CHAPTER 7
COMPLETING THE AUDIT AND
POST AUDIT RESPONSIBILITIES
INTRODUCTION:
Th s chapter w1II Present two 1mnortan'·
•·
- activ1ti~s
· ,n the financ,al statement aud • pr~
.....
e
Audit"
which
requires
the
performance
of r.,rocedures at the e 1d af •
"
first 1s " Comp Iet Ing u ;
that ,.., 111 give the auditor the: last chanc= to detect malEnal misstatement. The proced~tc:. ~..
stage involve consiaerable professional Judgrner,t5 by the auditor end thus usually pe
ME:mber.; of the audit team who have extens,~e e.<perienc.e with c the cl'.ent 5 c:>ud1t
staterne11ts. Tne standard procecures for completing the audit are as ,allows .
a.
b.
c.
a.
e
f.
g.
h.
t: .,
O
~" •
;:nalyt1cal procedures for overall review
Related party transactions review
Subsequent events review
A.ssessment of going concern assumpt1c,n
Obtains :nanagement':; representation letter
Rev1e.-. ~or commitments and contmge,c,es
Makes ' r,a assessment of mate, 1al1ty and audit nsk rev,ews the ·.vorking paofrs '"t'•
the fma11c a statement presentat1or. and disclosure:., and forrr,L•lc\tes audit op :-i or,
Communication with the client
The second is "' Post Audit Respons1b1ht,es". It pertains to events oi.:curnng after tr.e date •
aud tor's report such as the following:
a. Subsequent discovery of facts.
b. Auc1:: team debriefing.
ANALYTICAL PROCEDURES FOR OVERALL REVIEW
The aud tor uses analytical procedures durmg the following c;tages of the aud,t.
a Aud t Planning
b Substantive Tests
c. Completing the Audit
PSA 520 (Redrafted), Analyttcal Procedwes, statt", that th-e auditor 5hal des,,Jr. a.,d ;l rfcr
crna:yt cal procedures nea- the end of thP aLJj,t th t a
t th nud1tor wtien f.J m ng D" ~,~r
conrlu~ on as to whether tne financial st... tements are , ons,s• nt with the {lu,11tor,; undt:r t , ... , ,
tne ent,~
The analytical pr?CPdUrE' P rformco for ov
II rt-v •v-. m y he s.1m1lar to those t" ,t .....
used as nsk assessment proccour
dur,r, tnc.- a d1t p'ln 11ng
The results of such analytical pro dur
rn y 11 , ,ta~ f , ~ , • u 1.- unrecogn ze j
k '
m•s~tatcment. In such ctrc.:..imst,mc- s, PSA 31':i (Rer4r tr ) Jd flt,fymq and Assessm!,/ tit ....
Materu,1 Misstatem ent throuah U 1derc,t,JT1d1ng tftP Ent ty I
It Environment, requ re_ t \P
to re vise the audit or's as,;er mcnt of the nrk of m t n I n • •a·ernent and modify the fJ"'t
p!aoned audit procedures accord,ngly. Thi§ rnP.!Ht, ~
rit J'lr perfo,m•ng furt her audit proce
relation to Matters that are ,dent fed a t gt1 r k
c,.._,;
r
e~
.i
es
J
cHAP I t:K r:
-- -,,,,.,,,----
CO NJp LE
r,N G THe
- - - -.._Au
__o1r 4 No
- -- - - ---
-------=
Pos T-Auo,r
-
fES
- - - - RES PO NS/ 8 /L/T
~
-
---
ti
con clu sio ns dra. wn fro m l e res, I
,1,e
-' ts or ana i
d d
me
for
sio ns
cn1 Proc. e<J1 r1•s fo
11· ·obo rate cont·cluTh ·
ur1119 th e aud Yt1
t
d
co ·al sta tern en s.
:i ssis ts ti
rs
r overall rev iew are inte nde
to
t1to r to d ' of ino 1v1clua1 r
a11c
the
le
of
s
e11t
elem
.omoonent s or
fi/lanC' '5 opi nio n.
ruw reasonabl
base th e
auditor
e <.onclu ,ions on which to
of
r the end
,i,e key issu e. is tha t, nea
aud 1to h
h1ghl1 ght ed ~1e auct,t, the
ues
aud it
dence to exp lain the iss
c / s ou ld have sufficient
Pro
ca1
:yt,
Y ana
so nab l en
rea
re b-= at;le co
rall
refo
ove
the
the
uld
to
sho
as
,1
an
eV' 1ude
et ures ,
ess of the f1nanua l sL
s
t a ement
cone
CTIONS REVIEW
' RELATED PARTY TRANSA
dra fted ) R I
pSA SSC( Re vis ed and Re
, e ale d Pc:rtiec:. a d R ted Party Transa ctio ns, sta tes th at
.
t
t
,i
in tl>e n orm al cou·rsen of bela.
are
s
tron
sac
s, they
ran
Y
ar
p
an\' relatel•
usiness . In such circ um sta nce
. k
h. h
ni
teri al rnis st t
sim il ar
ma
n
tha
of
s
rrs
ent
tem
er
sta
rg
l
a\' ca rry no
ent :lf the fin2ncia
em
a
e
How
.
ties
s a rd
par
ship
ela ted
terl par ty rela tion
ni nsa ctio ns wit h unr
F "h
, . th e nat ure of rela
Ver
.
s
nce
sta
.
um
circ
f
e
k
· s o materia l m,s sta tem ent o l e
tra sactions ma y, in som
, giv e ri se to high e r ns
tran al sta tem ent s tha n tra nsa ctio n s w1ti1 unr ela ted parties.
finan c,
na ge me nt
Responsibilities of the Ma
the design ,
ernance . ,s responsib le For
fro m tho se charged with gov
ht
rsig
st- ,ps and
ove
t,on
h
rela
wit
,
rty
pa
ent
Mana gem
con trol s ove r related
e
t
qua
ade
of
ce
,n
nan
inte
for and disclos ed
implementatio n 2nd ma
apr ,rop riately acc oun ted
and
ied
ntif
ide
are
are
se
gov ern ance
trar:sac tion s so tha l the
role, thos-= charged wit h
wo rk. In the ir ove r!'ig ht
me
fra
con trols.
h
the
suc
h
for
wit
ty
nce
ibili
accorda
gin g its respons
how ma nag em ent is dischar
g
rin
nito
mo
for
ible
ons
resr
dit or
Responsibilities ol tl1e Au
ive : o~ the aud it or are to
rty tra nsactio ns, the obj ect
pa
ted
rela
t'J
and
ties
par
s suffi cien t to be abl e are
In rela tion to rela ted
trant ·saction
and
I t·,ons hips
h'i ps - nd tran sac tion s tha t
t
d
a
re
rty
c
10n s
d;
of rela ted ·pa·ng
pa r y re Ia teri
fro m r ela te
al mis sta tem ent due to frau
obtain an und ers· tan din g
·f
f ma
h· . k
,
·
se
ans
,
tho
any
by
1
d
,
s
cte
tor
are affe
recogn ize frau d r isk fac
t e n~n s ~ far as the y
tion and assess m ent of ents,
5
relevant to the ide ntif i caer
tem
sta
the fina n cial
and to con clu de wh eth
ns:
ctio
relationships and tra nsa
on framev1orks) ; or
. . rec;entatiork
.
s) · and
,
P
ir
fa
r
o,l (fo
a. Ach iev e fair pre sen tatr
'
ew
fram
nce
plia
com
r
(fo
g
b. Are not mis lea din
eth er relacea.
