Completion of the Audit
ISA 320, 500, 560, 570, 700, 705, 706 (+ IAS10)
Steps in the completion process:
- Sufficiency of audit evidence
o Is the evidence sufficient and appropriate?
o Are the Work Papers complete (sufficient information), with cross-
referencing to the Trial Balance and FS, and have they been adequately
reviewed?
o Has a “Management representation letter” been received in writing (or
guarantee given verbally – which increases risk)?
- Evaluating audit differences
o 1 – Determine final materiality
This figure will be used to evaluate all audit differences
It can differ from the initial, planning materiality figure
o 2 – Consider audit differences
Amount in FS VS Amount obtained through audit evidence
There are three types of/reasons for differences, namely:
1 - Auditor and the company have different identification
methods, accounting treatments and disclosure practices for
THE SAME AMOUNT; and
2 - Auditor and the company have different judgements when
it comes to calculating and disclosing ‘estimates’ (ie. Provisions
for future expenses, etc)
3 – An unadjusted difference from the previous year is
influencing the current FS.
Consider the following:
The amount of the difference
The nature thereof
The risk associated with that difference (were it undisclosed)
, o 3 – Identify the materiality of the difference(s)
Is the difference quantative or qualitative?
What is their effect on the FS of the company:
Individually (each line item); AND
Joint/total effect
Draw up a schedule of audit differences
Ask: Is the item material?
NO = Review cumulative effect and report to management
YES = Request that the client change the FS
o 4 – Search for unrecorded liabilities
Read minutes of meetings
Enquire at attorneys
Receive management representation letter
Review all contracts, guarantees and loans
Review the cashbook and journals
- Overall revision of financial information
o Draft FS (calculations, etc – cross-reference with work papers)
o Perform final Analytical Procedures (objective: general reasonableness test)
o Review reasonableness of presentation by checking:
Consistency and prudence of accounting policy
Presentation and disclosure (GAAP + statutory requirements)
- Going concern considerations (ISA 570)
o Going concern = business will continue in operation and has no intention (or
necessity) to liquidate or cease operations.
o Management’s responsibility:
Evaluate going concern assumption
Estimate figures (for at least 12months after BS date)
If unsure about going concern, management MUST disclose so.
o Auditor’s responsibility:
Consider appropriateness of going concern assumptions
Identify any material uncertainties relating to going concern
Consider ‘going concern’ during planning, procedures and completion.
ISA 320, 500, 560, 570, 700, 705, 706 (+ IAS10)
Steps in the completion process:
- Sufficiency of audit evidence
o Is the evidence sufficient and appropriate?
o Are the Work Papers complete (sufficient information), with cross-
referencing to the Trial Balance and FS, and have they been adequately
reviewed?
o Has a “Management representation letter” been received in writing (or
guarantee given verbally – which increases risk)?
- Evaluating audit differences
o 1 – Determine final materiality
This figure will be used to evaluate all audit differences
It can differ from the initial, planning materiality figure
o 2 – Consider audit differences
Amount in FS VS Amount obtained through audit evidence
There are three types of/reasons for differences, namely:
1 - Auditor and the company have different identification
methods, accounting treatments and disclosure practices for
THE SAME AMOUNT; and
2 - Auditor and the company have different judgements when
it comes to calculating and disclosing ‘estimates’ (ie. Provisions
for future expenses, etc)
3 – An unadjusted difference from the previous year is
influencing the current FS.
Consider the following:
The amount of the difference
The nature thereof
The risk associated with that difference (were it undisclosed)
, o 3 – Identify the materiality of the difference(s)
Is the difference quantative or qualitative?
What is their effect on the FS of the company:
Individually (each line item); AND
Joint/total effect
Draw up a schedule of audit differences
Ask: Is the item material?
NO = Review cumulative effect and report to management
YES = Request that the client change the FS
o 4 – Search for unrecorded liabilities
Read minutes of meetings
Enquire at attorneys
Receive management representation letter
Review all contracts, guarantees and loans
Review the cashbook and journals
- Overall revision of financial information
o Draft FS (calculations, etc – cross-reference with work papers)
o Perform final Analytical Procedures (objective: general reasonableness test)
o Review reasonableness of presentation by checking:
Consistency and prudence of accounting policy
Presentation and disclosure (GAAP + statutory requirements)
- Going concern considerations (ISA 570)
o Going concern = business will continue in operation and has no intention (or
necessity) to liquidate or cease operations.
o Management’s responsibility:
Evaluate going concern assumption
Estimate figures (for at least 12months after BS date)
If unsure about going concern, management MUST disclose so.
o Auditor’s responsibility:
Consider appropriateness of going concern assumptions
Identify any material uncertainties relating to going concern
Consider ‘going concern’ during planning, procedures and completion.
