Audit & Assurance

1. SCOPE SYLLIBUS FOR CHAPTER 5
5.1 UNDERSTAND THE NATURE OF AUDIT REPORT
5.1.1 DEFINE AUDIT REPORT ACCORDING TO THE
STATUTORY REQUIREMENT.
5.1.2 STATE THE TYPES OF AUDIT REPORT :
• UNMODIFIED REPORT
• MODIFIED REPORT
5.1.3 PREPARE AND OVERVIEW EACH TYPES OF REPORT
5.1.4 EXPLAIN THE SITUATIONS WHICH RESULTED IN
EACH TYPES OF THE AUDIT REPORT BEING
RELEASED
5.1.5 DISCUSS THE ELEMENTS IN EACH OF THE AUDIT
REPORT
5.1.6 DESIGN THE REPORT FOR EACH TYPE
5.2 KNOW THE AUDITOR’S RESPONSIBILITIES
5.2.1 DESCRIBE AUDITOR’S RESPONSIBILITIES
5.2.2 DISCUSS MATTERS THAT EFFECT AND DO NOT EFFECT THE
AUDITOR’S RESPONSIBILITIES

2. AUDIT REPORT
• A legally required review of the accuracy of a
company's or government's financial records.
The purpose of a statutory audit is the same
as the purpose of any other audit - to
determine whether an organization is
providing a fair and accurate representation of
its financial position by examining information
such as bank balances, bookkeeping records
and financial transactions.

3. TYPES OF AUDIT REPORT
• CONSIST OF TWO TYPES
 UNMODIFIED REPORT
 MODIFIED REPORT

4. UNMODIFIED REPORT
• As know as an unqualified report which mean as a
clean report.
• Should be expressed when the auditor concludes that
the financial statements give true and fair view (or
presented fairly, in all material respects,) in accordance
with the identified financial reporting framework.
• Also indicates implicitly that any changes in accounting
principles or in the method of their application, and
the effects thereof, have been properly determined
and disclosed in the financial statement.

5. MODIFIED REPORT
• As known as qualified report which mean auditor
not be able to express an unqualified opinion
when either of the following circumstances exist
and, in the auditor’s judgment.
• Expressed when the auditor concludes that an
unqualified opinion cannot be expressed but that
the effect of any disagreement with
management, or limitation on scope is not
material and pervasive as to require an adverse
opinion .

6. The effect of the matter is or may be material to
the financial statements
a) There is a limitation on the scope of the
auditor’s work or
b) There is a disagreement with management
regarding the acceptability of the accounting
policies selected, the method or their
application or the adequacy of financial
statement disclosures.

7. UNMODIFIED REPORT
“MATTERS THAT NOT AFFECT THE
AUDITOR’S OPINION”
• Unqualified opinion with emphasis of matter
paragraph
• Unqualified opinion with emphasis of matter
paragraph that have going concern is
appropriate but a material uncertainty exist
and adequate disclosure is made.

8. MODIFIED REPORT
“MATTERS THAT DO AFFECT THE
AUDITOR’S REPORT”
• Qualified opinion (emphasis of matter)
• Disclaimer of opinion
• Adverse opinion

9. LETS SEE HOW THE CHANGES ARE
REFLECTED IN THE AUDITOR’S REPORT
• Refer the Notes

10. SITUATION WHICH RESULTED IN EACH
TYPE
• UNMODIFIED REPORT
Highlight a matter affecting the financial
statements which is included in a note to the
financial statements that more extensively
discusses the matter.
Does not affect the auditor’s opinion – ordinarily
refer to the fact that auditor’s opinion is not
qualified in this respect.
Highlight the material matter regarding a going
concern problem.

11. • MODIFIED REPORT
a) QUALIFIED OPINION
Should be expressed when the auditor concludes
that an unqualified opinion cannot be expressed but
that effect of any disagreement with management,
or limitation on scope is not material and pervasive
as to require an adverse opinion or disclaimer of
opinion. A qualified opinion should be expressed as
being “except for” the effect of the matter to which
the qualification relates.

12. b) DISCLAIMER OPINION
Should be expressed when the possible affect of
a limitation on scope is so material and pervasive
that the auditor has not been able to obtain
sufficient appropriates audit evidence and
accordingly is unable to express an opinion of the
financial statements

13. • ADVERSE OPINION
Should be expressed when the effect of
disagreement is so material and pervasive
to the financial statement that the auditor
concludes that a qualification of the
report is not adequate to disclose the
misleading or incomplete nature of the
financial statements.