. t e aud it ev idence abo ut wh
na
ana
ror
app
for,
nt
•
ted
ff'
.
ntif ied, acc oun
su ,c,e app rop riat ely ide k
ain
obt
to
as
h
r
ito
aud
In aC:d:tio n the
have been with the fram ewo r ·
.
, tra ns i"ct ron sin ar.co rd an ce
Party ~elatio n shi ps anc
t
.
me n 5
·c
c/osed in th e fi nan cia l st ate
rf1_.
De fin it ion s
t is e,
Related pa rt:y - A par ty tha
th
SSO ( Revised
t · i n fram ewo rk; or PSA
er:
·ca !Jl e finan cial rep nr ",,
ted par ty
t he app l I
t t lish e·" min ima l or no rela
(1')
J
rn
a
e
es
rk
efin
,
d
as
A rela ted par ty
rtin (J frnme\o\ 0
.
u y h nne
and Red raft ed•
ce dire ctly or ind irec tly thro
f
.
o
rep
l
cia
n
,
fina
. nt 11 1 Ju e ,1
(i1) Wh ere tr.~ apr.Jli ca bl e
t-ro l or s1yn1f1ca
d1rec~ly or
requ irem ent s :
t . I or s1gnif1cant infl uen ce,
;
1tY
e11t
9
c~n
has
10
t:h at rep o ,1 111
1ias co 11
.
in .
a. A Person or o ..·h e r ent ity
re
or
e rep ort' l ,l'J en t1Ly
t'
,
ove
es,
g.
n
a
hav
edr
h
rm
ug
n1ore inte
rep or,w g e11t 1ty thro
th _ ied1c1rie~, orw1tl 1 th e
l1
c
wh1
r
ove
ity
ent
r
b. Anothe
e 1nt ern - con rro 1
"'d1recuy thro ugh one o r mo r
335
3 ED ITIO N)
r coi n 171011
nde
PR IN C I PLE S (20 22 - 202
c A
. nol her ent it y tha t IS U
d .
A ~sU RA N CE
A UDJTfN G AN D
1..,n t-1r / L1'
/;
CQ~
~ T I N G TH
~ I T AND
~UDtT
~IL/TIES
nif1c ant ri sks. In mak ing th IS d t
errn ,nat 10 n, th
,rtY tran sact, ons OL:tside th e ent, e
t ,
P"
y s r,orrna1 cou r: audi tor shall trea t .identified signi fican t related
.
e of business
.
as g1v·n rise to signi
If the aud ito r 1dent 1fies fr aud nsk f
fican t risks .
· g
.
(,
rs
acto
infl
t
inan
d::>m
1
·
related part y with
ud,ng
nc
h
.
e)
uenc
.
.
·
..
w en Perf or . circumstances r
ste:nce of a
ex1
the
to
g
act1v 1t1 es ,n conn ectio n With r
elatin
ss
d Parti es th ming the risk asse
elkate
_
the
g
ssin
asse
relat ed
and
and
g
es
ifyin
ident
rnent procedur
_
Shall
'is s of mate r" , I e audi tor
mation when
infor
such
ider
cons
0 ( Red ra ~ed ).
t
e
tatern
ia rn1ss
24
n due to fraud in accordance with PSA
51g
.
~esp ons es . to the Risk s of M a t eria l
Miss tate n, ent Assa ·
ns
ctio
Rela tion ship s and T1a nsa
c,ater.l with Rela ted Part y
Jdenti,cicatinn of ~rev ious /y Unid e n t•,,.
,,,cd or U d1.
. s ors· .,,.
n sclosed Re,'ated p,art,e
Relat ed Part y Tran sacc ions
IQf'/IICant
r
.
If the .audi t .or iden tT
ents
ngem
arra
, ,~.:,
the exist ence of relat ed
tha ~ ma~ ; ~nfo r~ati on that suggests
party rela t,on shps or tran sact i o ns
y iden tified or disclosed to
min e wh th g men . has not prev iousl
the aud1tur, the aud1 Lor shal l detu
g circumstances conf irm the exist ence
ns Tf . e er t_he ur,de rlyin
ed
of thos e rela tion ship s or tran sa ct ,c ·
tor id en t·f·
audi
e
h
l
I
ies related parti es or sign ifica nt relat
.
-.
t h
th e
tor,
audi
the
to
party t ra nsac l ion s th at man age men
osed
discl
or
tified
as llOt prev ious ly iden
audit or shal l :
.
ant i .
gem ent
(a) Prorrq1 t ly com mc nic ate th e relev
mati on to the othe r mem bers of the enga
nror
tea m I.
.
f
t
requ irem ents :
a l re
(b) Wh er e th e .app li cab le fin a:ic,
ing rame work establishes relat ed party
por
·
R
)
(
relat ed part ies
tified
iden
ly
new
the
with
s
n
1 . _e q u e st m an~ gem e •it to 1ue,1t1fy all trans actio
an d
fo , th e aud itor s fu1;: ll er ev alu ati on;
and trans actio ns
co11trols over relat ed party relat ions hips
(ii) Inqu ire a s to why the enl1t y's
hips or
ions
relat
discl osur e of the relat ed party
fc. il ed t o enalJle tile 1dent 1f1ca t1 on er
trJn sact 1on ::. ;
ly iden tified relat ed
e audi t pror::er1 ures relat ing to such new
(c ) Perfor111 app ropr iate subs tant iv
~ran sacti ons;
part i e s o r s1gn 1f1cd nt relat ed i:;arty
y trans actio ns may
,·elat ed parti es or sign ifica nt relat ed part
( d) Reco n s id er th e : 1sk tl1at othe r
audi tor, and
the
to
io L. sly iden tified or disclos ed
ex ist L11a t man ag e m e nt ha s not prev
.
.
. .
es as nece ssar y; a11 rl
risk
a
of
perfo rr,1 a dd1': 1ona l a t1d1t proc eduat1ve
ind1c
fore
m ent appe ars inten tiona l (and there
( e) If t:,e n on - dis c los ure l)y managP.
t.
), eval uate t!le impl icati ons for the audi
of :11ater ial mi 3 stat e 111 ent du e to fraud
ty's Norm al Course of Business
d p t Tra 1 s-cti ons outs ide the Enti
.
.
..
c.
'
ar Y
Ident 1f1 ed S19n1f1 can t ~ elat e
of
norm al cour se
rty transa ction s outs ide the entit '{'s
d
·
oa
Fo:- id enti fied s ignif i cant rela te
:
ll
busi11ess , th e 3 udit or sha
whe ther :
ts or agre eme nts, if any, and eval uate
_
that they may have
ests
sugg
ns
actio
trans
k tr eo") of the
(a) In spe ct the und erly ing cont rac
or to concec1I
ier ·n f raud ulen t fin ancia l repo rting
(i) The busi ness ratio nale (or l~c
i
bee n ente red into to enga ge
anat ions ; and
consis~e nt with mcn ager 1ent 's expl
misa pprn pria tion of asse ts; .
acco rdan ce
in
osed
discl
ion s are ·atel y acco unte d for and
, .., Th. term s of th e tran sact
opri
appr
n
bee
e
,11;
rting fram ewo rk; and
( iii)T he trar. sact ion s ha_v e ncia l repo
.
