Module: Audit and Assurance
Lecture 10 – Statement of Financial Position (SOFP), Finalisation & Review, Going
Concern (GC)
Audit of the statement of financial position
There are certain factors that will affect how the auditor carries out the job:
Collection of sufficient appropriate audit evidence in order to be able to form
an opinion on the truth and fairness of the financial statements, and watch out
for how consistent management have applied the accounting policies. Have
they used the same policies year on year? Have there been changes? If there
are changes, what are they and how might it affect us?
Adequate disclosure by management – what kind of information have they
disclosed? Is it in line with what you have been told? Is it in line with what you
see in the numbers?
Compliance with statutory & professional requirements such as industry
regulations, Companies Act 2006
Known as ‘pre-final work’
Final work – problem areas
Known problems – e.g. a weak system that isn’t reliable
Inventory count instructions – do you know how your client counts their stock?
Timetable for preparation of the financial statements e.g. to assess the quality
of the data being captured in that time period, see whether everything is
complete.
Confirmations – from third parties
Requirements of accounting and reporting standards – is your client
compliant?
New legislation
Requirements of auditing standards
Audit of the statement of financial position (SOFP)
Evidence is accumulated from:
Compliance Testing the first stage of testing
- Compliance testing is the test you carry out on internal controls – is it
strong or weak?
Lecture 10 – Statement of Financial Position (SOFP), Finalisation & Review, Going
Concern (GC)
Audit of the statement of financial position
There are certain factors that will affect how the auditor carries out the job:
Collection of sufficient appropriate audit evidence in order to be able to form
an opinion on the truth and fairness of the financial statements, and watch out
for how consistent management have applied the accounting policies. Have
they used the same policies year on year? Have there been changes? If there
are changes, what are they and how might it affect us?
Adequate disclosure by management – what kind of information have they
disclosed? Is it in line with what you have been told? Is it in line with what you
see in the numbers?
Compliance with statutory & professional requirements such as industry
regulations, Companies Act 2006
Known as ‘pre-final work’
Final work – problem areas
Known problems – e.g. a weak system that isn’t reliable
Inventory count instructions – do you know how your client counts their stock?
Timetable for preparation of the financial statements e.g. to assess the quality
of the data being captured in that time period, see whether everything is
complete.
Confirmations – from third parties
Requirements of accounting and reporting standards – is your client
compliant?
New legislation
Requirements of auditing standards
Audit of the statement of financial position (SOFP)
Evidence is accumulated from:
Compliance Testing the first stage of testing
- Compliance testing is the test you carry out on internal controls – is it
strong or weak?
