to the accountsI discussed the fixed asset disposals with the client who informed us that therewere no further disposals made during the period. An inspection was alsoundertaken at the clients premises In our professional judgement sufficient appropriate audit evidence has been obtained and no other audit procedures need to be performed in pursuanceConclusion of the audit objectives. Based on this audit evidence we conclude that Tangible Fixed Asset disposals are materially correct and in our opinion they are presented in accordance with the applicable financial reporting © OmniPro OmniPro Education & Training 129 of 322
  • 132. Compliant Client C731 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed Assets To ensure the completeness, existence, correct valuation and presentation andObjective disclosure, accuracy and ownership of Fixed Assets. The classification of Fixed Assets will also be testedAudit Sample Sample selection not applicable as all material items identified will be tested on aSelection substantive basisTest Details Detail revaluations and obtain copies of relevant documents for file. Ensure that (i) historical cost information is available for disclosure purposes in accordance with FRS 15. (ii) Consider carrying out an impairment review in accordance with FRS 11. (iii) Ascertain location of title deeds and inspect or confirm details with third party. Inspect vehicle registration documents and agree details to company records and (iv) ensure that vehicles are registered in the company’s name. (v) Physically inspect a sample of items contained in fixed assets and document on file. (vi) Consider treatment of any grants received or receivable. Review nominal ledger accounts for repairs and renewals (or similar) for items which (vii) should have been capitalised.ResultsRevaluationsOption 1 No revaluationsNo revaluations took place during the period. The companies accounting policy is to carry all assets atcostOption 2 Revaluation UndertakenA revaluation of the Buildings was undertaken during the period based on valuations received from ASurveyors. The valuation report provided a value of ???? For the Buildings and the accounts havebeen adjusted to reflect this valuation in the Financial Statements. The adjustment has resulted in thecreation of a revaluation reserve of €??? on the Balance Sheet of the company © OmniPro OmniPro Education & Training 130 of 322
  • 133. Compliant Client C731 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed AssetsConsideration of Impairment ReviewOption 1 No impairment reviewThe value of Buildings in the Balance Sheet of ??? Were considered minimal and immaterial in thecontext of the Financial Statements as a whole and therefore an impairment review has not beenundertaken. In my opinion and in the opinion of the Directors of the company if an impairment reviewwas carried out its potential/expected results would not have a material impact on the FinancialStatementsOption 2 No impairment review required in accordance with FRS 11In reviewing Fixed Assets I considered FRS 11 and those events/changes in circumstances that wouldindicate that an impairment review should take placeThose events are as follows 1) Significant trading losses 2) Significant net cash outflows (expectation for this to continue) 3) Significant decline in an assets value 4) Evidence of obsolescence 5) Significant adverse changes 6) Major loss of key employeesFrom our review it would appear that a combination of these events &/or circumstances have notoccurred during the year for this company therefore we consider that there is no indication ofimpairment to the assetsOption 3 Impairment review undertakenIn reviewing Fixed Assets I considered FRS 11 and those events/changes in circumstances that wouldindicate that an impairment review should take placeThose events are as follows 1) Significant trading losses 2) Significant net cash outflows (expectation for this to continue) 3) Significant decline in an assets value 4) Evidence of obsolescence 5) Significant adverse changes 6) Major loss of key employeesThe company has experienced significant trading losses and significant cash outflows during theperiod. It has also been affected by the current general economic downturn with sales 20% adversecompared to the previous year. The companys buildings are valued @ ???? in the Balance Sheet andas is the case with all property assets in the country at present the value of these assets is difficult toassess. Based on this assessment of the company and asset values generally an impairment review isrequired in accordance with FRS 11. This was discussed with the Directors of the company who haveundertook an impairment review of the companys buildings. Based on the Directors projections for thecoming year, expectations and observations of the general economic outlook and assessment of theassets values the Directors consider that the Buildings are not materially impaired and on that basis noimpairment adjustment has been made in the accounts. © OmniPro OmniPro Education & Training 131 of 322
  • 134. Compliant Client C731 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed AssetsThird party valuations were not obtained for the Buildings as the Directors felt that they were in the bestposition to make a judgement regarding the valuations of the companys assets. A representation hasbeen received regarding these valuations in the Letter of Representation.During our audit fieldwork no evidence was obtained or reviewed which would suggest that theDirectors valuations were not a fair and accurate reflection of the true valuations of the Buildings © OmniPro OmniPro Education & Training 132 of 322
  • 135. Compliant Client C731 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed AssetsTitle DeedsI obtained title deeds for all Buildings and these are filed on the permanent section of the file @ WP RefP 2. All Buildings carried on the Balance Sheet of the company are legally owned by the Company Description Value REF € 1 Building 1 120,000 P 2(a) 2 Building 2 300,000 P 2(b)Vehicles Registration DocumentsI inspected all vehicle registration documents and included these on the permanent section of this file@WP Ref P 4. All cars are registered under the Companies name Description Value REF € 1 Motor Vehicle 1 30,000 P 4(a) 2 Motor Vehicle 2 25,000 P 4(b)Physical Verification of Fixed AssetsDuring the stocktake I physically verified the following assets Description Value € 1 Building 1 120,000 2 Equipment 1 5,000 3 Equipment 2 4,000Grants ReceivedThe company received no grants for Fixed assetsRepairs & MaintenanceI reviewed all repairs and maintenance nominal codes and identified no items of a capital nature. Acopy of the nominal print out is included on file @ C 103 In our professional judgement sufficient appropriate audit evidence has been obtained and no other audit procedures need to be performed in pursuance of the auditConclusion objectives. Based on this audit evidence we conclude that Tangible Fixed Assets are materially correct and in our opinion they are presented in accordance with the applicable financial reporting framework in the financial statements © OmniPro OmniPro Education & Training 133 of 322
  • 136. Compliant Client C831 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed Asset Depreciation To ensure depreciation of Fixed Assets is correctly calculated and recorded inObjective the Financial Statements ensuring amounts are accurate and completeAudit Sample Selection 10Method of Sample Sample size was calculated using the formula set out in Section 8 of the auditCalculation planning memorandum All 10 items were selected at random to facilitate the reasonable expectation ofMethod of Sample detection of fraud aswell as designing a sample that accurately reflects theSelection attributes of the entire population.Test Details (a) Consider reasonableness of provision of all depreciation in accordance with FRS 15 with regard to: (i) Estimated useful lives; and (ii) Residual value. (b) Test check depreciation calculations. (c) Agree total to Profit and Loss Account charge. © OmniPro OmniPro Education & Training 134 of 322
  • 137. Compliant Client C831 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Fixed Asset DepreciationResultsFixed Asset Depreciation RatesI reviewed the depreciation rates for each class of asset and discussed these with the client. All usefullives and residual values would appear reasonableDepreciation Rates are as followsBuildings 2%Office Equipment 20%Computer Equipment 33%Test Check Depreciation????% of total depreciation was recalculated @ Ref C 102 Ref C 102No material differences were noted between the depreciation per the accounts for each of these assetsand the amount as recalculatedORBased on differences noted of ??? on our sample of ???? which represents ??% of our populationpotential audit differences of €???? were noted. These will be included on our Schedule of Errors WP RefA7Total ReconciliationThe total depreciation charge per C2 agrees to the total depreciation charge per the Financial statements In our professional judgement sufficient appropriate audit evidence has been obtained and no other audit procedures need to be performed in pursuance of the audit objectives. Based on this audit evidence we conclude that TangibleConclusion Fixed Asset depreciation is materially correct and in our opinion they are presented in accordance with the applicable financial reporting framework in the financial statements The sample size selected accurately reflects the attributes of the population. There is no need to extend the sample selection beyond the sample calculated above © OmniPro OmniPro Education & Training 135 of 322