.
and
with the cppl icab le Fina
hav e been appr opria tely auth orize d
that the tran sact ions
ence
evid
udit
a
in
(h) Obta
C nduc ted on Term s Equi vale nt to
.Jpp rov ed.
Tran sactions w ere o
o
th Tra nsac ti on
Asse rtio ns Tha t Rela ted • artY
's Lena
Those Prev ailin g in an Arm
AUD ITIN G
U
A ND A SS
EDIT ION )
RJ.N CE PRIN CIP LES (202 2 -202 3
337
,r·HA PTE R 7:
~
-------\'lhC"'l
uo.., r
co~PLt TING Tr'£: AUDIT ANU
- - - - -_
'
/(111,
I', 11
r 11 n f1l
1.1111
,v t I tt J nr , 1111
1
cfflc1l Pt i!ppro1,11tl
·idtt ·,mJ ,
,,0 1t ti 1
management has madr an ' '- t1C'P
ncact1on wai; Londult d on lNr,1
re'ated party tra ,.,uditor shnll obto1n
transa ct1un, the ..,
ALJfJIT nr"POII'
I
Evaluation of the Accounting 101 nnd Dist los ur c of lde11tif1m.l Rcl!Jtrd Party Relatlonaht
1
and Trnnsactions
l1'1 form -rig an opinion on the f111,1nc1tJI ,tatr111rnt ,n re ord 111c•' with PSA I()
~uj tor sha I evaluate whether the 1de11t11 ,ed rrlotdl pcir tv rl I ,tto'1 li11J" nd tr ,
epprJpnate \ accounted for anrl d1~clo~Cl1 ,n accordant.C w,t11 t~1e aop11cabt
fra~ewilr1-:; and whether the effects of tl1e rela,ed pJrty relc1t1on,,h1pt; and tror
frta'lC.J statements from ach1ev1ng f;:i,r 1)r1::se11ldl10n (lor tc11r pr£>~erita·ro"'
tr~ fanancicl
statements to be n11sleaa1ng (for co111pl1,111c':' rrc1111eworkc;).
Written Rc.pre!;entations
Whe-e the applicable financial report,ng frc.mework estr1bl1shE'S related part/ re
aud to-r shall obtain wntten representations from n1an::1gernent a,1d. where apv ,..' •
chargea w th governance that:
(a) They have disclosed to the auditcr the 1dent1ry of tile ent1tv's related pc.rt·
related party relationships and transactions of wl11cl1 ttlL'y are uware, and
(b) Tl7ey have appropriately accounled for c>nd dt~closed such relationships i:!'lc' rr
accordance with the re 4 u1rements of the framcwort<.
Communication with Those Charged with Governance and Documentation
Jn ess all of those charged with gover:iance are involved in mar,ag,ng the ent.
r
~a commun cate with those charged with governance significant m.:,tters ans1r".l c.;.i·
., connE:ct on with the entity's relat2d parties. Examples
of s•~nif1cant related
p ~r-.
re ;Jde:
•
Ncr-d1sdosure (whether intentional or not) by manilgerncnt to the auditor o' r J~ ~
s g.., f ~nt related party transactt0ns, which m.Jy .ilerl t110se churged w,th gove,.n.:m,..,. t
rE ated parry relationships and transacuons of wh,c.11 th2y may not t1a·:e been pn:.'\ .;l 5 Y
• Toe dent~ cation of s,gnificant ri>lated pr1rty tr;in<;d,·t1nns t11at ha\ e not b~
rzed and approved, which may give ri se f'O :.uspt:ClC'll 1•i1uo
r.
• D agr~e'Tlent w t'h management n•garc11ng the act Junt ,1q t.:ir ,rnd d1sdo!>ure of s
r,art,' tran!:act.Jons n accordan<:e will\ tile apn1,~a1,:C' f1111nc1 11 11 t>-.>rt,ng rr..irnework
• r~c...- rrrr.pt ar.ce with appliciJblt• 'nw or rt:'fJUIJti.JrH, rro~1 t>1t1ny or rt' tri .. t n,
rel t-c.1 r, rtv transac:uon~.
• 0 ff
'"U • £',
ir 1dent,fy ng thP purtv tit.it 11llln1o.1tll~ rn 1l
l
I th
l''
itt\
Docunientatlon
In m< Et n3 thf' doc um n t ri r ~ ,1r n nt , t I A
,1 (R<' ir,ifl ti\
n1
t •
aurHor i.ti:1II In JUdC' rn th a f'ltt c; umtr,t ,11 n ti names of the Identified rel•t•d
the nature of the related party retatlonsh,ps.
338
AUDITING AND ASSUR!l<NCE PRINCIPLE'S (1022 J013 EDITION)
I> A
1
p•rt•"• and
~ u O IT AN
D Po
-
-----
3~
ussEQUENT EVEN TS RE:v
sr.Auo1r
~
RESPON SIBILITI ES
IEW
events after the date of finan .
R. 2 drafted) Subseq uent Eve~~:I stc.ternents
known
560( r,1ents and the date of the a . are event s are
subsPq uent events. As used in PSA
Ud1tor·-.,, report occ urring as
'
totedate ofth e au d·tI ors
b t
re;:>ort
s
ween th e date of the
e
f
and
,
·
financial
he
b
that
acts
t
ecome k
nown to the auditor after
.,.he auditor has respons ibilit·i es to
. .
.
,
(ai obtain suff1c~ent approp riate ai .
date of the financia l stc1terne Jdit eviden-:e ab
Wheth
. nts and th e date ofout
f or disclosu re ·in, t h e financia
. er events occurring between the
the
l
o,
st aternent s are a au~ito~•s report that requ ire adjustm ent
stateme nts; and
PP opnately reflected in those financial
approp riately to fa t
b)
( respond
c s that b
,
.
.
ecurne known to th
auditor s report, that. had the
after the date of th e
auditor
e
.
the
to
known
,been
Y
·
aud
the
amend
to
the auditor
auditor at that date, may have caused
itor s report.
rypes of Events
..
There are two types of subseq uent event .d
s I ent1f1ed in PSA 560.2.
.
(a) Those that provide evidenc e of condi~io
ns th at existed at the date of the financial stateme nts ;
(Typ~ 1) and
th
( b) Those that provide evidenc e of cond ·t
1 ·ions at arose after the date of the financial
stateme r.ts. (Type 2)
liabilities at a differen t
Type 1 events (such as settlem ent of estimate d year-end litigation
while Type 2 (such as loss
amount than recorde d) require adjustm ents of the financial stateme nts
re.
of material amoun t of invento ries as a result of fire) events require disclosu
ations of subsequ ent
There a1·e three major time periods to properly understa nd the consider
follows:
as
events in the financia l stateme nts audic. This can be illustrate d
Date of ~he financial stateme nts
(eg. Decemb er ]1)
. . ..
-
Date of the Auditor's Report Financial Statement Issuance Date
_)_
(e_g_._M_ar_c_h_S
(eg. Februar y 28) ____ _____ _
·············..,--..---·· · · .
