report and review

Q1 No difference. The use of an other matter paragraph is covered in our nofes and lectures on the audit report.

Q2. Preconditions for an Audit
In order to establish whether the preconditions for an audit are present, the
auditor shall:

(a) Determine whether the financial reporting framework to be applied in
the preparation of the financial statements is acceptable; and

(b) Obtain the agreement of management that it acknowledges and
understands its responsibility:

Q3 Yes

There are no hard rules and the transition to pervasive is very much governed by the judgement of the auditor.

If the misstatement is just beyond the upper materiality limits, then almost certainly not pervasive. Pervasive also usually means that many figures are badly wrong: profit, assets, reserves so that the effect of the misstatement cannot be easily isolated.

Once the auditor says that the FS do not show a T&F view, or disclaims an opinion, theFS are not really worth the paper they are written on because the problems are so pervasive that the FS are undermined. Auditors have to be pushed quite a bit to disclaim an opinion or give an adverse opinion. ‘Except…for’ qualifications are more useful to shareholders ie the error can be isolated and the rest of the FS are still of some use.