  • 138. Compliant Client C 1031 December 2008 Initials Date Prepared by: Staff 1-Jan-09Tangible Fixed Assets WP Reviewed by: Partner 31-Jan-09Accounting Policies, Accounting Treatment & Disclosures To ensure that the accounting policies used, accounting treatment andObjective disclosures in the Financial Statements comply with accounting standards and applicable lawTest Details Review lease costs expensed and consider whether the accounting treatment is (i) correct. Obtain or prepare schedule of net book value and depreciation of assets held (ii) under hire purchase contracts and finance leases. Ensure that any capital commitments have been identified: from for example (iii) board minutes, after-date review, and enquiries. (See also Creditors Programme). Assess the appropriateness of the accounting policy for this area. Ensure that (iv) the accounting policy is in accordance with accounting standards and applicable law. Ensure that the accounting treatment and disclosures in the financial statements (v) comply with the appropriate legislation and applicable accounting standards in particular FRS 15 & FRS 11.ResultsLease cost have been correctly accounted for, disclosures required in the financialstatements can be found @ WP Ref I 9. Copies of the lease agreements have been reviewedand included on file @ WP Ref P 3I have reviewed all the accounting policies in this section and these are in accordance withaccounting standards and applicable lawI have reviewed the accounting treatment and disclosures in the financial statements for allFixed Assets and these are in accordance with accounting standards and applicable lawThere were no capital commitments noted as discussed with the client In our professional judgement the accounting policies, accounting treatment andConclusion disclosures for all tangible fixed assets are in accordance with FRS 11, FRS 15 and applicable law © OmniPro OmniPro Education & Training 136 of 322
  • 139. Compliant Client C 10031 December 2008 Initials Date Prepared by: Staff 1-Jan-09Fixed Asset WP Reviewed by: Partner 31-Jan-09Listing of Additions Date ofDescription Invoice No Supplier/ Reg No Purchase Gross Cost VAT Net Cost Ref € € €Fixtures & FittingsTelephone systems 12345 Eircom Jun-08 100,000 21,000 121,000 C 200 C 201 100,000 21,000 121,000Plant & Equipment - - -Motor VehiclesCar No 3 - - - 100,000 21,000 121,000Total Additions during period 500,000% of Additions Checked 20% © OmniPro OmniPro Education & Training 137 of 322
  • 140. Compliant Client C 10131 December 2008 Initials Date Prepared by: Staff 1-Jan-09Fixed Asset WP Reviewed by: Partner 31-Jan-09Listing of Disposals Supplier/ Reg Date of Agreed toDescription Invoice No No Purchase Cost Accum Depr NBV Proceeds Lodgements Profit/Loss REF € € € € €Fixtures & FittingsTelephone systems 12345 Eircom Jun-08 100,000 21,000 79,000 80,000 Yes 1,000 Yes 100,000 21,000 79,000 80,000 1,000Plant & Equipment - - - - -Motor VehiclesCar No 3 - - - - - 80,000Total Disposals during period 90,000% of Disposals Checked 88.89% © OmniPro OmniPro Education & Training 138 of 322
  • 141. Compliant Client C 10231 December 2008 Initials Date Prepared by Staff 1-Jan-09Fixed Asset WP Reviewed by Partner 31-Jan-09Fixed Asset Register-(Re)/Calculation of Depreciation Opening Opening Current Year Current Year Supplier/ Reg Date ofDescription Invoice No No Purchase Cost Accum Depr NBV Depr Rate Depr NBV € € € € € €Fixtures & FittingsAsset 1 12345 Eircom Jan-06 100,000 25,000 75,000 25% 25,000 50,000Asset 2 100,000 25,000 75,000 25,000 50,000Plant & Equipment - - - - -Motor VehiclesCar No 3 - - - - - - 100,000 50,000 150,000 0 50,000 100,000TOTALS per Lead Schedule 100,000% of Depreciation Recalculated 50% © OmniPro OmniPro Education & Training 139 of 322
  • 142. LTD CO AUDIT REPRESENTATION LETTER EXAMPLE SHOULD BE PRINTED ON CLIENT HEADED PAPERXYX AccountantsWHOEVER AccountantsADDRESS DATE Note: The date should not be after the date of the auditor’s reportRe: XYZ LimitedDear Sirs,This representation letter is provided in connection with your audit of the financialstatements of XYZ Limited for the year ended 30th June 2011 for the purpose ofexpressing an opinion as to whether the financial statements give a true and fair viewof the state of affairs of the company as at 30th June 2011 and of its results for theperiod then ended in accordance with the Companies Acts, 1963 to 2009 and withaccounting standards generally accepted in Ireland.We acknowledge as directors our responsibilities under the Companies Acts, 1963 to2009 for maintaining proper books of account (accounting records), preparingfinancial statements which give a true and fair view and making accuraterepresentations to you.We confirm, to the best of our knowledge and belief and having made appropriateenquiries of other directors and officials of the company, the followingrepresentations: Accounting records and informationWe confirm our responsibility: o For the preparation and fair presentation of the financial statements in accordance with Generally Accepted Accounting Practice in Ireland including the accounting and financial reporting standards issued by the Accounting Standards Board and the Companies Acts, 1963 to 2009; o For such internal controls as is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and o To provide the auditor with: i. Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; ii. Additional information that you have requested from us for the purpose of the audit; and iii. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. We confirm that we have secured compliance with the companys obligation to maintain proper books of account by the use of appropriate systems and procedures and by the employment of competent persons and that the company has kept proper books of account throughout the year. In this regard we confirm that we have fulfilled our responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including where relevant their fair presentation, as set out in the terms of the audit engagement. All transactions have been recorded in the accounting records and are reflected in OmniPro Education & Training 140 of 322
  • 143. LTD CO AUDIT REPRESENTATION LETTER EXAMPLE the financial statements. All the accounting records have been made available to you for the purpose of your audit and all other records and related information which might affect the truth and fairness of, or necessary disclosure in, the financial statements, including details of all bank accounts, minutes of directors, shareholders and relevant management meetings, have been made available to you and no such information has been withheld. All information which we consider important and relevant to the financial statements and your audit of them has been brought to your attention. Accounting policies We confirm that we have reviewed the companys accounting policies and estimation techniques and, having regard to the possible alternative policies and techniques, the accounting policies and estimation techniques selected for use in the preparation of the financial statements are the most appropriate to give a true and fair view of the companys particular circumstances, as required by FRS 18. Accounting estimates We confirm that significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. Revenue recognition We confirm that the recognition of revenue from sales of goods and services and other sources, reflects the substance of all relevant contracts and arrangements with customers and other parties. Accordingly, revenue has been recognised only to the extent that (all significant risks and rewards of ownership have been transferred to third parties. Related Party Transactions During the period the directors have identified and approved related party transactions and provided the information for disclosure of all transactions relevant to the company in the accounts. Related party transactions do not involve undisclosed side agreements. They are not aware of any other matters which require to be disclosed under FRS 8 (‘Related Party Disclosures’) or other requirements. Transactions with Directors (Or persons connected with them) The directors confirm that no transactions, arrangements or agreements were made or entered into by the company for persons who at any time during the period were directors or officers of the company, or persons connected with them. Directors’ remunerations and the shareholdings of directors and company secretary We confirm that the disclosure of directors remuneration is complete and particularly includes all relevant forms of remuneration and reflects appropriately the provision of management and other services by the directors to the company. We confirm that the interests of the directors and secretary in the shares (and debentures) of all group companies have been disclosed in accordance with the Companies Act, 1990. OmniPro Education & Training 141 of 322