--· ... ············-- ... - · -----····
-- ............................-
- - - - -c:$
........ -·-·- .. .....- - ··subseauent Events
---- ·· (events after the date of financia l stateme nts)
- Sul5s·e·c j'uent..Eveiits ·J5i/,?od~ res onsibilitJ)
- ..
P
(events in this period are the auditor s
•
Ev
th ents Occurr ing Betwe en
e Auditor 's Report
the oate
•
f the Finc,nc1a 1
0
Statem ents and the Date of
ning the natu r e and
. k . "'ssmen t in determi
.
. 's n s assshall include the followin g:
aunt tr.e au ditor
nd
s
a
,
ent
ev
ent
ace
into
Th'= au~itor shall ta:<e
.
ubseq u
Pxt
ment has establis hed to ensure that
- ent Gf audit procedu res for s
ures manage
proc.e d
anY
cf
.
.
(a)
Obtainin g an unders tanding .
·dent1f,e d.
s b
u seq uent -=vem:s are 1
~ PRINCIP LES (2022-2 023 EDITIO N )
.... ,n ASSUR ANC
33!
CHAPTER 7:
COMPL ETING THE A 1Jn1r I.ND l"C,~T- AUDIT RESPO 1r
lnq~irln g of manag ement :ind. where approf)11 '
tt
a·w su b s-equen t events have occur, ed which m1 1r.t if'
may make spec1fii: mqu,ne s about the follovJtn'l n m
r ti
• Whethe r new commi tments , brrrow1 ng~ or gudr mt
n ntered •
• Whethe r sales or acqu1s1t1011s al assets ,1c1ve orcu-r
nPtj
• Whe'::.her there have be'?n increas es 111 capital or I c- 1iaN·
fa h~ 11 tru~e
of new shares or debent ures, or an ayreem ent to mery~ vr liquida
te ha be
pla'"lned .
• Whethe r any assets have been approp riated by gvverrm 1(_nt
or jn"'trcy ed, fore:,
or flood .
• Whelhe r there have been ,my develC 'pn,ents reqard, ng C' ntmqer
c es
• Whethe r any unusua l accoun t;ng adJustm ents have br>en made
or arE. contemi:,'.-.• ...
• Whethe r any events have occurre d or dre !ikely to occur tlh
t v11 11 bring mto qu .J?..,
ppropn
ateness
of
accoun
ting policies used in the f1nanc1al statem ents, as w0u ~ ,€
3
for exampl e, if such events call into questio n the validity of the gomg
c::,nccr:i asJ r. .. ~:.
• Whethe r any events have occurre d t,1at are relevan t to tl1e measu
rement of estimat e .. ,.~
prov1s,ons made in the fina'lcra l statem ents .
• Whethe r any events have occurre d that are relevan t to the reco•1e
rab1hty of assew.
(c.) Re3ding minutes , if any, of the meetin gs, 0f the enMy's
owners , rr,anag e,.,.e":
charged with govern ance, that have been held after ':ne date
of the financ a st2te.-r ~ c; mquinn g about matters discuss ed at any such meetin os for wh1cll
minute s are 1ot f-=p c:1. •
(ct) Reading the entity's latest subse1.1uent interim financia l statem
ents, 1f any.
(e) Reac the entity's latest availab le budget s, cash flow forecas ts anc
otller re dte~ rra"~"'~ _
reports
for periods after tne date of the financia l statem ents;
(f) Inquire , or extend previou s oral or written inquirie s. of
tre entity's legal counse
I t1gc.t1on and claims; (see illustra tive letter) or
r.:-::r::;r ,...;
(g) Conside r whethe r written represe ntation s cove,·irig particu
lar sub~eq •Jent event:i r,3
t~
necessa ry to suppor t other audit evidenc e and thereby obt,1111 sufficie
nt apprnp nate au ...
evidenc e.
\Vritte n Re presen tations
ThP auditor shall request manage ment and, wher?. approp rn,te
t~oc;e charge d w ttproilldi: a written represe ntation ,n ciccordance w1~h PSA StlO
(Revi:,e d and Re ra>t
events or.curring subseq uent to the di:'tc of the t1nc1ncial statefll
eMs a'1d for wt- .. h r-h _
financ.1al I Ep0rt1ng framew ork requires ad1ustrr,ent or disc mr ui e
helve been ~dJust d •
tr,
Ex hibit 7-1: Illu s t rat ive Le tt~ r o f- Au d it Inqui ry t o Entit
y 's Legal Co u n se l
Date
Lawy r's Name
~w•1er's Address
Dear
ln conncct 1on with an audit of our fmar1 1..JI t p •1ne
{penodJ then ended, mana(J cment of th Comp iny ,
1
(name and address of aud1lors), a de.-,c.r pt1nn nct v I t ,
f
.
thosP set fortti below 1,1volvin g mtHterc. w1lll rP p t t tu wl ,u vou • rt ,in contin
1 1
1iave "L' en engag
340
AUDITI NG AND A SS U R AN CE PR I NC I PLES (2012•2 023
E D trf ON)
Pos 7-Auo
17
RESPONSIB ILITIES
i,ave devoted substantiv
.
e atte
T
·
,,otJ
r.t1on
, epresentatI on. hese cont·
on beh
ingenr
(
or r
alf of th
-les aI e
tl1Is purpose manageme nt
b~ Company in the f
ca;:9arded
indi
r~•av
Your
f~~r.hed with the aucitor).
agement of t~rm of legal consultation
n--,aterial~an
.
a
sliou1
sponse
from
period
the
during
and
~ate)
e Company as material
d Inc1L,de Y limit if an
that date t
ding _ has been
exi~~~ersta~
hat
~
o the date ofmyc1tters
ndi 11g or Threntened litigati
· at (financial stc,tement
our res po
on ( excIUd
pe
nse .
Ing un
claims)
asserted
information
the
[Ordinarily
progress of the case to datWould include th
3
litigation (for exarnple to e, ( ) how mane following · (l) th
and (4) an evaluation 'of thcotest the cast:iemen t is .respon: nature of the litigation, (2) the
e ikelihood of a vigorously or to /lg or intends to respond to the
be made, of the amount
eek an out-of-court settlement)
n unfavorable
or range of Pot
.1f one can'
.
outcome an d an estimate,
ential Ioss .]
.
Please furnish to our audtors su h
c explan t·
.
. f
.
tfie foregoing 1n :)rmat1on , includ ·ing rin e a Iion, if any , th at you
.
consider necessary to supplement
. Xp anation of th
differ from those stated and un .d
1
matter
ose
entIficat·
'
.
•
.
s as to which your views may
ion of the omissi
:it,ga tIon, claims, ano assessmen ts
or a statement that th . on of any pending or thrt::atened
·
e 11st of such m tt
a ers 1s complete.
unassert~d Claims and Ass ~
es.,ments ( considered h .
·c
~ mana-;iement to be probabl e of asse rt·10n, an d
that, 1, assArted , would have at least a re:isonable po-s·bTty
" 1 11 of an unfavorable outcome)
[Ordinarilv manageme nt's informat·ion would incl d h
.
e following : (1) the nature of the matter ,
(2) how mc:nagem enl intends to rE. spon d .If th u 1et
·
·
. .
l1kel1hood of an unfavorabl e outcorr.e and an e , _aim is _asserted, and (3) an evaluation of the
eS t irnatE, if one can be made, of the amount or
range of potential loss.]
