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AUDIT REPORT STANDARDS / BULLETINS
   ISA 700 (DEC 04)– THE AUDITOR’S REPORT ON F.S.
   DRAFT ISA 700 (JULY 05) – UNMODIFIED REPORTS
   DRAFT ISA 705 (APRIL 05) - MODIFIED ( EXCEPT EMPHASIS
    OF MATTER)
   DRAFT ISA 706 (APRIL 05)– EMPHASIS OF MATTER /
    OTHER REPORTS
   DRAFT APB BULLETIN 2005/4 (NOV 05)– E.G.’S OF UK
    REPORTS UNDER SAS’S 700,705,706 ( SUPERCEEDED)
   DRAFT BULLETIN 2006/06 (SEPT 06) – UPDATED AS NEED
    TO REPORT ON CONSISTENCY OF DIRECTORS’ REPORT
AUDITOR’S REPORTS ON F.S.
DRAFT APB BULLETIN 2006/6 E.G.3
(UNLISTED/INDIVIDUAL A/CS)
Independent Auditors’ Report to Shareholders of XYZ Ltd
We have audited the fin statements of … for the y/e ….which
   comprise P/L ,B/S,Cash Flow Statement,STRGL and the related
   notes.These fin. statements have been prepared under the a/c
   policies set out therein.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and
   the financial statements in accordance with applicable law and
   UK A/c standards are set out in the Statement of Directors’
   Responsibilities.
Our responsibility is to audit the fin. statements in accordance with
   relevant legal and regulatory requirements and ISA’s (UK & Ire).
AUDITOR’S REPORTS ON F.S.
DRAFT APB BULLETIN 2006/6 E.G.3
(UNLISTED/INDIVIDUAL A/CS)
Respective responsibilities of directors and auditors (cont’d)
We report to you our opinion as to whether the F/S give a T/F view
   and are properly prepared etc re the Coys Act 1985.
We also report to you whether in our opinion the info given in the
   Directors’ Report is consistent with the F.S.
In addition we also report to you ….(exception reporting items) .
   We read other info in the Annual Report, and consider if it is
   consistent with the audited F.S. This other info comprises ….
   Our responsibilities do not extend to any other information .
AUDITOR’S REPORTS ON F.S.
DRAFT APB BULLETIN 2006/ E.G.3
Basis of audit opinion
We conducted our audit in accordance with ISA’s on Auditing (UK
   & Ire). An audit includes an examination on a test basis etc
Opinion
In our opinion:
 the F.S. give a T/F view, in accordance with UK GAAP, of the
   state of the company’s affairs as at …. and of its profit (loss) for
   the year then ended;and
 the F.S. have been properly prepared in accordance with the
   Companies Act 1985
 the information given in the Directors’ Report is consistent
   with the financial statements.

Registered auditors                                 Address
Date
AUDIT QUALIFICATIONS
Problem         Material    Pervasive


Disagreement    “Except”    “Adverse”


Uncertainty –
Scope           “ Except”   “Disclaimer”
E.G. 7 DISAGREEMENT - EXCEPT
Disagreement re accounting treatment
Included in debtors shown on the B/S is an amount of
   £Y due from a company which has ceased trading .
   XYZ plc has no security for this debt. In our opinion
   the company is unlikely to receive any payment and
   full provision of £Y should have been made,reducing
   profit before tax and net assets by that amount.
Except for the absence of this provision, in our opinion
   etc …
E.G. 10 ADVERSE OPINION
 As more fully explained in note ….no provision has
   been made for the losses expected to arise on
   certain long term contracts currently in progress, as
   the directors consider that such losses should be off-
   set against amounts recoverable on other long-term
   contracts. In our opinion, provision should have been
   made for foreseeable losses on individual contracts
   as required by SSAP 9 . If losses had been so
   recognised the effect would have been to reduce
   profit and contract WIP at 31 Dec 2002 by £…
In view of the failure to provide for the losses referred to
   above, in our opinion the financial statements do not
   give a true and fair view etc
E.G 8: SCOPE LIMITATION - EXCEPT
(Basis of opinion – excerpt)
….However,the evidence available to us was limited
  because £…. of the company’s recorded turnover
  comprises cash sales over which there was no
  system of control on which we could rely for the
  purposes of our audit
Except for any adjustments that might have been found
  to be necessary had we been able to obtain sufficient
  evidence concerning cash sales, in our opinion etc
E.G. 9 DISCLAIMER
(Basis of opinion – excerpt)
….However,the evidence available to us was limited
  because we were appointed auditors on …. And in
  consequence were unable to carry out auditing
  procedures to obtain adequate assurance re stock
  and WIP appearing in the B/S at £……
 Because of the possible effect of the limitation in
  evidence available to us ,we are unable to form an
  opinion as to whether the financial statements give a
  true and fair view of the …… etc
DRAFT ISA 706 - EMPHASIS OF MATTER/
OTHER MATTER PARAGRAPHS