  • 144. LTD CO AUDIT REPRESENTATION LETTER EXAMPLE Compliance with law and regulation We confirm that, we are not aware of any actual or potential material non- compliance with those laws and regulations which provide a legal framework within which the company conducts its business and which are central to the company’s ability to conduct its business and hence to the results and financial position to be disclosed in the financial statements for the year ended 30th June 2011, together with the actual or contingent consequences which may arise therefrom. We are not aware of any instances of actual or potential breaches of, or non- compliance with laws and regulations, including the Companies Acts and the Taxes Acts, that are central to the companys ability to conduct its business or that could have a material effect on the financial statements. Contractual Arrangements All contractual arrangements entered into by the company with third parties have been properly reflected in the accounting records or, where material (or potentially material) to the financial statements, have been disclosed to you. The company has complied with its obligations under contractual agreements where non-compliance could have a material effect on the financial statements. There are no other agreements not in the ordinary course of business. Liabilities Full provision has been made for all liabilities at the balance sheet date including guarantees, commitments and contingencies where the items are expected to result in significant loss. Contingent liabilities, where in our opinion provision is not required, have been appropriately disclosed in the financial statements. We are not aware of any pending or threatened litigation, proceedings, hearing or claims negotiation, which may result in significant loss to the company All guarantees and commitments given to third parties, including oral guarantees and commitments made on behalf of an affiliate, director, officer or any other third party have been disclosed where appropriate in the financial statements. Retirement benefits (where applicable) All retirement benefits that the company is committed to providing, including any arrangements that are statutory, contractual or implicit in the company’s actions, wherever they arise, whether funded or unfunded, approved or unapproved, have been identified and properly accounted for and/or disclosed. Depreciation and impairment (where applicable) We are satisfied that the useful lives by reference to which depreciation has been calculated are appropriate. We confirm that an impairment review has been carried out and that there has been no impairment of fixed assets above the amount depreciated in the current period. Current assets OmniPro Education & Training 142 of 322
  • 145. LTD CO AUDIT REPRESENTATION LETTER EXAMPLE We are satisfied that the current assets in the balance sheet are expected to realise, in the ordinary course of business, no less than the net book amounts at which they are stated. Unusual transactions No transactions which had the primary objective of altering the appearance of the accounts have been entered into during the period. Going concern The financial statements have been prepared on the going concern basis. Having considered the companys trading performance since DATE its profit and cash flow budgets / forecasts and its future business plans, we confirm that we have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Fraud and error We acknowledge our responsibility for the implementation and operations of accounting and internal control systems that are also designed to prevent and detect fraud and error. We have disclosed to you all significant facts relating to any frauds or suspected frauds known to management that may have affected the entity. We have disclosed to you the results of our assessment of the risk that the accounts may be materially misstated as a result of fraud. We are not aware of any irregularities, or allegations of irregularities, including fraud, involving management or employees who have a significant role in the accounting and internal control systems, or that could have a material effect on the financial statements. Unadjusted audit differences We confirm that the financial statements have no unadjusted misstatements that are considered to be, both individually and in aggregate, material to the truth and fairness of the financial statements either taken as a whole or in connection with the ability to assess the performance and the financial position of the company. A list of unadjusted misstatements is attached to this letter of representation. Events after the balance sheet date There have been no events since the balance sheet date, which necessitate revision of the figures included in the financial statements, or inclusion of a note thereto. (ADD any further specifically tailored representations as required)This letter was tabled at the meeting of the Board of Directors on DATE.Yours faithfully,_________________ _______________Director DirectorDate : DATE OmniPro Education & Training 143 of 322
  • 146. Education & Training The Essential Advisors Mix 2011 Audit Opinion Dilemmas Presenter: Des O’Neill CPA; A.C.I.S; ACCA OmniPro Education & TrainingUnit 3 South Court, Block D, Iveagh Court,Wexford Road Business Park, 5 – 8 Harcourt Road,Carlow. Dublin 2.059 9183888 01 4110000www.omnipro.ie info@omnipro.ie
  • 147. Audit Opinion DilemmasContents PageAudit Opinion Dilemmas 144Audit Completion Memorandum 157Going Concern Samples 172Bulletin 2006 1 174Financial Statement Extracts 212-322Tamorbrick Limited 212-220Merlin Developments Limited 221-222Becbay 223-229Cicol Limited 230-231Bloomburg Limited 232-235Harcourt Developments 236-241Bluefort Properties Limited 242-243Landmark Fundamental Uncertainty BDO 244-245CG Hotels 246-250Ashford Castle 251-254Slieve Russell Hotel Limited 255-263Vesway Limited 264-268Bishopscourt 269-279McSweeney Pharmacy KPMG 280-282Merrion Pharmaceuticals Ireland 283-289Mount Carmel Medical Group 290-293Setanta Sports Channel Ireland 294-295Shannon Castle and Banquets PWC 296-296Smithfield Property 297-297
  • 148. Audit Opinion DilemmasContents PageExtracts from Recent Financial Statements 298-300DCD Builders 301-309D2 Private Limited KPMG 310-311Irish Car Rentals Limited 312-314Irish Press Plc. 315-318Lalco Holdings Limited 319-319Robert Butler Holdings Limited 320-322
  • 149. Forming Audit Opinions in 2011• Going Concern and the Crystal Ball• Forming Unqualified and Modified opinions• Gathering and Documenting the Evidence to support the opinions• What is happening in the market place? The Auditing Standards• ISA 570 Going Concern• ISA 700 The Auditors Report on Financial Statements• ISA 705 Modifications to the Opinion in the Independent Auditors Report• ISA 706 Emphasis of Matter Paragraphs OmniPro Education & Training 144 of 322
  • 150. Forming Opinions Nature of Matter Auditor’s Judgment about the Giving Rise to the Pervasiveness of the Effects or Possible Modification Effects on the Financial Statements Material but Not Material and Pervasive Pervasive Financial statements are Qualified opinion Adverse opinion materially misstated Inability to obtain sufficient Qualified opinion Disclaimer of opinion appropriate audit evidence ISA 570 – Going Concern• Obtain sufficient appropriate audit evidence regarding managements use of the going concern assumption• Conclude based on the evidence obtained whether significant material uncertainty exists• Determine the implications for the auditors report• The auditor should consider any relevant disclosures in the financial statements ISA 570 – Going Concern• Managements Responsibility• Going concern a fundamental principle on which financial statements are prepared• Continuing successfully in business for the foreseeable future• Realise its assets and discharge its liabilities in the normal course of business• Self fulfilling prophecy OmniPro Education & Training 145 of 322
