- This topic has 6 replies, 2 voices, and was last updated 2 years ago by
.
- Posts
Hello tutor, I am confused the answer of in past paper Mar/Jun 16.
Extract the answer:
Financial statements not yet issued
If the financial statements have not yet been issued, then the auditor has no active duty to
perform procedures (or make enquiries) during this period.Facts have come to light, however, that suggest that the financial statements should be amended. In this case, the auditor should enquire how management intends to address the errors in the financial statements that are issued. The auditor should assess the materiality of the misstatements, and should consider whether further audit procedures need to be performed as a result of discovering the misstatements.
If the financial statements are amended, then the auditor should perform extended procedures on the amendments, and issue a new auditor’s report on the amended financial statements.
Financial statements have been issued
Although the auditor has no active duty to perform procedures during this period, something has been discovered and the auditor should discuss with management how the misstatements are going to be addressed.If management then amends the financial statements, then a revised auditor’s report should be issued including an Emphasis of Matter paragraph discussing the amendment.
If management does not amend the financial statements but the auditor thinks that they should, then the auditor needs to take legal advice in the relevant national jurisdiction to prevent reliance on the auditor’s opinion.
This answer may be so long, I try to highlight the key words to be easy to follow but it didn’t work ==.
My question:
The answer choose the point of time that the Financial statement has been issued to determine the auditor’s duties.
+ If Financial statement not yet issued -> the auditor has no active duty to perform procedures during this period.
+ If Financial statements have been issued -> he auditor has no active duty to perform procedures during this period.It may be wrong, and it is conflicted when I reviews in the text book.
I see that, the auditor’s report is the point of time to determine the auditor’s duties.
+ Before auditor’s report -> Active duties
+ After auditor’s report -> Passive duties.Can you please to explain if the answer is right or wrong ?
I hope to receive your explanation in relation to my question. Thanks a lot !
Sequence of events is:
1. Directors sign FS (“authorise for issues”)
2. Auditor signs report – active duty ENDS – passive duty only from here on
3. FS issued (with auditor’s report thereon) typically at the AGMThe point the answer is considering is, that after 2 – what the auditor can DO about a matter coming to his attention (that his opinion on the FS may be wrong) depends on whether or not it has been issued. If not yet issued, the auditor may be able too prevent issue – or exercise the auditor’s right to “speak and be heard” at the AGM.
Of course in practice, there may be no delay between 1, 2 and 3 – 1 and 2 before lunch and the AGM after lunch (!)
oh oh, thanks your explanation which is so clear. But I still have a question about the answer in past paper.
+ If Financial statement not yet issued -> the auditor has no active duty to perform procedures during this period.
Point (1), I think it may be not correct as the financial statement has not yet issued, it doesn’t mean that auditor’s report has been issued. I think it should be divided into 2 small cases:
+ Case 1: Auditor’s report has not issued.
+ Case 2: Auditor’s report has issued
I think it will be clear the duties of auditor.I cannot look at an answer in isolation and I cannot find the question in the absence of further reference – please advise where you are seeing this answer and what is the question name.
oh, I just extracted the answer from BPP kit (52 Boston), you can also check the past paper Mar/Jun 16.
Extract from the answer
Financial statements not yet issued
If the financial statements have not yet been issued, then the auditor has no active duty to
perform procedures (or make enquiries) during this period. Facts have come to light, however, that suggest that the financial statements should be amended. In this case, the auditor should enquire how management intends to address the errors in the financial statements that are issued. The auditor should assess the materiality of the misstatements, and should consider whether further audit procedures need to be performed as a result of discovering the misstatements. If the financial statements are amended, then the auditor should perform extended procedures on the amendments, and issue a new auditor’s report on the amended financial statements.Financial statements have been issued
Although the auditor has no active duty to perform procedures during this period, something has been discovered and the auditor should discuss with management how the misstatements are going to be addressed. If management then amends the financial statements, then a revised auditor’s report should be issued including an Emphasis of Matter paragraph discussing the amendment. If management does not amend the financial statements but the auditor thinks that they should, then the auditor needs to take legal advice in the relevant national jurisdiction to prevent reliance on the auditor’s opinion.
I think BPP must have adapted the question as I cannot find a part in the original that would call for what is effectively “rote-learnt knolwedge”. I would expect the question to either indicate that the FS have been authorised for issue/auditor’s report signed or for this to have already been discussed earlier in the answer. I don’t have a BPP kit to hand as I’m not in my office today.
- You must be logged in to reply to this topic.