Distinction between "emphasis of matter”/
“other matter” reports
 Emphasis of matter - when matter of

  fundamental importance to F.S and unusual.
 OM – when referring to matters other than

  those in the F.S. e.g. director’s report or
  chairman’s statement (ED ISA 706 E.G. 1)
“EMPHASIS OF MATTER” SITUATIONS
(OTHER THAN GOING CONCERN)
   Significant uncertainties e.g. litigation
   Significant and unusual RP transactions
   Subsequent event disclosed in F.S.
   Major catastrophe , which is disclosed but
    continues to have a significant impact on
    business
REVIEW OF FINANCIAL REPORTS –
ISRE 2400 (ISA 910)
   Obtain an understanding of the business
   Enquiries re a/c practices,a/c records and
    procedures re summarising info for report
   Enquiries re material assertions in report
   Analytical procedures – budgets/prior periods
   Negative opinion
   Moderate assurance
UNQUALIFIED REVIEW REPORT
REVIEW REPORT TO
We have reviewed the B/S ,P&L and cash flows of ABC Ltd
for the year ended ….
We conducted our review in accordance with the ISA applicable to
    review engagements.This standard requires that we plan &
    perform the review to obtain moderate assurance as to whether
    the F/S are free of material misstatement. A review is limited
    primarily to enquiries of personnel and analytical procedures
    and thus provides less assurance than an audit.
Based on our review, nothing has come to our attention etc
SAS 610 COMMUNICATION OF AUDIT
MATTERS TO THOSE CHARGED WITH
CORPORATE GOVERNANCE
Those charged with governance include the
  directors,partners,proprietors,management
  committee
Listed company
Auditors disclose in writing to audit committee:
 Relationships with client entity /related

  entities relevant to independence
 Related safeguards in place

 Confirm firm independent / staff objective
SAS 610 ( CONT’D)
Auditors should communicate:
 Expected modifications to the auditors’ report

 Unadjusted misstatements

 Material weaknesses in internal control

 Views re qualitative aspects of a/c & fin

  reporting
 Any other relevant matters
SMALL COMPANY AUDIT PROBLEMS
   Simple book-keeping and accounting controls
   Emphasis on personal participation by
    management – opportunity to override
    controls
   Easy access by staff to assets
   Informal procedures of
    reporting,analysis,planning and control
   Accountancy services etc often provided by
    auditor (when regulations permit)
CHARITIES – INTERNAL CONTROLS
   Cash Donations – numbered/sealed tins,2 people
    count
   Postal Receipts – 2 people / post list
   GAD’s – follow-up o/s amounts / reconcile to tax
    repayments
   Legacies – correspondence files retained / follow up
    o/s legacies
   Fund raising activities – records maintained / receipts
    for cash takings / 2 people count
CHARITIES – AUDIT WORK
Substantive tests designed to check:
 Incompleteness of income

 Overstatement of expenses / grants

 Misanalysis or misuse in application of funds

 Misstatement or omission of assets

 Appropriateness of a/c policies e.g. income

  gross / accruals basis
APB BULLETIN 2001/2
WORDING OF AUDITORS’ REPORTS
(LISTED)
Independent Auditors’ Report to the Shareholders of XYZ Plc
   (Extracts)
We have audited the financial statements etc
Respective responsibilities of directors and auditors
The directors’ responsibilities etc
Our responsibility is to audit the fin.statements in accordance with
   relevant legal and regulatory requirements,UK standards and
   the Listing Rules of the FSA.
We report to you etc……info specified by law or Listing Rules re
   directors’ remuneration and transactions with the company.
APB BULLETIN 2001/2 WORDING OF
AUDITORS’ REPORTS (LISTED- CONT’D)
We review whether the Corporate Governance
 Statement reflects the company’s compliance with
 the seven provisions of the Combined Code specified
 for our review by the Listing Rules, and we report if it
 does not. We are not required to consider whether
 the board’s statements on internal control cover all
 risks and controls,or form an opinion on the
 effectiveness of the company’s (group’s) corporate
 governance procedures or its risk and control
 procedures.
We read other info contained in the Annual Report and
 consider whether it is consistent etc
APB BULLETIN2001/1 THE ELECTRONIC
PUBLICATION OF AUDITORS’ REPORTS
1)Where it is not possible to use page no.s to identify the location
   of parts of fin info on a web site – the report should specify the
   location/ description in another way.
2) Possible footnotes to report re integrity of web site / legislation
 The maintenance and integrity of the XYZ plc website is the