  • 151. ISA 570 – Going Concern• Auditors Responsibilities• Planning the audit – events conditions or risks that cast doubt on GC• Throughout the audit – Detecting conditions or events that indicate that GC may be an issue – Evaluate managements assessment – A minimum of 12 months after the balance sheet date – Auditor not limited to same period as management assessment. Must enquire of and investigate issues beyond period of assessment ISA 570 – Going Concern• Risk assessment procedures and related activities• Management assessment• Where management has not yet performed an assessment request them to make their assessment• Evaluating management’s plans for the future• Evaluating the reliability of the underlying information used to prepare cashflow projections• Assess the assumptions used in the projection Going Concern Testing• Overall financial review• Cash flow forecasts• Discussion with directors• Order book review• Review of lending facilities and terms• Creditor payment periods• Subsequent events on financial transactions• Action plan review• Specific representations OmniPro Education & Training 146 of 322
  • 152. Going Concern Testing• Looking into the crystal ball• ISA 540 management estimate approach• Cashflows form the basis for the opinion• Assumptions are tested and assessed• 3rd party documentary evidence• Documented assessment of assumptions ISA 570 – Going Concern• Document the extent of the auditors concern if applicable about the entity’s ability to continue as a going concern• Narrative supported by facts and figures supported substantively• Are the disclosures sufficient to give a true and fair view?• Is the period of assessment of going concern is less than 12 months? ISA 570 – Going Concern• Statement that the financial statements have been prepared on a going concern basis• Statement of the relevant facts• Nature of the concern• Statement of assumptions adopted distinguishable from pertinent facts• Details of plans for resolving the issues• Details of actions taken OmniPro Education & Training 147 of 322
  • 153. ISA 570 - Going Concern• Company has decided to cease trading• Going concern no longer appropriate• Make relevant disclosures• Assets reduced to realisable values• Reclassify fixed assets and long term liabilities as current assets and current liabilities• Emphasis of matter in relation to basis of preparation ISA 700 The Independent Auditors Report• Title of Report• Addressee• Introductory paragraph• A statement of responsibility of the management• A statement of the auditors responsibilities• Scope of the auditors work• Reference to audit and reporting framework• Opinion• Other matters• Other reporting responsibilities• Date of the report• Auditors signature• Auditors address Audit Report Dates• Audit report is the date on which the auditor signed the report• Audit report should not be dated earlier than the date on which all other information contained in the report have been approved by those charged with governance OmniPro Education & Training 148 of 322
  • 154. ISA 700 The Independent Auditors Report• Scope• Examining on a test basis, evidence to support the financial statements amounts and disclosures• Assessing the accounting policies used in the preparation of the financial statements• Assessing the significant estimates made by management• Evaluating the overall financial statement presentation ISA 700 The Independent Auditors Report• Opinion• Financial reporting framework being used• Financial statements give a true and fair view• Presented in accordance with reporting requirements• Comply with statutory requirements ISA 700 The Independent Auditors Report• Unqualified Opinion• Emphasis of matter• Qualified opinion• Disclaimer of opinion• Adverse Opinion OmniPro Education & Training 149 of 322
  • 155. ISA 705 Modifications to the Opinion in The Independent Auditors Report• Qualified / Adverse / Disclaimer• Express clearly and appropriately modified opinion on the financial statements• FS are not free from material misstatement• The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements are free from material misstatement ISA 705 Modifications to the Opinion in The Independent Auditors Report• Qualified opinion• Unqualified opinion can not be expressed• Obtained sufficient appropriate audit evidence• Misstatements individually or in aggregate are material• But not pervasive• Except for ISA 705 Modifications to the Opinion in The Independent Auditors Report• Qualified opinion• Unqualified opinion can not be expressed• Unable to obtain sufficient appropriate audit evidence• Possible effects on the financial statements of undetected misstatements• Could be material• But not pervasive• Limitation in Scope OmniPro Education & Training 150 of 322
  • 156. ISA 705 Modifications to the Opinion in The Independent Auditors Report• Adverse opinion• Having obtained sufficient appropriate audit evidence• Concludes misstatements individually or in aggregate are both material• and pervasive• Disagreement ISA 705 Modifications to the Opinion in The Independent Auditors Report• Disclaimer of opinion• Unable to obtain sufficient appropriate audit evidence on which to base the opinion• Concludes possible effects of undetected misstatements• Are both material and pervasive• Limitation in scope ISA 705 Modifications to the Opinion in The Independent Auditors Report• Adverse opinion• Having obtained sufficient appropriate audit evidence• Concludes misstatements individually or in aggregate are both material• and pervasive• Disagreement OmniPro Education & Training 151 of 322
  • 157. ISA 705 Modifications to the Opinion in The Independent Auditors Report• Disclaimer of opinion• In extremely rare circumstances involving multiple significant uncertainties• Notwithstanding having obtained sufficient appropriate audit evidence on which to base the opinion• It is not possible for form an opinion• Due to the potential interaction of the uncertainties and their possible cumulative effect on the financial misstatements ISA 705 Modifications to the Opinion in The Independent Auditors Report• Management imposed Limitation in Audit Scope• If the auditor becomes aware, after accepting an audit engagement, that those charged with governance of the entity, or those who appointed them as auditor, have imposed a limitation on the scope of the audit work which they consider likely to result in the need to issue a disclaimer of opinion on the financial statements, the auditor should request the removal of the limitation. ISA 705 Modifications to the Opinion in The Independent Auditors Report• Limitation in Audit Scope• Withdraw from the audit where possible under applicable law or regulation• If withdrawal not possible disclaim the opinion OmniPro Education & Training 152 of 322
  • 158. Forming Opinions Nature of Matter Auditor’s Judgment about the Giving Rise to the Pervasiveness of the Effects or Possible Modification Effects on the Financial Statements Material but Not Material and Pervasive Pervasive Financial statements are Qualified opinion Adverse opinion materially misstated Inability to obtain sufficient Qualified opinion Disclaimer of opinion appropriate audit evidence ISA 706 Emphasis of matter Paragraphs and Other Matter Paragraphs• The opinion having been formed• Draw users attention when necessary to• Matter although presented and disclosed in the financial statements is of such importance that it is fundamental to the users understanding of the financial statements• As appropriate and other matter that is relevant to the users understanding of the audit, the auditors responsibilities or the audit report ISA 706 Emphasis of matter Paragraphs and Other Matter Paragraphs• Include it immediately after the opinion on the financial statements paragraph• Use the heading Emphasis of Matter• Include a reference to the matter being emphasised• Indicate that the auditors opinion is not modified in respect of the matter emphasised OmniPro Education & Training 153 of 322
  • 159. ISA 706 Emphasis of matter Paragraphs and Other Matter Paragraphs• Communicate with those charged with governance regarding the proposed wording ISA 706 Emphasis of matter Paragraphs and Other Matter Paragraphs• Emphasis of matter paragraphs – ISA 210 – ISA 560 – ISA 570• Other matter paragraphs – ISA 560 – ISA 710 – ISA 720 A OmniPro Services• Assist Accountants• Maximise profitability• Improve quality of customer service• Be compliant – Institute, audit company & law• Achieve success• Gain peace of mind• The Accountants Resource Centre OmniPro Education & Training 154 of 322
  • 160. Accountants Resource Centre• Large Company Audit File – Programmes and the integrated working papers and file• Small Company Audit File – Programmes and the integrated working papers and file• Audit Exempt, Sole Trader, Property Management and Charity File• ISQC1 Manual Sole Practitioner and Partner• Template letters and communications• Ongoing technical updates• Members forum OmniPro Services• OmniPro Corporate Consultants – Company Formation Services • Standard Formations for €250.00 (incl VAT) • 24 Hour Turn Around – Company Secretarial Services • Annual Compliance • All Company Secretarial Special Assignments • Company Secretarial Training • Next Door to the Companies Registration Office OmniPro Services• OmniPro Practice Support – Pre-Monitoring Visits – Strategic Planning & Implementation – Practice Development – Practice Sale, Purchase & Merger – In House Training – File Review Services• Practice Incorporation – Valuation – Taxation – General advisory OmniPro Education & Training 155 of 322
