Topic 12 audit report

1. TOPIC 12 : AUDIT REPORT
REFERENCE: CHAPTER 3
AUD390 2014
AUDITING AND ASSURANCE
SERVICES
IN MALAYSIA

2. LEARNING OUTCOMES
AUD390 2014
 TYPES OF AUDIT REPORT
 COMPONENTS OF AN UNMODIFIED AUDIT REPORT
 DEPARTURES FROM AN UNMODIFIED AUDIT
REPORT

3. AUD390 2014
 Audit Report
 the final stage in the entire audit process
 A written communication of audit findings to the
shareholders
 Types of audit report
1. Standard unqualified / Unmodified audit report
2. Unqualified / Unmodified audit report with Emphasis of
Matter Paragraph
3. Qualified – Qualified opinion
4. Qualified Report - Disclaimer opinion
5. Qualified Report - Adverse opinion
INTRODUCTION

4. 1. STANDARD UNQUALIFIED /
UNMODIFIED AUDIT REPORT
AUD390 2014
CONDITION
TO ISSUE
STANDARD
UNQUALIFIED
AUDIT REPORT
All statements are
included in the FS
No circumstances requiring
the addition of explanatory
paragraph or modification
of wording
ISAs have been followed
In all respects on the
engagement
Sufficient evidence
has been accumulated
FS are presented in
accordance with approved
accounting standards.
Adequate disclosure have
been included

5. Cont…
AUD390 2014
 SUAR consist:
1. Report Titles
2. Audit Report Address
3. Introductory Paragraph
4. Scope Paragraph
5. Opinion Paragraph
6. Name of CA firm & signature of auditor
7. Auditor’s address
8. Audit report date

6. 1. Report Title
AUD390 2014
 All audit report are required to be title
 The title must include the word independent
 For e.g.
 Independent auditor’s report
 Report of independent auditor
 Report of the Auditor to the Members of Sintok
Hardware Sdn Bhd

7. 2. Audit Report Address
AUD390 2014
 Normally report is addressed to the company,
stakeholders, the Board of Directors
 For e.g.
 Report of the Auditor to the Members of Sintok
Hardware Sdn Bhd

8. 3. Introductory Paragraph
AUD390 2014
 Consist of
1. Simple statement that the CA firm has done an
audit
 E.g. we have audited the financial statements
of Sintok Hardware Sdn Bhd set out on page
__ to __
2. Lists of FS that were audited
 E.g. …comprising of the balance sheet of the
company and notes to the account as at 31st
December 2005 and of the profit and loss
account and the cash flow statement…
3. Statement of the responsibility of management &
auditor’s responsibility
 E.g. The preparation of the financial
statements is the responsibility of the
company’s directors. Our responsibility is to
express an opinion on the financial statements

9. 4. Scope Paragraph
AUD390 2014
 A factual statement about what the auditor did in the
audit
 Consist of:
1. Statement that the auditor followed Malaysian
Approved Standards of Auditing
 We conducted our audit in accordance with
approved standards on auditing
2. Statement that the audit is designed, planned and
performed to obtain reasonable assurance about
whether the statements are free of material
misstatements
 …to provide us with sufficient evidence to give
reasonable assurance that the financial
statements are free of material misstatement

10. Cont…
AUD390 2014
3. Highlight the audit evidence accumulated and
statement that the auditor believes that the evidence
accumulated was appropriate to express the opinion
presented
 E.g. Our audit includes examining, on a test basis,
evidence relevant to the amounts and disclosures
in the financial statements. Our audit includes
assessment of accounting principles used and
significant estimates made by the directors as well
as evaluation of the adequacy of the presentation
of information in the financial statements. We
believe our audit provides a reasonable basis for
our audit.

11. 5. Opinion Paragraph
AUD390 2014
 States the auditor’s conclusions based on the
results of the audit
 It is a statement of opinion rather a statement of
absolute fact or a guarantee, due:
 Conclusions are based on professional judgment
 There may be some information risk associated
with the financial statements, even though the
statements have been audited

12. 6. Name Of CA Firm &
Signature Of Auditor
AUD390 2014
 Identifies the CA firm and the auditor who performed
the audit
 E.g.
Bakar & Anthony
Firm No: XXXX
Chartered Accountants
Alor Setar

13. 7. Auditor’s Address
AUD390 2014
 The location of the audit firm

14. 8. Audit Report Date
AUD390 2014
 Refer to the completion date of the audit assignment
 Indicates the last day of the auditor’s responsibility for
the review of significant events that occurred after the
date of the financial statements

15. AUD390 2014
 Reasons for the issuance of this report:
1. Emphasis of matter (pp. 56)
2. Substantial doubt about going concern (pp. 57)
2. UNQUALIFIED /
UNMODIFIED AUDIT REPORT
WITH EMPHASIS OF MATTER
PARAGRAPH

16. AUD390 2014
QUALIFIE
D AUDIT
REPORT
Qualified
Opinion
Adverse Opinion
Disclaimer
Opinion

17. AUD390 2014
 Conditions results in issuing modified audit report:
1. The scope of the audit has been restricted
(Scope Limitation)
2. Disagreement

18. 1. Scope Limitation
AUD390 2014
 Arises when the auditor has not accumulated
sufficient evidence to conclude whether FS are
stated in accordance with CA Act 1965
SCOPE
LIMITATION
RESTRICTION IMPOSED BY
THE CLIENT
E.g. Management refuse to
permit the auditor to perform
stock count or to confirm
account receivable with
debtors
RESTRICTION CAUSED BY
CIRCUMSTANCES BEYOND
EITHER THE CLIENT’S OR
AUDITOR CONTROL
E.g. To perform stock count of
inventories after client’s year
end

19. 2. Disagreement
AUD390 2014
 Arises where the auditor is able to express an
opinion but his opinion differs from the view
expressed by the management in the FS
Examples….
Non-conformity with the provisions of the CA
Act 1965 & other legislation
Non-compliance with approved accounting
standards
Disagreements with facts or amounts included
in the financial statements
Inadequate disclosure of facts or amounts
included in the FS

20. AUD390 2014
CONDITIONS FINDING –
MATERIAL &
NOT PERVASIVE
FINDING –
MATERIAL &
PERVASIVE
LIMITATION ON SCOPE
OF AUDIT
QUALIFIED OPINION DISCLAIMER OF
OPINION
DISAGREEMENT WITH
MANAGEMENT
QUALIFIED OPINION ADVERSE OPINION
TYPES OF QUALIFIED AUDIT REPORT TO PRODUCE
Material:the omission, non disclosure, misstatement of
an item would influence the decision of users of FS
Pervasive:one matter which is so significant as to
undermine the FS as a whole