·f any, that you · consider necessary to supplement
· t ·ion, 1
Please furnish
. expl ana
_ such
...
.to our auditors
.
of those matters as to which your views may
explanation
an
including
n,
the foregoing informaLIO
differ from those st:3ted .
We understand that whenever, i:, the course of performing legal services for us with respect to a
matter recognized to im,olve an unasserted possible claim or assessment that may call for financial
statement disclosure, if you have formed a professional conclusion t:-iat we should disclose or
consider disclosure concerning such possible claim or assessment, as a matter of professiona l
responsibili~y to us, you will so advise us and will con~ult _with us concerning th_e question of such
disclosure 3 nd the applicable requi:-emen ts of . Ph1lIppme F1nanc1al Repo~mg Standards on
Contingencies. Please specifica:ly confirm to our auditors that our understandi ng 1s correct.
Pl
ease specifically identify the nature CJ
f and reacons for any limitation on your response .
""
Name of Entity
CONCERN ASSUMPTION
J
! ASSESSMENT Of GOING
ontrary, the client's operation is viewed as
are
in
liabilities
its
discharge
and
assets
its
,·ze
•
concern assurnP
In the absence of s1gntfican_
h II cover at least
ble to rea,
th£ going
t
.
.
contin,
a
s
fnue as a going concern
t'tY viill be a
· JIng acccrdIng o
reco rrJed on the basis that the en I ssessrnent to con I
statements.
the norm al course of business. The tn:;indal
1
the
twelve months from the date of
.
..
th
t information to e/0 n and as such, assets and liabilities
ASSURANC E PRINCIPLE S (2022-2023 EDITION)
AUDIT/NG AND
341
-
- - - - -= ==--==-------
I
HOO/ I
RESPONStR, , ,
Respons1.b.alities of the Audito r
Acccrding to PSA 570(Redralted), Gomg Concern, the oud1tor·s rE;sponsit.Jtlrties are
a to obtain sumc,ent aµpropriate audit evIdencr.. dbuut th,.
( ) use of the gwng concern assumption 1r1 ~he I repdrc1t1on p1iropr1a tene ...s of rrifirc'l
"'r1
r.:sentat,on of tti l'.Jtr ·r '".•
"' cl pr"
statements;
f111 l'i cl
(b) to conclude whettier the1c ,s a rnatertdl uncertn1r1t'( ,it ,Jut the t.:ntity's c1bil ty to c.r,rt
.
_
a going concern; and
j.
{C) to determine the m1pl1cat1ons for tile <1Ud1tor s repoI t.
Responsibilities of Manag e m e nt
Smce the going concern assumpt,011 1s a fundarnerir.i1 pr1r1c1plc 111 the prepurJt•o~ t
tre fin r ;i1
statements, management's re::;pons1b1lity for the preoarat1011 .Jnd r,rE>sen~at1on
corc.:>q
gcing
a
as
statements includes a refpons1b1ltty to assess the entity's ab1l1t·1 to contrnue
a
Events or Conditions That May Cast Doubt about Gc.,ing Concern Assumption
The following are examples of events or conditions thLJt. 1nd1v1dually or collect,vel,,
significant doubt ahout ti1e going conc2rn 2ssurnotion. This listing is not c.ll-1nclus1ve nor d
existence of one or more of th~ items always signify that a material uncertamty ex1srs.
es
th
Frnancral Conditions
• Net liability or net current liab1l1ty position.
.. Frxed-term borrowrngs approachin~ maturity w1th0ut realistic prospects of renewa o~
repayment; or excessive reliance on short-term borrow ings to fm ance long-term asse~• Indications of withdrawal of financial support by creclt~orc: .
• Negative operating cash flows indicated by historical or ;::irospectI·1e financial statements
.. Adve1·se key financial ratios.
• Substcintial operating losses or significant deterioration 1n tile value of assels used to
generate cash flows.
• Arrears or discontinuance of dividends.
• Inability to pay crejitors on due dates.
• Inability to comply with the terms of loa'l a9recme,1ts.
• Change from credit to cash-on-delivery transactions wit~ supplI€rs.
to obtain financing for essential new product development or other
• Inability
essential investments.
Operatrng Conditions
• Managemerit intentions to l1quidNe the entity or tu cecise operations.
• lo,;s of key managemeni- without replacement.
••
•
•
Other
a maJor market, key customer(s), frcJnch1se, license ' or principal suppl,er(c;)
LQss ofdlff1cult1es.
labor
Shortages of important suppl1e!).
Emergence of a highly suc\..essful cornpet I ur.
1
Condrt,ons
• Non-compliance with cap,t al or other statutory rr Quirl ffh nt.,.
Pending legal or regulatory JJrnr0.1.."d111qc, i)Qc11r1 t ll,P ·ntIt-} lli.it mo}', ,r sucless.ul rt ,
•
·
claims that tt1e entity Is u11l1h.,.-.Iy to 1.;l, able to atisf
• Ch1nges In law or regulutio11 (,r c1over, 11 nC'riI polity P~pectt•lf l'·
" 1dverseIy affect the "nt-t''y.
• Uninsured or unct,-nnr;urPd U;tt,istrcipt1t Wllf' tt
l t ~• Ol.( LIi
I1
•
'
AJdit Procedures
When perform,ng risk as!Jessrnrnt
cons1::Jer whether there are eventc, or i,>rocedur c• (rJur r 1 •t
iH J,•~ r
1 • 1P < lld1t pldnnrng) th
ability to c0nt1nue as a qo,ng conrer 11 conJ1t1w, th lt 11 d\'
.,Igr11frcant doutn Ofl tf.t e
l l '
111 'J rlo1ng, ll1t• MU Mur ~hall determine Whe•h,..
342
AUDITING AND A SS URAN CE P RI N C I PLES
(2022-2023 ED I T/ ~NJ
r'
u
- ~ AND
-----!_osr.Auo1r
RESPONSIB ILITIES
agement has already Perf
orf"'led
d
f11af1
a PreI I
concern, an shc:ill ev· i
179
rn1nary a
Ua te sue•
d
a go1
ssessrnen~
,, rna nag
.
of the ent It ,
ernent's
, n events or condit·ions have b
Y s ability ~o continue as
assessrnent
wne
.
een ldenn
litY to continue as n going co
abl determire whether or not ncern, the rl ud·t1 led that rna y cast s.g T
i or sh
a rnat .
.
to
er1aI u:-icert . all obtain suff '. n1icant doubt on t h':! entity's
cedu res, ,ncluding considerut i
on of I11itigatin ~Inty exists th icient appropric.te audit 2vidence
pro
9
fc.ctors. These P;ough Performing additional audit
When managem ent h
ocedures shall include:
Yet
not
:is
.
(a)
Performed an ~
as a going concern, requec-t·
assessrne t
.., ing man
. I t'
agement to rna • . n of the entity's ability to continue
(b) Eva uc:i ing managem ent's
t,<e its assessment.
Plans for future
as~essmen t, wbether the
ac ions in r I rion to its going concern
outcome f
ea
. .
') these Pia
whet h er man2gem ent's plan _
s cm~ feasible in the c~ s is likely to improve the situation and
has p
entity
the
When
c)
(
irc.umstances
rerared a
. .