  • 161. OmniPro Services• OmniPro Education & Training – Professional CPD Seminars • Technical CPD • Personal Development Training for Accountants • Online CPD • In House Training OmniPro Supporting Irish Accountants Unit 3, South Court, Iveagh CourtWexford Road Business Park, Harcourt Road Carlow. Dublin 2 doneill@omnipro.ie mkane@omnipro.ie gwynne@omnipro.ie 059 9183888 01 4110000 OmniPro Education & Training 156 of 322
  • 162. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYContents  Partner Conclusion Summary  Matters for Partners Attention  Matters Forward  Communications with those Charged with Governance  Section 1 Reporting Requirements  Section 2 Ethics, Independence & Continuance  Section 3 Laws & Regulations Review  Section 4 Deficiencies in Internal Controls  Section 5 Achieving Audit Objectives  Section 6 Fraud  Section 7 & 8 Materiality & Sample Size  Section 9 Response to Significant Specific Risks identified at Planning stage  Section 10 Audit Accounting Estimates  Section 11 Other Matters A. Related Parties B. Going Concern C. Events after the Balance Sheet date D. Use of Expert and Service Organisation E. Groups & Consolidations  Section 12 Independent Partner/Hot File Review/External Consultation  Section 13 Summary of Errors  Section 14 Disclosures & Accounting Policies  Section 15 File Completion  Section 16 Re-AppointmentKEY TO NOTATIONS BELOWWP Working PaperCAF Current Audit FileACM Audit Conclusion MemoAPM Audit Planning Memo Page 1 © OmniPro OmniPro Education & Training 157 of 322
  • 163. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYDisclaimerThis Audit Conclusion Memo is provided to give guidance in relation to the format and contents of a typical AuditConclusion Memo under the relevant auditing standards. It does not purport to give definitive professional advice inany form. It should, accordingly, not be relied upon as such. Auditors using these Work Programmes and anyprogrammes or templates, should tailor the approach and the evidence gathered to comply with Generally AcceptedAccounting Practices in Ireland in accordance with the Accounting Standards Board, International Standards onAuditing (UK & Ireland) and Company LawDespite taking every care in the preparation of this document OmniPro does not guarantee the accuracy or veracity ofany information or opinion, or the appropriateness, suitability or applicability of any practice or procedure containedthereinOmniPro does not take any legal responsibility for the contents of this manual and the consequences that may arisedue to any errors or omissions. OmniPro shall therefore not be liable for any damage or economic loss occasioned toany person acting on, or refraining from any action, as a result of or based on the material contained in this publicationAll areas of this document need to be specifically tailored to each individual client Page 2 © OmniPro OmniPro Education & Training 158 of 322
  • 164. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYPartner Conclusion Summary(REF ISA 700, ISA 720)This needs to be specifically tailored and added to for each assignment based on the facts of the auditfindings etcI have reviewed and assessed the conclusions drawn from the audit evidence obtained as the basis for theexpression of an opinion on the financial statements within the materiality levels set out at the planning stageThe auditor report is presented in accordance with the recommended formats presented in Auditing Practices BoardBulletin 2006/1 (RoI)As highlighted and documented below based on our interpretation of ISA 700 and Bulletin 2006/1 (specificallyAppendix 2) we do not have a situation which requires any disclosures or modification of the standard audit opinion.  We have obtained sufficient appropriate audit evidence  The financial statements are prepared in accordance with Irish GAAP  The financial statements are not affected by significant uncertainties.  The financial statements give a true and fair view  Thus in our professional judgement particularly there is no need to make any modifications to the standard unqualified audit opinion for an entity of this type Page 3 © OmniPro OmniPro Education & Training 159 of 322
  • 165. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYI have completed the Audit Completion –Audit Partners Checklist @ A 4. No issues arose.Based on these conclusions reached I can express an opinion as follows o That the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the statement of the companys affairs and of its profits for the period o That the financial statements have been properly prepared in accordance with the Companies Acts 1963 to 2009 o That we have obtained all the information and explanations we consider necessary for the purpose of our opinion o That in our opinion the company has kept proper books of accounts and that the companys financial statements are in agreement with these books of accounts o That in our opinion the information given in the Directors Report is consistent with the financial statements o That the net assets are more than half of the amount of its called up share capital thus in our opinion on that basis there did not exist a financial situation which under Section 40 (1) of the Companies (Amend) Act, 1983 would require the convening of an extraordinary general meeting of the company.__________________________PARTNER & DATE Page 4 © OmniPro OmniPro Education & Training 160 of 322
  • 166. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYMatters for the Attention of PartnerSignificant Matters and issues for partner attention to include Issue File Ref All issues of significant relevance should be detailed.Matters ForwardThere have been no changes in the client’s activities or procedures this year that require attention on next year. Therewere no tests identified during our audit fieldwork that could be omitted from testing in subsequent yearsThere were no other issues that require any mentionCommunications with those charged with Governance (Ref ISA 200, ISA 210, ISA 260, ISA265, ISA 580, ISQC1)The practice has open channels of communication with the client.The key formal communications were as follows:Letter of Engagement  A tailored letter of engagement reflecting the requirements of the client and the specific nature of the engagement in hand has been issued. A signed copy can be found @ WP Ref B 6.Audit Planning Letter  Arising out of our engagement team meeting, the client planning meeting and our acceptance and continuance procedures an audit-planning letter has been issued to the client. A signed copy can be found @ WP Ref B 7.  The timescale of the audit has been discussed with the Engagement Partner and those charged with governance on WP B9.Letter of Representation  A tailored letter of representation was issued to the client. A signed copy can be found @ WP Ref A2.Audit Findings Letter  A tailored audit findings letter reflecting the specific issues identified during the audit was drafted and forwarded to the client. A signed copy with the client’s responses can be found @ WP Ref A12.  Audit Opinion Letter (WP A15) has been issued to Management on XXXX 2011 outlining the audit opinion.  Response from audit client where a qualified audit opinion has been made has been documented on WP A15.1 Page 5 © OmniPro OmniPro Education & Training 161 of 322
