Auditing and Assurance Principles

Audit Reporting
 FUNDAMENTAL PRINCIPLES OF ASSURANCE SERVICES

PRACTICE AND REGULATION OF THE ACCOUNTANCY PROFESSION

PRE-ENGAGEMENT RISK ASSESSMENT RISK RESPONSE EVALUATE/CONCLUDE

Introduction to FS Evidence Completing the Audit

Audit Planning
Audit

Pre-engagement Consideration of Selecting Items for

Reporting
Activities Internal Controls/IT Testing (Sampling)

Transaction Cycles

FRAUD, ERROR AND NON-COMPLIANCE

CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS

QUALITY CONTROLS FOR AUDIT AND ASSURANCE FIRMS

Objectives of Financial Statements Audit
Responsibility Measure / Assure • To obtain reasonable assurance
Evaluate
about whether the FS as a whole
Management and External are free from material
those charged with
governance
Auditor misstatement, whether due to fraud
or error.

PFRS Audit evidence • To enable an auditor to express an

opinion as to whether the financial
statements are prepared, in all
Historical
material respects, in accordance
Financial
Financial Audit Report with applicable financial reporting
Statements
Information framework.

Users
Types of Audit Report
Unqualified “Presents fairly in all material respects”
• Should be expressed if sufficient and appropriate evidence has been obtained that the financial
statements, in all material respects, are fairly presented in accordance with the applicable
financial reporting framework.
Qualified “Except for”
• Unqualified opinion cannot be expressed but that the effect of any disagreement with
management, or limitation on scope is not so material and pervasive as to require an adverse
opinion or a disclaimer of opinion.
Adverse “Do not present fairly, in all material respect”
 Should be expressed when the effect of the disagreement is so material and pervasive to the
financial statements that the auditor concludes that a qualification of the report is not adequate to
disclose the misleading or incomplete nature of the financial statements.
Disclaimer “Cannot express a conclusion”
 Should be expressed when the possible effect of a limitation on the scope is so material and
pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and
accordingly is unable to express an opinion on the financial statements.
Additional Communications in the Auditors’ Report
Emphasis of Matter Other Matter
Key Audit Matters
Paragraph Paragraph
• Those matters that, • A paragraph • A paragraph
in the auditor’s included in the included in the
professional auditor’s report that auditor’s report that
judgment, were of refers to a matter refers to a matter
most significance in appropriately other than those
the audit of the presented or presented or
financial statements disclosed in the disclosed in the
of the current financial statements financial statements
period. that, in the auditor’s that, in the auditor’s
• Selected from judgment, is of such judgment, is
matters importance that it is relevant to user’s
communicated with fundamental to understanding of the
those charged with users’ audit, the auditor’s
governance. understanding of the responsibilities or
financial statements. the auditor’s report.
Key Audit Matters (KAM)
• Auditors shall take into account: 1) Areas of
higher assessed risk of material misstatement, or
significant risks, 2) significant auditor judgments
Determining KAM in areas that involved significant management
judgment, and 3) The effect on the audit of
significant events or transactions.

• Auditors shall communicate these matters in the

Communicating auditor’s report under heading “Key Audit
KAM Matters”

• The auditor shall not communicate KAM in the

auditor’s report when 1) the auditor would be
Exceptions in required to modify the opinion, 2) law or
Communicating regulation precludes public disclosures about the
matter, and 3) the auditor determines that
KAM adverse consequences of communicating
outweigh the public interest benefits.
Emphasis of Matter Paragraph (EMP)

• Going concern assumption is appropriate but

material uncertainty exists
• Uncertainty relating to future outcome of
exception litigation or regulatory action
Examples of EMP • Early application of new accounting standard
with pervasive effect in advance of effective date
• Major catastrophe with significant effect on
financial position

• Auditors shall communicate these matters in the

auditor’s report under heading “Emphasis of
Communicating Matter” and should indicate that the auditor’s
EMP opinion is not modified in respect of the matter
emphasized.
Other Matter Paragraph (OMP)
• In rare circumstances where auditor is unable to
resign from the engagement (to explain why it is
not possible to withdraw)
• Reporting on more than one set of financial
statements using different frameworks
Examples of OMP • Restriction on distribution or use of report
• Comparative information were unaudited or
were audited by the previous auditor.
• Material inconsistency in other information
(annual report data)

• Auditors shall communicate these matters in the

auditor’s report under heading “Other Matter”
Communicating except when the inclusion is not prohibited by law
OMP or regulation, and the matter has not been
determined to be a KAM.
Modified Opinions
Nature of Matter Auditor’s Judgment about the Pervasiveness of the Effects or
Giving Rise to the Possible Effects on the Financial Statements
Modification
Material Material
but not Pervasive and Pervasive

Financial statements are Qualified Opinion Adverse Opinion

materially misstated.
Inability to obtain sufficient Qualified Opinion Disclaimer of Opinion
appropriate audit evidence.
Pervasive: A term used, in the context of misstatements, to describe the effects on the financial
statements of misstatements or the possible effects on the financial statements of misstatements, if
any, that are undetected due to an inability to obtain sufficient appropriate audit evidence. Pervasive
effects on the financial statements are those that, in the auditor’s judgment:
• Are not confined to specific elements, accounts or items of the financial statements;
• If so confined, represent or could represent a substantial proportion of the financial statements; or
• In relation to disclosures, are fundamental to users’ understanding of the financial statements.
Comparative Information
Under PFRS, a reporting entity is required to present at least two periods for its complete set of financial statements.
Under Revised SCR Rule 68, the required comparative information to be presented are as follows:
• Unlisted companies: A minimum of two (2) year comparative financial statements.
• Listed companies: A minimum of two (2) comparative statement for statement of financial position and a three (3)
year comparative statement of financial performance, statement of cash flows, and statement of changes in equity.

Corresponding Figures Approach Comparative Financial

Statements Approach
Auditor’s Responsibility Comparative information are intended to be Comparative information are
read-only and dictated primarily by included for comparison with current
relevance to the current period figures. period. Audit opinion refers to each
Audit opinion refers to current period period for which the financial
figures only. statements are presented.
• Corresponding figures are fairly stated, or
contain misstatement but were resolved
during current period: Unmodified opinion
• Corresponding figures contain
misstatement and remained unresolved
during current period: Qualified or adverse
option

Other Matter Paragraph Corresponding figures were audited by a Prior period FS were audited by a
previous auditor or are unaudited. previous auditor or are unaudited.