These economically challenging times present an added dimension to the opinion forming process facing auditors when they form audit opinions on financial statements. This practical session blends the theory and the technicality of the standards and the guidance documents with the practicality of actual opinions formed.
Audit Opinion Dilemmas forms part of the Essential Advisors Mix which is also available online. When you purchase this course as part of the Essential Advisors Mix you get 10 Hours Online CPD for just €150.00.
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Audit Opinion Dilemmas
1. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
In Association with:-
Online CPD for Accountants &
Professional Advisors
Audit Opinion Dilemmas
Presenter:
Des O’Neill CPA; A.C.I.S; ACCA
CPDStore.com
Unit 3, South Court, Block D, Iveagh Court,
Wexford Road Business Park, 5 – 8 Harcourt Road,
Carlow. Dublin 2.
059 9183888 01 4110000
www.OmniPro.ie www.CPDStore.com
2. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
Audit Opinion Dilemmas
Supporting Documentation Index
Contents Page
Slide Set 1 – 13
Audit Completion Memorandum 14 – 28
Going Concern Samples 29 – 30
Bulletin 2006/1 31 – 68
Financial Statement Extracts
Tamorbrick Limited 69 – 77
Merlin Developments Limited 78 – 79
Becbay 80 – 86
Cicol Limited 87 – 88
Bloomburg Limited 89 – 92
Harcourt Developments 93 – 98
Bluefort Properties Limited 99 – 100
Landmark Fundamental Uncertainty BDO 101 – 102
CG Hotels 103 – 107
Ashford Castle 108 – 111
Slieve Russell Hotel Limited 112 – 120
Vesway Limited 121 – 125
Bishopscourt 126 – 136
McSweeney Pharmacy KPMG 137 – 139
Merrion Pharmaceuticals Ireland 140 – 146
Mount Carmel Medical Group 147 – 150
Setanta Sports Channel Ireland 151 – 152
Shannon Castle and Banquets PWC 153
Smithfield Property 154
3. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
Audit Opinion Dilemmas
Supporting Documentation Index – Continued
Contents Page
Extracts from Recent Financial Statements 155 – 157
DCD Builders 158 – 166
D2 Private Limited KPMG 167 – 169
Irish Car Rentals Limited 170 – 171
Irish Press Plc. 172 – 175
Lalco Holdings Limited 176 – 177
Robert Butler Holdings Limited 178 – 179
4. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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5. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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6. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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7. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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8. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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9. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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10. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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11. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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12. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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13. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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14. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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
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15. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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34. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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35. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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36. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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37. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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38. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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39. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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40. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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41. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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42. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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43. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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44. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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45. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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46. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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47. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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48. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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49. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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50. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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51. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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52. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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53. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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54. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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55. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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56. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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57. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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58. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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59. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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60. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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61. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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62. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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63. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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64. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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71. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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73. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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75. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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76. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.
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