  • 167. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYOther verbal communications and meetings, which were recorded include:-  Audit planning meeting with client (WP Ref B 9)  Interim Audit meeting with Engagement Partner and those charged with Governance on weaknesses/errors in internal controls (WP Ref B10)  Internal Meeting with Engagement Partner & Audit Manager on Audit Findings (WP Ref A11.1)  Audit conclusion meeting with client (WP Ref A 11)All other client communications which was relied upon in the course of the audit or which was required to ensure goodcommunication with those charged with governance was recorded on the individual sections of the audit fieldworkSection 1 Reporting Requirements  As identified at the planning stage there are no specific 3rd party reporting requirements for this client to regulators or third party but the following obligations were considered as part of the audit:- o Money Laundering Reporting (Money Laundering & Terrorist Financing) Act 2010 (Section 25). o Reporting to ODCE under the CLEA 2001 o Criminal Justice Theft & Fraud Offences Act 2001 & Criminal Justice (Terrorism Offences) Act 2005 o S1079 Taxes Consolidation Act  We have no grounds for suspicion of Money Laundering and the need to report in accordance with the Criminal Justice Act (Money Laundering & Terrorist Financing) Act 2010 (Section 25).  No have not become aware in the course of our audit of any indictable offences committed by the company which are reportable to the Director of Corporate Enforcement  We have considered our reporting requirements under the Criminal Justice Acts 2001 and 2005 and have not become aware of theft, fraud or other related offences as defined in the Acts.  We have not become aware of any incidences requiring reporting under S 1079 of the Taxes Consolidation Act 1997In accordance with ISA 200 we have  Complied with relevant ethical requirements (a) Integrity (b) Objectivity (c) Professional competence and due care (d) Confidentiality and (e) Professional behaviour, including those pertaining to independence, relating to financial statement audit engagements  Planned and performed the audit with professional scepticism recognising that circumstances may exist that cause the financial statements to be materially misstated  Exercised professional judgment in planning and performing an audit of financial statements  Obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby enable us to draw reasonable conclusions on which to base the auditor’s opinion  Complied with all ISAs (UK and Ireland) relevant to the audit. An ISA (UK and Ireland) is relevant to the audit when the ISA (UK and Ireland) is in effect and the circumstances addressed by the ISA (UK and Ireland) exist  Understood the entire text of all relevant ISA (UK and Ireland), including its application and other explanatory material, to understand its objectives and to apply its requirements properly  Determined that there are no other audit procedures in addition to those required by the ISA’s necessary.Section 2 Ethics, Independence & Continuance (REF ISA 220, ES, ISQC1)  As set out in Section 2 of the APM no ethical issues that were not rectifiable with the implementation of suitable safeguards were identified at the planning stage. No information has been obtained during the audit fieldwork that would have caused the firm to decline the audit engagement had that information been received prior to commencement of the engagement. Page 6 © OmniPro OmniPro Education & Training 162 of 322
  • 168. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY  Throughout the audit engagement, the engagement partner remained alert, through observation and making inquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the Engagement team  No matters came to the engagement partner’s attention through the firm’s system of quality control or otherwise that indicated that members of the engagement team have not complied with relevant ethical requirements. Therefore in the opinion of the engagement partner all members of the engagement team have complied with the APB Ethical Standards and the Institutes Ethical Guide  All the threats to independence and objectivity, and safeguards implemented/ have been clearly documented OR  At the conclusion stage in my opinion no threats to independence have arisen, this will be reviewed again at the Conclusion stage of the audit  The engagement partner will monitor engagement performance through:- o Direction, Supervision and Performance of the audit engagement in compliance with professional standards and applicable legal and regulatory requirements. o Reviews being performed in accordance with the firm’s policies and procedures (ISQC1), and on or before the date of the auditor’s report a discussion will be held with the engagement team to ensure that sufficient appropriate audit evidence has been obtained to support the conclusions reached and for the auditor’s report to be issued, WP Ref A11.1 o Consultation on difficult or contentious matters between engagement team and others at appropriate level outside the firm A11.1 o Engagement Quality Control Review which will involve discussion of significant matters with the engagement team, and evaluating the conclusions reached in formulating the auditor’s report and consideration of whether the proposed auditor’s report is appropriate, on WP A11.1. o Differences of Opinion between the engagement team and the engagement quality control reviewer will be resolved through the firms policies and procedures, ISQC1.Section 3 Laws & Regulations (REF ISA 250(A) & 250(B) If applicable)  All discussions with management in relation to laws & regulations have been documented in the audit planning meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A11. The management have given specific representations in relation to laws and regulations in the letter of representation on WP Ref A2.  Documentation from regulatory authorities was reviewed to assess compliance. ADD DOCUMENTS REVIEWEDLaws & Regulation Identify/Inspect Areas of Non Responses to non compliance Compliance and/ or Reporting Requirements  Employment Law  Collusion  Employment Law  Forgery  Tax Legislation  Deliberate failure to record transactions  Co. Act  Management override of controls  Health & Safety and or  Investigations by regulatory Environmental Health organizations and government departments or payment of fines or penalties  Tax Legislation  Sales commissions or agent’s fees that appear excessive in relation to those ordinarily paid by the entity or Page 7 © OmniPro OmniPro Education & Training 163 of 322
  • 169. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY in its industry  Purchasing at prices  Tax Legislation significantly above or below market value  Tax Legislation  Unusual payments in cash  Tax Legislation  Unusual transactions with companies registered in tax havens  Employment Law  Unauthorized transactions or improperly recorded transactions  We have specifically documented responses to non compliance and/or reporting requirements in accordance with ISA 250 and 250(B) and the ODCE.  We reviewed the legal expenses and correspondence during the year and traced to supporting documentation and obtained relevant explanations. No issues aroseSection 4 Deficiencies in Internal Controls (REF ISA 260, ISA 265)Note: A deficiency in internal control exists when o A control is designed, implemented or operated in such a way that is unable to prevent, or detect and correct, misstatements in the financial statements on a timely basis or o A control necessary to prevent, or detect and correct, misstatements in the financial statements on a timely basis is missingThe following deficiencies in control were noted during our audit work Weakness / Issue File Ref Suggested Resolution / ActionOPTION 1In this regard we conclude that the deficiencies in internal control noted above constitute “significant deficiencies” asdefined in ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance andManagement. On that basis these merit the attention of those charged with governance and therefore these havebeen formally communicated to those charged with governance as part of the audit findings letter (WP Ref A 12).;OPTION 2The deficiencies in internal control noted above do not constitute “significant deficiencies” as defined in ISA 265Communicating Deficiencies in Internal Control to Those Charged with Governance and Management. On that thesehave not formed part of the audit findings letter (WP Ref 12) however these were discussed with management at theAudit Closing Meeting as documented at WP Ref A 11Section 5 Achieving Audit Objectives (ISA 200, ISA 315, ISA 520, ISA 500, ISA 230, ISQC1)Knowledge of the clientThe client knowledge and background has been documented in the APM in Section 3. This documentary has beensupported by the transaction testing performed and all other evidence obtained throughout the audit. Based on the Page 8 © OmniPro OmniPro Education & Training 164 of 322
  • 170. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYinformation gathered throughout the audit as supported by the conclusions recorded on the working papers and theconclusions reached on the individual sections C – OAnalytical Review – Expectations and Variations (Ref ISA 520)The financial performance and published results are in line with expectations and all material variances are explainedon the final analytical review @ WP Ref A 6Explanations Received, Corroborative Audit Evidence and Substantive TestingAll explanations received from management throughout the audit have been fully supported by sufficient appropriateaudit evidence obtained. The audit evidence obtained, substantive testing and conclusions reached have beendocumented throughout the file from Section C to O.Additional Audit ProceduresDuring the planning stage of the audit we determined that no additional audit procedures would be required in additionto those required by the ISA’s in pursuance of the objectives stated in the ISAs. Following our audit testing no furtheradditional procedures were identifiedFinal OpinionIn our professional judgement based on the evidence gathered and documented throughout the file in ourprofessional opinion the financial statements give a true and fair view.BudgetThe planned budget and actual budget comparison has been recorded on WP Ref B 5. Any matters forward toimprove efficiency have been recorded above in the Matters Forward SectionQuery & Review PointsAll query and partner review comments have been dealt with @ WP Ref 3.1.Section 6 Fraud (REF ISA 240)  Throughout our audit testing samples were selected to facilitate the reasonable expectation of detecting fraud as well as designing a sample that accurately reflects the attributes of the entire population.  Based on an initial assessment of Fraud using the Fraud questionnaire @ WP Ref A13.1 the following areas were identified as potential fraud risk areas Page 9 © OmniPro OmniPro Education & Training 165 of 322