   directors’ responsibility;the work carried out by the auditors does
   not involve consideration of these matters,and accordingly, the
   auditors accept no responsibility for any changes that may have
   occurred to the fin. statements since they were initially
   presented on the website.
 Legislation in the UK governing the preparation and

   dissemination of financial statements may differ from legislation
   in other jurisdictions.
APB BULLETIN 2001/2 REVISIONS TO THE
WORDING OF AUDITORS’ REPORTS
(UNLISTED)
Independent Auditors’ Report to Shareholders of XYZ Ltd
We have audited the fin statements of … for the y/e ….which
   comprise P/L ,B/S,Cash Flow Statement,STRGL and the related
   notes.These fin. statements have been prepared etc
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and
   the financial statements in accordance with applicable law and
   UK A/c standards are set out in the Statement of Directors’
   Responsibilities.
Our responsibility is to audit the fin. statements in accordance with
   relevant regulatory requirements and UK standards. We also
   report to you ….(exception reporting items) Our responsibilities
   do not extend to any other information.
APB BULLETIN 2001/2 REVISIONS TO THE
WORDING OF AUDITORS’ REPORTS
(UNLISTED)
Basis of audit opinion
We conducted our audit in accordance with international
    auditing standards etc
We planned and performed our audit so as to obtain all
   the info & explanations etc
Opinion
In our opinion the financial statements. give a true and
   fair view of the state of the company’s affairs as at
   and of its profit for the year then ended and have
   been properly prepared in accordance with the
   Companies Act 1985.
Registered auditors /Date                          Address
AUDITOR’S REPORTS ON F.S.
DRAFT APB BULLETIN 2005/4 (UNLISTED)
Independent Auditors’ Report to Shareholders of XYZ Ltd
We have audited the fin statements of … for the y/e ….which
   comprise P/L ,B/S,Cash Flow Statement,STRGL and the related
   notes.These fin. statements have been prepared etc
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and
   the financial statements in accordance with applicable law and
   UK A/c standards are set out in the Statement of Directors’
   Responsibilities.
Our responsibility is to audit the fin. statements in accordance with
   relevant regulatory requirements and ISA’s (UK & Ire). We also
   report to you ….(exception reporting items) . We read other info
   in the Annual Report, and consider if it is consistent with the
   audited F.S. This other info comprises …. Our responsibilities
   do not extend to any other information.
AUDITOR’S REPORTS ON F.S.
DRAFT APB BULLETIN 2005/4 (UNLISTED)
Basis of audit opinion
We conducted our audit in accordance with ISA’s on Auditing (UK
   & Ire). An audit includes an examination on a test basis etc
Opinion
In our opinion:
 the F.S. give a T/F view, in accordance with UK GAAP, of the

   state of the company’s affairs as at …. and of its profit (loss) for
   the year then ended;and
 the F.S. have been properly prepared in accordance with the

   Companies Act 1985
Registered auditors                               Address
Date