·
cash flow for r
significant factor in con ·d .
s1 enn£, the futu l'e outc e.ast, and analysis of t he ~orecast is a
I
f mana ement'
0
orne of events or conditions in the evalu3tion
s p.ans for future i'lction :
g
;i) Evaluating the reliability of the und 1 .
and
(ii) Determinin g whether there is adeqer yting data generated to prepare the forecast;
.
.
'Ja e support f or th e assumptions
undE:rlying the rorecast.
.
.
(d) Considerin g whether any additio I f
, na acts or information have become available since the
date ~:rn which managem t
en maGe its assessment.
.
.
st
tions from manageme nt or, where appro;:iriate, t:hose charged
representa
written
,ng
(e) Reque
plans for future action and the feasibility of these plans.
thei;
regarding
e,
wit~ governanc
The audit:or shall remain alert throughout the audit for audit evidence of events or conditions
that may cast significant doubt on the entity's ability to contiriue as a going concern . The possibl e
effects 'Jf going concern issues in the auditor's report and its disclosure requiremen t will be
discussed in Chapter 8, Audit Report.
Communic ntion with Those Charged with Governanc e
ce are involved in managing the entity, the auditor shall
.
ents or conditions identified that m ay cast
Unless all those charged with governari
. h
. .
ev
d with governance
h
.
.
a going co'lcern . s uch comm ur11catIon wit
s
.
communica te with those c arge
a
continue
to
ability
,
't
.
·e tl,e following:
.
significant doubt on the enti Y s
those ch arged with governanc e shall incluo
·t tea material uncertainty ;
ption is appropriate in the preparation an d
(c1) Whether the events or conditions const1 u ,..
-o~cern asJum
.
d
(b) Whether the use of the going 1- •
· 1 st a tements·' anthe financia l stateme nts ·
Presentation of the finanoa
(c) The adequacy of related disclosures in ·
5
ESENTATION LETTER
. from managem ent with appropri ate
sen tatIons the matters concerned. PSP, 5 8 0
of
ri tten repre
tt
·
·
d kn owledge
equest W
a written representa tion is a wn en
·hat
an
ments
The auciitur is required tu r
the financial state_ sen taUons, stat~s ,firm certain matters or to su pport other
f
responsib 'l't'
(Rev d t I lf'S or ft d) Written (<ep1e tl1 e auditor to ._ 0111co 'not include financial statements , the
h . _ context
v ·ided to
1se und Re(lra e ,
· t Is
st d t ement by managem en t pro tat1on s in
d reco rdsaudit evidence. Written repres en
books an
.
assertions therein, or supporting
pSA 58 0 ar~:
as required IJY
uditOI
343
T h~ objectives of the a
PRINCIPLE S (2022-2023 EDITION)
MANAG EMENT 'S REPR
ASSURAN CE
- AND
A uotrtNG
CHA PTE_t<__,_:_c;_·_u~ '_!__,,._~ _:__:~""uv,,
11/Vl.:.I
r-
representdt1onc; frnm m rn HJ ,1 "' th • rn r q m nt b ~, ,,
(a) T0 0 btain written
- darnental rec;pons1bil1t1es tnJt Cl n t1tutl tt,e pr ern,se r..n \~t 1, ~
fulf1 led the tun
corducted;
rt otlier audit evidence , eleva·1t to th finun I ii tdlPments or r,pu:•t, <! , r ..,
(b) To SUPP t t ments by means of wr 1tte11 1eprec;f'n~c1t1on~ 1! cleterr~•ncd nec..e:.,::.nr I t,, n, •
fin2rc1a 1 s a e
or required by other PSAs; c1nd
°
atelv· to written rer.rese11tc1t1or,s prr.v1d• d b}' rnana9ement or f
( ) To respond appropn
c does not prov, d e the written representations rt'qu~sted l>y the dUd1tor.
a1..1
b
Written represen t a t 1Ons ,s an important audit .ducurnent .JS 1t rJrov1de necessa~y
do not ravide sufficient appropriate audit evidence on their own a out an.,. c.,f ► ,
•
but
which t ,_,,evpd e al . Therefore: , the auditor ,s requ:red to µ.erform ttie ':>tandard v -~ _
w th,hey
cont~ined in the ¼r1tten representat,,rns.
I
COJTOborate th P. ··nformat,on
Exhitlit 7 - 2: Illustrative Management's Representation letter
.,
---------- ~-
(F.nt1ty Letterhead)
(Date)
(To Auditor)
This representation letter is provided in Grnnect1on with vour audit of the financial S!ate '= "..S ,:•
~ tJ
ABC Companv for the year ended December- 31, 20xx fo1 the purpose of ex;Jressir.g an c;: '1
whether the financial statements are pr-esented fairly, in a!I mate1·ial respects, in accor03"''"F:
Philippine Financial Reporting Standards .
We confirm that (, to the best of our know ledge and belief, having made such 1nqu1r es ~,
cons1oered necessary for the ourpose of apprc,priately informing ou r selves):
,e
Financial Statements
a.
fulfilled our responsib1l1ties for the ))reparation and presentat•on oF the
We
st have
atements as set out in the terms of the audit engagement dated [msert d.;1te'
;:,articu_lar, the financial statements are fairly presentect in acco, dance ,.... ti1
Financial Reporlir,g Stanoards.
-,~
.
P
b.
Signiflc~nt assumµtions used by us in 'llt1k111q .JCCount,nq estimates,
mea~ured at fair value, are reasonable. (F'SA 5•1U (KC'v1sed tlnd Redrafted))
t it uj r-
c.
Related party relationships and t
disclosed in accordancP witti thp ransaction~, hrivc• bee•1 nrproprmtely oc.counte ,_
I Repo'"t ng s ,a 1 J
(PC:A I""
reriu1rl' l 11i"nts or Phttlp• 11 n F
•
, ri.- 1nanc1a
"" .,SQ (Revised ancJ Re{lraftecl)
d.
All evAnts subseque,1• to llie tJ•itF of
th
F1nanc1al P.eµorUr,g Star,dardc r~
e fiilJ'l,iJI ',tt1t('mc.11ts and for which P
"' ,-qu,r,•
d
ISClosed. {PSA 560 (Rr•drdftr-d))
r1J:u<.tr,w, 1 t or drc;c ,osure have oeen dJtu ted ._
e.
The effects of 'Hl( orrc. cted m, r.t,Jtcmr•,1ts
1
aggregate, to the financ.,al st :\t ,-mc>nt
t e
)rf' ,nrr1<1tPr1al, both lndl\ridu.:,lfy an~
f
A I
Wh')jp
'
1<,
1c; attached to the represent.:it,on lettu.
O
the uncorreLted ms t c;r,,e s
ic;t
([P
roi,o•,l'dj PSA 4=,0 (Revised e.nd Redraft d
[Any other matter·, that the .. iJr!,tor
mdy 'on.,, Jer dppropn.-'te (
PSA).J
see paragraph A12 or
..
f.
344
AUD.'TING AND AS S URANCE p
RINC.IPL ES ( 2022 - 'J02J
EDtTtONI
...
I
•
LUMPLf:TJN '
G THE
AUc1r AND
Pos T-A UOIT RESPONSI Bl LI TIES
rrformation Provided
a.
b.
we have provided you lt\lith:
o All information such ,
c,S record r
relevant to the preparation
" c1nd document .
a nd Presentation f atior,, and other matters that are
o the financ· I t
o Additional information th t
ia s atements;
a You have re
.
quested from us; and
o Unrestnct~d access to those . .
lt\l1th11, the ent·t
I y,
All transactions have been
.
record "d in th
.
financial s1:ate:ments.