  • 171. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYSection Specific Risk Results & Conclusions based on WP Ref work carried outSales Revenue RecognitionStock Inventory QuantitiesCreditors Provisions-Accounting EstimatesCash/Bank Misappropriation of Cash amountsPayroll Misappropriation of Cash amounts  Detailed conclusions can be found @ WP Ref A13.2  The discussions with and verbal representations obtained from the directors in relation to fraud were recorded in the audit conclusion meeting memo on WP Ref A 11. Formal written representations in relation to fraud were obtained from the directors in the letter of representation on WP Ref A 2.  No reportable fraud offences were detected during the course the auditSection 7 & 8 Materiality & Sample Sizes (REF ISA 320, ISA 315, ISA 330, ISA 530)OPTION 1 No Change in Materiality or Sample Sizes RequiredThe materiality levels and sample size selections as set out at the outset of the audit during audit planning at WP RefA4.1 and WP Ref A4.2 and Sections 7 & 8 of the Audit Planning Memo were continually reviewed and assessedthroughout the audit fieldwork to ensure that the initial levels set were appropriate. No information was obtained orreviewed that would have caused Compliant Auditor to determine a different amount initiallySample testing carried out on all sections accurately reflected the attributes of the entire population being tested.Overall sample sizes were appropriate and the results obtained are sufficient to form an opinion.OPTION 2 Change in Materiality or Sample Sizes RequiredThe materiality levels and sample size selections as set out at the outset of the audit during audit planning at WP RefA4.1 and WP Ref A4.2 and Sections 7 & 8 of the Audit Planning Memo were continually reviewed and assessedthroughout the audit fieldwork to ensure that the initial levels set were appropriate. In light of information receivedregarding ????? we have revised the overall materiality level for the Balance and Profit & Loss to ???? and ????respectively. Performance materiality levels have also been revised in particular materiality for Debtors has beenrevised to €???? While the sample size has been revised to ????.. Audit testing was carried out based on theserevised materiality levels and sample sizesSection 9 Response to Significant Specific Risks Identified at Planning Stage of the audit(REF ISA 330) Page 10 © OmniPro OmniPro Education & Training 166 of 322
  • 172. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYArea Risk of Material Misstatement Risk Assertion Results and Conclusions WP Ref. Level Impacted based on Audit Work Ref PerformedStocks Existence of Stock 3 E Attended Stock take. F No Issues arose Incorrect treatment of 2 V NRV Testing on slow F obsolete/slow moving stock moving stocks identified during stock take. No particular concerns raisedCash Misappropriation of Cash 2 C, V Reviewed cash book H during period and reviewed of cash levels at year- end. No material items notedSales All sales of the company not 3 C, Reconciled Sales to M completely recorded in accounts A Point of Sale Reports of company E Performed Analytical review year on year and compared to benchmark with no issues notedSection 10 Audit Accounting EstimatesOPTION 1The followings situation(s) where accounting estimates, other than fair value accounting estimates, include:  Allowance for doubtful accounts  Inventory Obsolescence  Warranty Obligations  Depreciation method or asset useful life  Provision against the carrying amount of an investment where there is uncertainty regarding its recoverability  Outcome of long term contracts  Costs arising from litigation settlements and judgmentsOption 2There are no areas that require the use of accounting estimatesSection 11 Other MatterRelated Parties (REF ISA 550 & FRS 8)  All related parties have been adequately disclosed in the Financial Statements  There were no illegal loans to directors or related companies under S31 of CA 1990 in the previous year. All aggregate loans to directors throughout the year did not exceed 10%  Statutory minutes, legal correspondence, bank confirmations and guarantees and general correspondence were reviewed with all related party transactions documented on WP Ref T 2. Page 11 © OmniPro OmniPro Education & Training 167 of 322
  • 173. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY  Our discussions with management at the planning stage have been recorded in the audit planning meeting WP Ref B 9.  All discussions with management in relation to related parties have been documented in the audit planning meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A 11. The management have given specific representations in relation to related parties in the letter of representation on WP Ref A 2.  There was no evidence of window dressing or unrecorded related party transactionsGoing Concern (REF ISA 570)THIS SECTION NEEDS TO BE TAILORED SPECIFIC TO EACH CLIENT. COMMENTS BELOW ARE FORILLUSTRATIVE EXAMPLE PURPOSES ONLYThe going concern questionnaire @ WP Ref A 9.2 was completed and no issues arose. Detailed documentation offindings can be found @ WP Ref A 9.3. Copies of Cash flows, Bank facilities, Updated Management Accounts havebeen included on file @ A 9.4 & A 9.5.OrThe going concern questionnaire @ A9.2 was completed and the following issues arose which have been dealt withand explained below. Detailed documentation of findings can be found @ WP Ref A 9.3.Issue 1Circumstances / FactsOngoing Litigation and/or new claims since balance sheet dateSubstantial Losses of €???Net Liability or Net Current Liability Position €????Bank confirmation lettersEG Increased length of time in repaying loansNo Support from group subsidiariesManagement ExplanationSupporting Audit evidence obtainedConclusionIn our professional judgement based on the information obtained, this issue does/does not require disclosure in theaccounts.GENERALAll discussions with management in relation to potential going concern issues have been documented in the auditplanning meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A 11. The management have givenspecific representations in relation to going concern in the letter of representation on WP Ref A 2.A copy of the budgets/cash flow forecasts for the coming year is on WP Ref A9.4. These forecasts project continuedsteady growth and profitability. Page 12 © OmniPro OmniPro Education & Training 168 of 322
  • 174. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANYAs highlighted and documented below based on our interpretation of ISA 700/ ISA 570 and APB Bulletin 2006/01(specifically Appendix 3) we do not have a situation which requires any disclosures or modification of the standardaudit opinion.Based on our interpretation of ISA 570 and APB Bulletin 2010/2 Bulletin 2006/1 specifically Appendix 3 we do nothave a situation which requires any disclosures or modification of the standard audit opinion.  We have obtained sufficient appropriate audit evidence  The financial statements are prepared on a going concern basis  There is not a significant level of concern about the entity’s ability to continue as a going concern  The financial statements give a true and fair view  The directors in assessing going concern have considered a period of at least 12 months after the balance sheet date  Thus in our professional judgement particularly in relation to going concern there is no need to make any adjustments or disclosures in the financial statements.  Or If necessary - We have obtained and detailed below all the information necessary to make the relevant disclosures in relation to going concern.Events After the Balance Sheet Date (REF ISA 560 & FRS 21)The following audit evidence was reviewed and inspected up to the date before the signing of the audit report, toensure that and subsequent events have been identified and that the financial statements accurately reflect anyadjustments which should be made to the year end figures. Details of the actual audit evidence examined has beenrecorded for each individual item on WP Ref A 10.2. Copies of Cash flows, Bank facilities, Updated ManagementAccounts have been included on file @ A 9.4 & A 9.5. Page 13 © OmniPro OmniPro Education & Training 169 of 322