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disciple
 

11auditreps

  • 1. AUDIT REPORT STANDARDS / BULLETINS  ISA 700 (DEC 04)– THE AUDITOR’S REPORT ON F.S.  DRAFT ISA 700 (JULY 05) – UNMODIFIED REPORTS  DRAFT ISA 705 (APRIL 05) - MODIFIED ( EXCEPT EMPHASIS OF MATTER)  DRAFT ISA 706 (APRIL 05)– EMPHASIS OF MATTER / OTHER REPORTS  DRAFT APB BULLETIN 2005/4 (NOV 05)– E.G.’S OF UK REPORTS UNDER SAS’S 700,705,706 ( SUPERCEEDED)  DRAFT BULLETIN 2006/06 (SEPT 06) – UPDATED AS NEED TO REPORT ON CONSISTENCY OF DIRECTORS’ REPORT
  • 2. AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/6 E.G.3 (UNLISTED/INDIVIDUAL A/CS) Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which comprise P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared under the a/c policies set out therein. Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the fin. statements in accordance with relevant legal and regulatory requirements and ISA’s (UK & Ire).
  • 3. AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/6 E.G.3 (UNLISTED/INDIVIDUAL A/CS) Respective responsibilities of directors and auditors (cont’d) We report to you our opinion as to whether the F/S give a T/F view and are properly prepared etc re the Coys Act 1985. We also report to you whether in our opinion the info given in the Directors’ Report is consistent with the F.S. In addition we also report to you ….(exception reporting items) . We read other info in the Annual Report, and consider if it is consistent with the audited F.S. This other info comprises …. Our responsibilities do not extend to any other information .
  • 4. AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/ E.G.3 Basis of audit opinion We conducted our audit in accordance with ISA’s on Auditing (UK & Ire). An audit includes an examination on a test basis etc Opinion In our opinion:  the F.S. give a T/F view, in accordance with UK GAAP, of the state of the company’s affairs as at …. and of its profit (loss) for the year then ended;and  the F.S. have been properly prepared in accordance with the Companies Act 1985  the information given in the Directors’ Report is consistent with the financial statements. Registered auditors Address Date
  • 5. AUDIT QUALIFICATIONS Problem Material Pervasive Disagreement “Except” “Adverse” Uncertainty – Scope “ Except” “Disclaimer”
  • 6. E.G. 7 DISAGREEMENT - EXCEPT Disagreement re accounting treatment Included in debtors shown on the B/S is an amount of £Y due from a company which has ceased trading . XYZ plc has no security for this debt. In our opinion the company is unlikely to receive any payment and full provision of £Y should have been made,reducing profit before tax and net assets by that amount. Except for the absence of this provision, in our opinion etc …
  • 7. E.G. 10 ADVERSE OPINION As more fully explained in note ….no provision has been made for the losses expected to arise on certain long term contracts currently in progress, as the directors consider that such losses should be off- set against amounts recoverable on other long-term contracts. In our opinion, provision should have been made for foreseeable losses on individual contracts as required by SSAP 9 . If losses had been so recognised the effect would have been to reduce profit and contract WIP at 31 Dec 2002 by £… In view of the failure to provide for the losses referred to above, in our opinion the financial statements do not give a true and fair view etc
  • 8. E.G 8: SCOPE LIMITATION - EXCEPT (Basis of opinion – excerpt) ….However,the evidence available to us was limited because £…. of the company’s recorded turnover comprises cash sales over which there was no system of control on which we could rely for the purposes of our audit Except for any adjustments that might have been found to be necessary had we been able to obtain sufficient evidence concerning cash sales, in our opinion etc
  • 9. E.G. 9 DISCLAIMER (Basis of opinion – excerpt) ….However,the evidence available to us was limited because we were appointed auditors on …. And in consequence were unable to carry out auditing procedures to obtain adequate assurance re stock and WIP appearing in the B/S at £…… Because of the possible effect of the limitation in evidence available to us ,we are unable to form an opinion as to whether the financial statements give a true and fair view of the …… etc
  • 10. DRAFT ISA 706 - EMPHASIS OF MATTER/ OTHER MATTER PARAGRAPHS Distinction between "emphasis of matter”/ “other matter” reports  Emphasis of matter - when matter of fundamental importance to F.S and unusual.  OM – when referring to matters other than those in the F.S. e.g. director’s report or chairman’s statement (ED ISA 706 E.G. 1)
  • 11. “EMPHASIS OF MATTER” SITUATIONS (OTHER THAN GOING CONCERN)  Significant uncertainties e.g. litigation  Significant and unusual RP transactions  Subsequent event disclosed in F.S.  Major catastrophe , which is disclosed but continues to have a significant impact on business
  • 12. REVIEW OF FINANCIAL REPORTS – ISRE 2400 (ISA 910)  Obtain an understanding of the business  Enquiries re a/c practices,a/c records and procedures re summarising info for report  Enquiries re material assertions in report  Analytical procedures – budgets/prior periods  Negative opinion  Moderate assurance
  • 13. UNQUALIFIED REVIEW REPORT REVIEW REPORT TO We have reviewed the B/S ,P&L and cash flows of ABC Ltd for the year ended …. We conducted our review in accordance with the ISA applicable to review engagements.This standard requires that we plan & perform the review to obtain moderate assurance as to whether the F/S are free of material misstatement. A review is limited primarily to enquiries of personnel and analytical procedures and thus provides less assurance than an audit. Based on our review, nothing has come to our attention etc