~
e accounting records and are reflected in the
c.
We have disclosed to you the
resu 1ts
.
statements may be materia!ly mis t t d of ou r assessment of the nsk
that the financial
- s .a e as a result of fraud. (PSA 240 (Redrafted))
d.
We have disclosed to you all inform ·
.
aware of and that affects th
. ation in relat:on to fraud or suspected fraud that we are
e entity and involves :
o Management;
o Employees who have significant roles in internal control · or
I
o
Others where the fraud co uld have a material effect on the financial statements. (PSA
240 (Redrafted))
e.
We have disclosed to you al l information in relation to allegations of fra'..ld, or suspected
fraud, c.ffecting the er,tity's financial statements comrr,unicated by employees, former
employees, analysts, regulators or ::ithers. (PSA 240 (Redrafted)) PSA 580 (Revised and
Redrafted)
f.
We hcive disclosed to you all known instances of non-compliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing
financial statements . (PSA 250 (P..edrafted)
g.
We hcve disclosed to you the identity of the entity's related parties and all the relat_ed party
relationships and transactions of which we are aware. (PSA 550 (Revised and Redrarted)
h•
auditor ma '{ consider necessary (see paragraph A13 of t his
[Ar.y other mi'ltters th a t the
PSA).]
Chief Executive Officer
~ I Officer
Basir. El~ments of Written Representations
The written representations
approp ••iatelv dated and signed .
1.
m ust be addressed ro the auditor, contain specific information,
. d( ) covered. The date of theriwtrit:en reprtesentahtions shcill be as near
Date of and peno s
. t·'l
e dat2 of the au ' ors repor on t e financial state mer ts
1
'
•
as practicable to, bu t n ot after ,
AUDITING A
ND ASSURANCE PRINCIPLES (2022-2023 EDITION)
.~
V
45
. , , ;. '
.· .
.,,
:. \ :
RESP ONSI BILIT IES
ody ing eccn orn1c bene fi -s .
ef11 b
--- -,.;7.- - - L
1I be
vv1
bl1gat10 n cann ot be meu sure d vv ti
requ ired t
0
I 1 SUff1 c1en t O Settle the Obi '
" \ .
re11ab1
11
·t
The most com mon ly used
igation o th
. :.
.
Yr e amou nt of the
audit Proced
.
.
ures Used to ,, _
a. Inqu iry and discu ssion
,
.
s_drch conti
.
,:
1th
evalu ating , and ac
~
mona gem
ngen t liabilities are as follow s :
.
coun ting for co ent abou t its
. .
,.
b. Exam ine docu men ts ir. the entity 'nt1n gent
lic1bilities · polic1es and procedures for ident ifying
,
attor neys fo1 · pend ing or th
s recor ds such
·
··
c. Obtc. i n a legal lette r that d reat_ened lc1 wsuits
as correspondence and invoices from
.
h
.
bes
.
d. Revie w t e minu tes of meescn
t
and ev3lu ates
..
of l;:iws uits or othe r conti n e ings of th e Board
of ~ny litigat ion, claims, or assessments .
Obta in writt en repre se t tgencies.
,rectors and shareholders for indica tions
e.
n a ion f ·orr
claim s , ;:ind asse ssme t h
'
' mana gerne
1
. .
' s ave been disclo d nt th a t a11 li.t igatio
n , asserted and unas serte d
5e .
Lon g-ter m com mitm ents are usua ll ·c1
..
aud it of th e reve nue crnd purch asing pr Y I
entifi ed ~hrough inqui ry of client personnel
durin g the
a note to t he finan cial state men ts .
ocesses. In mo st cases, such comm itmen ts
are disclosed in
1 OTHER PRO CED URE S FOR COMPLETING THE AUD
IT
Final Asse ssm ent of Mate riali ty and Audi
t Risk.
While condu r:tinq \.:h e audit, adjusting journal ertries
for j~ed:ed material monetary errors are prepared.
These
ilr'= kno wn as "pro pose d adju sting journ
al entri es" (PAJE). The PAJEs, if approved
by the client, are
incorporated in arrivi ng at the accounts adj usted
balances that are in conformity with generally accep
ted acccunting
princi ples , h ence th 2 aud itor wil l is sue an unqu
al if ied opinion .
In S()m e cas2s the clie 11 t may not accep t the
PAJEs . These passed AJEs and other likely misstatemen
ts are
aggregated to detei ~ine if their combined effect
will cause ma(erial distortion of the client's fi~ancial
statem
ents.
The
estimated likely misst ateme nt: (the aggregate of
unr.orrected misstatements) ar~ compared w1~ ma~n
allty
level
set
•
bY ti,e au-:J 1tor.
misstatefT'ents i(lcr2ases, the nsk that the fmanc
A!; th e aggre g3 t e 1·kely
1
,al state ment s
ma y be 111o teria lly miss tated alsn in creas
es .
.
d
e opinion would be expressed by the auditor depen
ding on the
If the audit risk is high , a qualified or a v:~o
(Revised and Redrafted), Evaluation of Misstatemen
ts Identified
mat~riality of the effect of misstatements. PSA
u~ito r's responsibility to evaluate the_ effe~
t of ident ified
Du11n g the Audi t, st3te s tnat it is t h e
a
d misst atem ents, if any, on the financial state
.
ment s.
..n·,i1sstatelT' ents on the audit
;rn d of unco rrecte pons·ib'ility in formi.ng an opinio
. .
th f'
.a I
n
on
1
e
d"tor'
inunc1
s
res
PSA 700 ( Redr afted ) de2ls with the au I
uranc
e
has
been
obtained abou t whet her the
stat emen t s to conc lude wh ether re a-- onable ass
mate rial m;sst atem ent.
fi1
.
'
f~e
e
from
nanc1al sta '::eme nts as a whol e are ·
J
Review
0
f th
e
W
or
k ·I ng Pape rs
f
c·he auditor's opinion and there fore are very
.
or The work
.
he prima ry sUppo. rt =-d
· we d
of assoc1·a t e au d't
I ors are rev1e
Si ~o rking pape rs prov ide! be car':!fullY
review~ V.:ed b\' the managers . At the comp letion
stage
b gninc ant, as such they mu - t
,
k are in turn revie
roved PAJEs have been prope rly posted and
t Y tr,e senio r auoit ors whos e wor r) check
th
s 1f e ap~he formu lation of audit opinion,
the mana ger
he re vi ewer (•Jsu ally the managle supportec1.
Bef::ire f'nal review to ascertain that suffic
the d '
ient and
1
roper
Y
a Juste d balan czs are P
gerne nt conduc t ad'ting standards and enga
geme nt letter were
i'lnd t he partn er of the audit engad prov
ision of a_ute1
op
,
pp ·opna •
Propri ate evide nce were obta inehed
were
a '
(() rn 1
·
. ns rea c
.. ,pied, and t he conclus10
. n of the Audi t Repo rt
For
· ·on an d
ll11tl ation of an opin •
prepc1rat10
ALJC ITIN
G AND
A ssUR ANC E
PRIN CIPL ES (2022 -2023 EDIT ION )
347
CHA PTER 7:
--
COMPLETING TU£ AUDIT MID POST-AUDIT RE"P.:Jt
_
IS/BIL T
'r
In an audit engagement th
men h rs of thl
to
exnmine
At
the
ouel1t ccmi..: t,
and ac c r t "
I
nd
evaluated
to
prov,de
n r i.lr pt tur
Sl/1,"t'ID Z d a
~ atc'l"I ts.