14. ELEMENTS OF THE AUDIT REPORT
• Ordinarily in the following layout :
a) Title
b) Addressee
c) Opening or introductory paragraph
i. Identification of the financial statement audited
ii. A statement of the responsibility of the entity’s management and
the responsibility of the auditor
d) Scope paragraph (describing the nature of an audit)
i. A reference to the ISAs or relevant national standards or practices
ii. A description of the work the auditor performed
e) Opinion paragraph containing an expression of opinion on
the financial statements
f) Date of the report
g) Auditor’s address and
h) Auditor’s signature

15. TITLE
• The auditor’s report should have an
appropriate title. It may be appropriate to use
the term “Independent Auditor” in the title to
distinguish the auditor’s report from reports
that might be issued by others, such as by
officers of the entity, the board of director, or
from the reports of other auditors who may
not have to abide by the same ethical
requirements as the independent auditor.

16. ADDRESSEE
• The auditor’s report should be appropriately
addressed as required by the circumstances
of the engagement and local regulations. The
report is ordinarily addressed either to the
shareholders or the board of directors of the
entity whose financial statement are being
audited.

17. OPENING OR INTRODUCTRY
PARAGRAPH
• The auditor’s report should identify the financial
statements of the entity that have been audited,
including the date of and period covered by the
financial statements.
• The report should include a statement that the
financial statements are the responsibility of the
entity’s management and a statement that
responsibility of the auditor is to express an
opinion on the financial statement based on the
audit.

18. SCOPE PARAGRAPH
• The auditor’s report should describe the scope of
the audit by stating that the audit was conducted
in accordance with ISAs or in accordance with
relevant national standards or practices as
appropriate.
• The report should include a statement that the
audit was planned and performed to obtain
reasonable assurance about whether the
financial statement are free of material
misstatement.

19. • The auditor’s report should describe the audit
as including :
a) Examining , on a test basis, evidence to support
the financial statement amounts and disclosures
b) Assessing the accounting principles used in the
preparation of the financial statements
c) Assessing the significant estimates made by
management in the preparation of the financial
statement and
d) Evaluating the overall financial statement
presentation.

20. • The report should include a statement by the
auditor that the audit provides a reasonable
basis for the opinion.

21. OPINION PARAGRAPH
• The auditor’s report should clearly state the
auditor’s opinion as to whether the financial
statement give true and fair view (or are
presents fairly, in all material respects) in
accordance with the financial reporting
framework and where appropriate, whether
the financial statement comply with statutory
requirements.

22. DATE OF REPORT
• The auditor should date the report as of the
completion date of the audit. This informs the
readers that the auditor has considered the effect
on the financial statements and on the report of
events and transactions of which the auditor
became aware and that occurred up to that date.
• The auditor should not date the report earlier
than the date on which the financial statement
are signed or approved by management.

23. AUDITOR’S ADDRESS
• The report should name a specific location,
which is ordinarily the city where the auditor
maintains the office that has responsibility for
the audit.

24. AUDITOR’S SIGNATURE
• The report should be signed in the name of
the audit firm, the personal name of the
auditor or both, as appropriate. The auditor’s
report is ordinarily signed in the name of the
firm because the firm assumes responsibility
for the audit.

25. EXAMPLE THE REPORT FOR EACH TYPE

26. AUDITOR’S RESPONSIBILITIES
• Material versus immaterial misstatements
• Reasonable assurance
• Errors versus fraud
• Professional skepticism
• Fraud resulting from fraudulent financial
reporting versus misappropriation of assets

27. • 3 different types of audits
• EXTERNAL AUDITS
– Is an independent attestation performed by an
expert.
– Auditor that expresses an opinion regarding the
presentation of financial statement.
– They are also the one who do the attest service.

28. • Professional Skepticism
– Material misstatement may exist in a financial
statement and auditors should plan their work on
this basis.
– It makes clear even where auditors assess the risk
of litigation or adverse publicity as very low, they
must still perform sufficient procedure according
that auditing standards.

29. INDEPENDENT AUDITOR
• To ensure the financial statements are
objectively, free from bias, and manipulation
and relevant to the need users.

30. INTERNAL AUDIT
• Is an independent activity established by
management to examine and evaluate the
organization’s risk management process and
systems control and make recommendations
for the achievement of company objectives.
• The current focus of internal audit is on
adding value to an organization through risk
control and reviewing all types of risk and
recommending relevant controls.