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1)Ok. And like when we say that basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. I want to ask that basis for adverse opinion paragraph comes after opinion para or before opinion para?
2) Between evidence generated by auditor and evidence created by 3rd parties, which 1 is more reliable? The one generated by auditor is more reliable?
1)Ok. And like when we say that basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. I want to ask that basis for adverse opinion paragraph comes after opinion para or before opinion para?
2) Between evidence generated by auditor and evidence created by 3rd parties, which 1 is more reliable? The one generated by auditor is more reliable?
1)But in book its mentioned that if Going concern assumption is appropriate but material uncertainty is not adequately disclosed , the auditor’s opinion will be modified – either a qualified or adverse opinion will be issued depending on the magnitude of the uncertainty?
2) In GC reporting issues, suppose company is GC but it is subject to material uncertainty , and management have not or inadequately disclosed it . So a qualified opinion is given then in this case in the end can we write that a “basis for qualified opinion paragraph would be needed after opinion paragraph and would state that material uncertainty exist. The opinion paragraph would be qualified except for.” Am I right or am I right required to add anything else in this?
3) In GC reporting issues, suppose company is not GC so F/s must be prepared on breakup basis. But management has refused to amend F/s so in such a case adverse opinion would be given. In the end can we write that a “basis for adverse opinion paragraph would be needed after opinion paragraph and would state that use of GC is inappropriate. The opinion paragraph would be adverse opinion and would state that F/s do not give true and fair view.” Am I right or am I required to add anything else in this?
Ok, MURGC.
1)But still want to ask 1 thing, If disclosures are inadequate then audit opinion will need to be modified. Depending on the materiality of the issue, either qualified or an adverse opinion will be given. Right? We will write this na that depending on the materilaity of the issue either a qualified or adverse opinion will be given…..?
2) In the end can we write that since directors have refused to disclose, a basis for opinion paragraph would be needed and would state material uncertainty exist. The opinion paragraph would be qualified ‘except for’ OR would be adverse opinion and would state that F/s do not give true and fair view?
Sir like I want to ask that in Clarinet question (J14), Since directors have agreed to include some disclosures , if they are adequate then an unmodified opinion will be given but this uncertainty will be mentioned in EOM matter para OR material uncertainty with respect to GC para?
And in the last para in examiner’s answer it is mentioned that” A paragraph describing the matter giving rise to the modification will be included just before the opinion paragraph and this will clearly identify the lack of disclosure over the going concern uncertainty. The opinion paragraph will be amended to state ‘except for’ or the accounts are not fairly presented.”
Instead of the above para , can we just write that A basis for modified opinion paragraph would be needed and would explain going concern uncertainty. The opinion paragraph would be qualified except for / The opinion paragraph would be adverse opinion and would state that F/S do not give true and fair view?
And suppose in a response of audit risk we want to begin with that ” Perform increased testing over the cutoff of sales” , So using Perform in the beginning of response (i,e starting the sentence with Perform) is fine OR is it also incorrect English?
Ok. So if for any TOC we have to write that ask from management… but as you said that ask from is not proper English , so in this case what alternative word we can write like if we have to ask from management something? Enquire from management would be fine?
1) Sir if we cannot begin a response with “perform”, then can you please suggest me that from which word we can begin response?
2) If we cannot begin TOC with” Ask from..” then can you please suggest me that instead of this what shall we write?
Ok . And like if we write a TOC that
1)Review/Inspect a sample of orders to see whether they are in writing or not OR
2)Review/Inspect a sample of orders to ensure they are in writingWhich one is a more better option as far as exam is concerned?
Secondly if we are reviewing/inspecting any report then we would review/inspect the report or a sample of report?
Also would it more better to write say that Review/Inspect a sample of orders to see whether they are in writing or not OR writing that Review/Inspect a sample of orders to ensure they are in writing is a more better option?
Also would it more better to write say that Review/Inspect a sample of orders to see whether they are in writing or not OR writing that Review/Inspect a sample of orders to ensure they are in writing is a more better option?
Ok. I want to ask 1 thing related to this that what is the difference between inspect and review? I mean when to use Inspect in TOC and when to use Review in TOC?
Secondly if we are reviewing/inspecting any report then we would review/inspect the report or a sample of report?
So to keep it simple would it be enough to write that if the fees exceed 15%, then this should be disclosed to those charged with governance and either a “hot” (pre-issuance) or “cold” (post-issuance) independent review should be carried out.
Would it be fine and enough for 1 mark?
Examiner in its solution have mentioned 4 points as a safeguard that:
Audit firm should assess whether audit and non audit assignment fee would represent more than 15% of gross practice income for two consecutive years.
If the recurring fees are likely to exceed 15% of annual
practice income this year, additional consideration should be
given as to whether the non audit assignments should be undertaken by the firm.In addition, if the fees do exceed 15%, then this should be
disclosed to those charged with governanceIf the firm retains all work, it should arrange for a
pre-issuance (before the audit opinion is issued) or
post-issuance (after the opinion has been issued) review to
be undertaken by an external accountant or by a regulatory
bodySo in exam if we do not write all above four points and instead just write the first 3 points so would it be enough to obtain 1 mark for safeguard?
3) So point num 3 should be written as Cast the total of revenue to ensure accuracy and agree to income statement?
2) So point num 2 should be written as For a sample of GDN trace to the related invoices to verify that despatches have been invoiced and that revenue is complete?
1) So point num 1 should be written as For a sample of credit entries in the revenue account, trace back to the supporting invoices, despatch notes and customer orders?
4) And would this be correct that Select a sample of GDN’s pre year end and ensure whether these are recorded as revenue or not to verify cutoff?
1)Ok so as you told a SP that “trace bonus payments to cash book.” So would this point be enough to gain 1 full mark OR do I need to elaborate this point more like ” trace bonus payments to cash book and bank statement” in order to gain 1 full mark?
2)Secondly sometimes there are certain points which are not mentioned in examiner’s answers but if these points are correct then regardless whether they are mentioned in examiner’s answers or not , would we gain marks for writing those points or not?
Ok and would it be correct substantive procedures for directors bonus payments that
1)Compare bonus payments with budgets and investigate difference
2)Compare bonus payments with last year and investigate differenceSo rephrasing 1 and 2 it would be more appropriate to say that
2)Ask for a sample of IA reports of company that shows irregular transactions
1)Discuss with management and obtain details of controls implemented by company in response to fraud risks
Are these correct now?
Yes sir 5 components of internal control are Control environment,Risk assessment,Information system,Control procedures and monitoring
MonitoringBut as questions says that identify and explain FIVE components of an entity’s internal control for 5 marks.
So here as we know that each control would carry 1 mark.So I want to ask that
1) For Monitoring of controls if I write that it is a process to assess the effectiveness of internal controls over time and taking necessary remedial action. Management achieves monitoring of controls through ongoing activities, separate evaluations, or a combination of both. Would it be enough to score 1 full mark?
2) For entity’s risk assessment process if I write that it includes how management identifies business risks relevant to the preparation of financial statements in accordance with the entity’s applicable financial reporting framework. Would it be enough to score 1 full mark?