Also to help in the fotmul t1on
n np,r, r
\', tt- the C ent to d SCU!>S th fmd ng tlrnt I l' ,It d lo PAJE /
po b e
~E: olved , c.ues.
t
Con,munication wlth Client
PSA 2 60 (Re,ised and Redrartcd) - Comm m1catron w1t,1 The
Ct;arQed w • r.
PSA ._ 6 5 Ne~) • Commu111catt11g Oef,c1enc1""s m l11tcrrial C.or,trol to Those C .3rQ"'i w
n t•Jnegement address this requirement of the audit tt at v✓os mentioned
,._
cc 'Tl ., cat O"I to management 1s done through the prl'p.ir ..1tton cf a mana!Jement letter
POST AUDIT RESPONSIBILITIE S FOR SUBSEQUENT EVENTS
facts which become known to the Auditor after the date of the Auditor's Repo-1 bw.
before the ddte the Financial Statements are issued
?SA 560 (Reorafted), Subsequent Events, sta.:es tt1at tt1e auditor har no ob g.J•
a"y a..,a t procedures regarding the 17nanc:at statements after tfte date of tiJe a --1 • _
Hcw_ve-- when, after the date of the auditor's report but before the date aie f"
ar-e !:Sued, a ~act becomes known to the aud1to~ tnc,t , had it been known ::o ~ e a ... ::!. - •
of the al.it! tor's report. may have caused the aud1to1 to amend the aud1ro-'s reoort, rh= a
d SCJSS the discuss the matter with managem ent and, wh2re apprupriate th:15e
govema'lce and take the necessa ry procedures which wilt depend 0'1 whe':'1e,. o
Ma"lageme'lt amends the financial statements.
4
If rnanagement amends the frnancial statements, the ~uditor shall:
'aJ EY.tend the audit procedures to t!le dete of tf1e r1ew aud,t.:>r's report, and
bJ Prov de a new auditor's report on the amended t1nanc al statenentc; The
rep-ort shall not be dated earlier than the date ot appro\ al of th" c1 •c ded
state...,ents.
ly, tne auditor mav alsc, 1sc dual rlating . In duo I d J
dat ng of tre subsequ nt cvC'
11 ..i 1 1 d t ,
rs thet the auditor's pror
Qut: f'lt r
t
enr.lrnert: 01 the flnarc1c:i1
Ttic r , IJw il
I
e
C'
ed
t,
,,
•
However, wh~n management dOeti
c:lrcumstanc~ wh~re the auditor b II not amend the f1nanc1a1 stateP1~nts ,n
(•) If the Bl 11,tor'" r
r t
•
c eves th ~V ne~d to be am.ended, then:
'l a~,d th n r.,f
t
l t '
t l ~, the ud1t r h I
o 'y •
346
AUDITING AND ASSUR~NCE: PRINCIPLE'-'
.. ( 2 011 2JZJ ECITION)
~nf- \, I
------- -
CK '__:_ COMP LE1tN ------. .:..
~u
THE
uo,r
ANo
POST- AUDIT RESPO.NS/BIL ITIES
(b) If the audito r's report ha s
manag ement and unle
alrea dy be
h
,
ss all of ti
en Provided
the en I Y,_ t ose charge d With
lo se Churged With to the entity, the aud h:or shall notify
parties before the necess a
go1,ern ar,c~
. govern ance are involve d in manag ing
rth I
i....
ry arne11d
, not to ,,·s
neve
.
e ess SU•Jse
quently
.
.
rnents
ha
" ue t he financia
l statem ents to third
. t
.
.
ve been
d
approp na .e action , to seek issuPd
to - Withou t the nece ~ m a e. If the financi al statem ents
iJre
Preven t relianc e on t~ "a ry a_me~dm ents, the audito r shall
t
ake
1
f;..cts which becom e know n t
e auditor s report.
o the Aud·t
I
issued
or after the Financ ial Statem ents have been
After the financ i2I statem ents h
.
d es
di
ave been issued th
audit proce ur
regar ,ng such financi
al t
'
e auditor has no obligat ion to perform any
st3ternents have been issued a fact b
5
s
ateme
nt
.
er when after
.
the
h d t
financial
.
,
ecornes know t . Howev
. ,
,
audit or at t e a e of the audito
r's rep t
n
the
auditor
that
had
it
been
known
to the
·t
h
'I
·
report, t I1e au d I or s a. discus s the m or
'
tt ' may
. have caused the auditor
to
amend
t
he
audito
h
h
r' s
a
er
with mana
depend on w et er the manag ement revises th
.
.
.
. gemen t and perforrr: proced ures wh ich
will
e financi al statem ents or r10t :
If mana geme nt amen ds the fin
.
(a) Carry out the audit proced u
anc,al stat~me nts, the audito r shall: .
(b) Review the steps taken b res necess ary in the circum
stance s on the amend ment.
..
d f
.
t
Y manag ement to ensu,e that anyone in receipt of the prev
1
iously
issue . ,nanci a 5 ateme nts togeth er with the auditor
's report thereo n is inform ed of the
s1tuat1on.
(-:) Exte nd , th e audit proce_d ures to the date of the new
auditor 's report, -- and date the new
audito rs report no earlier than the date of approv al 0f
the amend ed financi al statem ents;
and
n
°
(d )
Provid e a new audito r's report on the amend ed financi
al statem ents (with emph asis cf a
matte r er other matte r(s) paragr aph).
If mana geme nt does not take the neces sary steps to
ensur e that anyon e in receip t
of the previo usly issued financ ial statem ents i:; il"lform
ed of the situat ion and does
not amen d the financ ial statem ents in circur n~tanc
es where the audito r believ es
they need to be amen ded,
(a) Notify manag ement and, unless al l of those charge
d w ith govern ance are involv ed in
manag ing the entity, those charge d with gove:rnance,
that the audito r will seek to preven t
future relianc e on the audito , 's report.
.
·f·cat·,on manag ement or those charge d with govern ance
If, d esp1·te sue h no t 1
1
do not take
,
.
.
·
audito r shall take approp riate action to see k to preven t
th ese neces sary st eps, the
rel, a'lce
on the audito r's report .
DEBRIEFING
. .
.
.
learn from previous perfo rmdnce s, maint~ in best practic
es
Debrie fing 15 an import ant tool t 0
ro erlv, debrief ing ca11 provide valua_b le inform atio n abo
L.t
and 1mpr')v e in the future . If 1_
t is don~ ~el~ an organi uition to . be compet1t1ve and
overco
me
how to condu ct quality service s an ·t the audit te~m
partne r wi ll lead tne d1scuss1on and provid e
challe,g es Upon compl etion of an audi '
mmend ations to even get better.
feedback ~n audit execut ion and provide re co
AUDIT ING
AflD ASSUR ANCE PRINC IPLES (2022- 2023 EDITIO
N)
349