report and review

Q; what are the preconditions of the audit ? Q; matters included in the agreement of audit are the matters of the engagement letter?

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

Dear sir, In the modified opinion section under adverse/disclaimer opinions, the use of word 'pervasive' is evident. In understanding the word pervasive, I've read a statement saying "the effect of a matter confined could represent a SUBSTANTIAL proportion of the financial statements. Is there any specific criteria or percentage to judge whether a particular element is a substantial portion of the financial statements. Your reply would be of great help. Thanking you in advance.

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.