  • 14. SAS 610 COMMUNICATION OF AUDIT MATTERS TO THOSE CHARGED WITH CORPORATE GOVERNANCE Those charged with governance include the directors,partners,proprietors,management committee Listed company Auditors disclose in writing to audit committee:  Relationships with client entity /related entities relevant to independence  Related safeguards in place  Confirm firm independent / staff objective
  • 15. SAS 610 ( CONT’D) Auditors should communicate:  Expected modifications to the auditors’ report  Unadjusted misstatements  Material weaknesses in internal control  Views re qualitative aspects of a/c & fin reporting  Any other relevant matters
  • 16. SMALL COMPANY AUDIT PROBLEMS  Simple book-keeping and accounting controls  Emphasis on personal participation by management – opportunity to override controls  Easy access by staff to assets  Informal procedures of reporting,analysis,planning and control  Accountancy services etc often provided by auditor (when regulations permit)
  • 17. CHARITIES – INTERNAL CONTROLS  Cash Donations – numbered/sealed tins,2 people count  Postal Receipts – 2 people / post list  GAD’s – follow-up o/s amounts / reconcile to tax repayments  Legacies – correspondence files retained / follow up o/s legacies  Fund raising activities – records maintained / receipts for cash takings / 2 people count
  • 18. CHARITIES – AUDIT WORK Substantive tests designed to check:  Incompleteness of income  Overstatement of expenses / grants  Misanalysis or misuse in application of funds  Misstatement or omission of assets  Appropriateness of a/c policies e.g. income gross / accruals basis
  • 19. APB BULLETIN 2001/2 WORDING OF AUDITORS’ REPORTS (LISTED) Independent Auditors’ Report to the Shareholders of XYZ Plc (Extracts) We have audited the financial statements etc Respective responsibilities of directors and auditors The directors’ responsibilities etc Our responsibility is to audit the fin.statements in accordance with relevant legal and regulatory requirements,UK standards and the Listing Rules of the FSA. We report to you etc……info specified by law or Listing Rules re directors’ remuneration and transactions with the company.
  • 20. APB BULLETIN 2001/2 WORDING OF AUDITORS’ REPORTS (LISTED- CONT’D) We review whether the Corporate Governance Statement reflects the company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls,or form an opinion on the effectiveness of the company’s (group’s) corporate governance procedures or its risk and control procedures. We read other info contained in the Annual Report and consider whether it is consistent etc
  • 21. APB BULLETIN2001/1 THE ELECTRONIC PUBLICATION OF AUDITORS’ REPORTS 1)Where it is not possible to use page no.s to identify the location of parts of fin info on a web site – the report should specify the location/ description in another way. 2) Possible footnotes to report re integrity of web site / legislation  The maintenance and integrity of the XYZ plc website is the directors’ responsibility;the work carried out by the auditors does not involve consideration of these matters,and accordingly, the auditors accept no responsibility for any changes that may have occurred to the fin. statements since they were initially presented on the website.  Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
  • 22. APB BULLETIN 2001/2 REVISIONS TO THE WORDING OF AUDITORS’ REPORTS (UNLISTED) Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which comprise P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared etc Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the fin. statements in accordance with relevant regulatory requirements and UK standards. We also report to you ….(exception reporting items) Our responsibilities do not extend to any other information.
  • 23. APB BULLETIN 2001/2 REVISIONS TO THE WORDING OF AUDITORS’ REPORTS (UNLISTED) Basis of audit opinion We conducted our audit in accordance with international auditing standards etc We planned and performed our audit so as to obtain all the info & explanations etc Opinion In our opinion the financial statements. give a true and fair view of the state of the company’s affairs as at and of its profit for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Registered auditors /Date Address
  • 24. AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2005/4 (UNLISTED) Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which comprise P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared etc Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the fin. statements in accordance with relevant regulatory requirements and ISA’s (UK & Ire). We also report to you ….(exception reporting items) . We read other info in the Annual Report, and consider if it is consistent with the audited F.S. This other info comprises …. Our responsibilities do not extend to any other information.
  • 25. AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2005/4 (UNLISTED) Basis of audit opinion We conducted our audit in accordance with ISA’s on Auditing (UK & Ire). An audit includes an examination on a test basis etc Opinion In our opinion:  the F.S. give a T/F view, in accordance with UK GAAP, of the state of the company’s affairs as at …. and of its profit (loss) for the year then ended;and  the F.S. have been properly prepared in accordance with the Companies Act 1985 Registered auditors Address Date

Editor's Notes

  1. Reference to not obtaining all info & explanations required and unable to determine proper a/c records re cash sales
  2. Note re limitation of scope re stock: Not obtained all info & explanations and unable to determine whether proper accounting records.