  • 175. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY o Management accounts o Cash book, invoices and bank statements o Cash flows o Correspondence o Minutes of meetings o Major contractsADD/DELETE TO LIST ABOVEThe initial field work and final audit work were performed within 1 week of each other so no secondary subsequentevents work was deemed necessary Are there any points forward from previous years which should be consideredThe discussions with and verbal representations obtained from the directors in relation to subsequent events wererecorded in the audit conclusion meeting memo on WP Ref A 11. Formal written representations in relation to eventsafter the Balance Sheet date were obtained from the directors in the letter of representation on WP Ref A 2.Work of an Expert (ISA 620)As set out in the Planning Memo Expert A was used during our audit due to their expertise in the area of????. TheWP @ Q 1 & 2 was completed. We have reviewed the expert’s findings and conclusions, their significant assumptionsand methods and in our professional judgment sufficient appropriate audit evidence has been obtained and no otheraudit procedures need to be performed in pursuance of the audit objectives in the area of ????.Use of Service Organisations (ISA 402)  We have obtained an understanding of how a user entity uses the services of a service organisation in the user entity’s operations, documented on S1 an S2.Groups & Consolidations (ISA 600)OPTION 1NO GROUPOPTION 2I (name auditor) have been appointed as Group Auditor as at DD/MM/YR.  We have obtained a letter of engagement as documented at WP B6.  We have obtained an understanding of the group as outlined in our group engagement team meeting documented @ WP B8.  We have consolidation adjustments and reclassifications as documented at WP T 3.  We have considered the work of component auditors @ WP B8, to include :- (a) Independence, (b) Ethical guidelines, (c) timescales.  Financial Statements and Trial Balances for each company have been filed at WP T4.  Intra group accounts have been reconciled at WP T5 with written confirmation on WP T6.Section 12 Independent Partner / Hot File Review/External Consultation (REF ISQC 1)  Based on an initial assessment of the engagement at the planning stage an independent partner review is not necessary. Having completed the audit file no further issues arose that would have changed the initial assessment, hence no hot file review is deemed to be necessary on this file in accordance with our internal Engagement Quality control procedures. Page 14 © OmniPro OmniPro Education & Training 170 of 322
  • 176. CLIENT NAME: Prepared by: _______PERIOD END: Reviewed by: _______ A3AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY  No external consultation was required for this assignment. Had such consultation requirements arose the firm would have followed its External Consultation internal policies which would include full documentation of the consultation etc  This file will be reviewed (cold file review) on a cyclical basis as part of the firm’s annual compliance review and ongoing internal quality control procedures.Section 13 Summary of Errors (REF ISA 450)THIS SECTION NEEDS TO BE TAILORED SPECIFICALLY TO EACH CLIENT. COMMENTS BELOW ARE FORILLUSTRATIVE EXAMPLE PURPOSES ONLY  As Compliant Accountant & Co are involved in the accounts preparation as well as the audit most detected errors are corrected as part of the accounts preparation procedures. Some minor errors remained unadjusted see WP Ref A7.1.  All misstatements noted during our audit with a value below €500 have been excluded from this listing as they are clearly trivial. These misstatements noted at WP Ref A7.1 have not been corrected in the financial statements as these amounts are clearly immaterial both individually and in aggregate. These have been notified to the directors as part of the audit findings letter on WP Ref A12.  Representations were also received in relation to unadjusted errors as part of the Letter of Representation @ WP Ref A 2. All material errors noted during the audit were adjusted as agreed with the Directors.Section 14 Disclosures & Accounting Policies (REF FRS’s & Company Law)All disclosures have been made in the Financial statements in accordance with our Disclosures checklist at WP Ref A8.1 & A 8.2 and pro-forma set of Financial statements. All accounting policies have been reviewed and these are inaccordance with accounting standards and applicable law.Section 15 File CompletionAll working papers have been completed and reviewed appropriately as recorded by the file completion checklist onWP Ref A 5.Finalised Financial Statements have OR have not been submitted to the client within three days of approval of thefinancial statements and signing of the auditor’s report, WP Ref A5.The Financial Statements have been signed off by (Personal Name of Auditor) on XXX 2011 on file Ref A1.1.Section 16 Re-Appointment (Ref ISA 220)Nothing has come to my attention during the audit which would prevent the firm, subject to review next year,accepting reappointment or remaining in office.________________________PARTNER & DATE Page 15 © OmniPro OmniPro Education & Training 171 of 322
  • 177. Compliant Client A 9.330 June 2011 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Going Concern To assess the ability of the company to continue on a going concern basisObjective for the next 12 months thus the adequacy of preparing the Financial Statements on this basisNOTE: Important to ensure that as much back up documentation as possible is gatheredand contained on file relating to Going Concern. The Work Done below is only asuggestion and should be fully tailored for each clientWork DoneAs at the current period end the company is in a current asset and a net asset position withnet assets totalling ?????All banking facilities for next year have been agreed and finalised with the bank. Copies ofthese agreementscan be found at WP Ref A 9.4There has been no major restructure in debt in the period and from a review of allborrowings in the company there would appear to be none approaching maturity withoutrealistic prospects of renewal or repayment. The company is not reliant on short termborrowings and the bank balance is in a positive positionFrom our knowledge of the client and discussions with the directors during Closing Meeting(Ref WP A 11) there is no evidence of the company defaulting or breaching anyagreements or covenantsWe discussed cashflows and liquidity with the Finance Director and reviewed liquiditycurrent and quick ratios @ A 6. The company would appear not to have any major liquidityissues. Discussions with the Finance Director were held during both the Planning Meetingand Close Out Meeting with the client see REF A 11 & B 9We reviewed the companys management accounts and cashflows up the the date ofsigning the Financial statements. For this three month period turnover was????, profit was???? And the bank position as at that date is ????.Therefore there is no particular concernregarding the companies ability to continue post year end (see WP Ref A9.5)There have been no substantial sale of fixed assets during or after the periodWorking Capital terms and conditions from both a customer and a suppliers perspectivehave not changed during the periodOperationally the company has not and is not expecting to change its business/level ofbusiness within the next 12 months © OmniPro OmniPro Education & Training 172 of 322
  • 178. Compliant Client A 9.330 June 2011 Initials Date Prepared by: Staff 1-Jan-09Index Reviewed by: Partner 31-Jan-09Going ConcernAs confirmed by way of Solicitors Letter the company is not subject to any major litigationwhich could render going concern issuesWe have reviewed the forecast Cashflows and Budgets for the client and we are satisfiedthat there are no going concern issues. We have completed the checklist @ A9/2 and havenot noted any issues in this regard. We also spoke to the management regarding goingconcern (see WP Ref A 9.5)No evidence was obtained during our work to suggest the company was overally reliant onany particular suppliers or customers who themselves could be facing difficultiesWe have obtained a written confirmation of support from the subsidiarieswithin the group, namely XXX Ltd and XXX LtdManagements Assessment of Going Concern (See WP Ref A 9.6)ConclusionIn our professional judgement work carried out in this section has been satisfactorilycompleted and recorded with all appropriate evidence received. Based on our testingcarried out we can conclude that using the going concern basis for the preparation of theFinancial Statements is appropriate © OmniPro OmniPro Education & Training 173 of 322
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