Lesson 4.3: Audit report
Procedures relating to the audit report
1.Read the audit report in detail. Many errors slip through regarding:
a. Reference to company or group incorrectly or vice versa.
b. Incorrect accounting framework
c. Reference to companies’ act when entity not subject to the companies’ act.
d. Directors’ approval of the financial statements not signed yet.
e. Missing required paragraphs.
f. Outdated wording of paragraphs. Check with the latest guidance.
2. When formulating the audit report, the auditor needs to form an opinion on the financial statements. In order to do so, the auditor concludes on (ISA 700.12 – 15):
a. Whether sufficient appropriate evidence was obtained
b. Whether misstatements individually and in aggregate are material or not
c. Whether the financial statements were prepared in compliance with the accounting framework
d. Whether the financial statements are a fair presentation of the financial position, performance and cash flows of the entity
e. Whether any fraud / potential fraud was identified and whether it was appropriately responded to.
3. Consideration of the audit report – It is recommended to document considerations in this regard in a separate working paper to provide adequate support for the audit report:
a. Audit report format required by ISA 700 (ISA 700.20 – 52)
b. Related modifications (ISA 700.16 – 19 & ISA 705)
c. Key Audit Matters (ISA 701) – Consider whether Key Audit Matters need to be reported on.
d. The impact of supplementary information presented with he financial statements, e.g., Detailed income statement and Tax calculation (ISA 700.53 – 54)
e. It is advisable to compare the audit report template used word for word with the illustrative audit report examples per SAAPS 3 to ensure that the wording is correct and appropriate.
f. Remember to consider the impact of Covid-19 or other similar significant events on the business, financial statements and potentially the audit report. Also consider the potential impact of Going concern and Reportable irregularities on the audit report.
Taking into account all these requirements building up to the audit report issued, one can clearly see that there needs to be a large body of evidence in place to support this ultimate end product of the audit work performed.