AF307 Project Draft

Before the initial audit begins, there are certain preconditions for the audit process to begin.
These
conditions are found under ISA 210 for paragraph 6. The two conditions required are:
The determination of the application financial reporting framework is acceptable
Confirming that the management acknowledges that its understands its responsibility as in
usage of applicable financial reporting framework, internal controls necessary for minimizing
material misstatement (due to fraud or error) in financial statements and to provide the
auditor with needed financial and non-financial information.
According to FEA 2015 annual report, it is shown that the management understand their
responsibility for financial statements in terms of internal control and preparing it according to
International Financial Reporting Standards (IFRSs) and the requirements of the Electricity Act
1966 (Cap 180).
A relevant used Electricity Act 1966 in our targeted report is:
Division 5 General Financial Provisions under section 24 in subsection 3, it is stated that the
copy of FEA statement of account to be hand over to the Minister with the copy of auditor
report on the audit financial statement.
Division 5 General Financial Provisions under section 25, it is mandatory that FEA to
prepare all it financial report for every passing of its financial accounting period.
According to ISA 200 under A2,it is stated that it is crucial for both managers and those deal with
governance must first acknowledged that they understand their responsibilities such in terms of
preparation of the financial statements in accordance with applicable financial framework and their
internal control. These facts were substantiated in our targeted organization (Fiji Electricity
Authority) report for 2015.
In relation to audit practice standard for financial reporting format, also according to ISA 200 under
A7 and A8 both demonstrate auditing standards for financial reporting frameworks. Under A7, it is
stated that financial reporting frameworks are fair presentation frameworks and others are
compliance frameworks. The purpose of these financial statements are to provide financial
information for specific users. Additionally according to A7, general purpose financial statements
are mandatory to use International Financial Reporting standards (IFRSs) approved by the
International Accounting Standards Board (IASB).
From the report we use, it shows that it implement a dozen of IFRSs but we focus on only 2 used
International Financial Reporting Standards:
IFRSs# 5: Non-current assets held for sale and discontinued operation.
According to this standard, one of the features it highlight is the measurement and disclosure
of non-current assets and disposal groups that are classified as held for sale. Under this
standard, it is shown that all non-current assets, either used in operation or going to be sold,
are all recorded at lower of carrying amount and fair value less costs to sell. According to
FEA 2015 annual report, the Financial statement of position regarding property, plant and
equipment are all recorded in such manner as further illustrated in Notes to and Forming
part of financial statements #11. Under Notes #11, it shows the calculation of all non-
current assets are recorded at its carrying amount (Original cost less accumulated
depreciation).
IFRS # 7: Financial Instruments Disclosures.
According to this standard, it also highlight the initial and subsequent measurement of
financial instruments. There are varying ways in which financial instruments can be
measured at and these measurements include fair value through profit or loss, amortization
cost and fair value via other comprehensive income. What is noted from FEA 2015 annual
report, it shows that financial assets measured and disclosed at fair value through profit or
loss but for financial assets not recorded at fair value via profit and loss will be fair value
plus transactional costs related with the acquisition of a given financial asset. In FEA 2015
annual report, it financial asset include of held to maturity financial assets which under
note #12 is a FEA deposits to ANZ bank with an annual interest of 0.2%.
In relation to A8 under the International Audit Standard, it further shown that the applicable
financial reporting framework must constitutes a complete set of financial statement. The main
purpose of these financial statements are to provide useful information to intended report users about
the targeted entity. Under A8, it is shown that a complete set of financial statements must comprised
of statement of financial position, statement of financial performance, income statement, statement
of financial changes in equity, cash flow and related notes for certain accounts for the previous
financial statements. According to FEA 2015 annual report, this standard is met.
Another relevant international auditing standard is ISA #250 that deals with responsibility for
compliance with laws and regulations. Under this standard, it states that for each different
organization financial report have different legal compliance. For our targeted organization FEA, it
is legally binding to follow strictly the Electricity Act 1966 (Cap 180).
Under this auditing standard, it is shown that it is the responsibility of management with the help of
people charged with governance to ensure that FEA daily operations are conducted according to the
provisions of laws and regulations which will determine certain reported amounts and disclosures in
its financial statements.
The auditors on the other hand, are responsible for making sure that the given financial statements
are free from fraud or error and are correctly given. Throughout the auditing process, the auditors
work closely with relevant legal and regulatory framework.
A relevant used Electricity Act 1966 in our targeted report are:
Division 5 General Financial Provisions under section 22 in subsection 1, it is stated that the
revenue received by FEA for any financial year should be in the remuneration, fees and
allowances of the members of FEA, the salaries, fees, remuneration, pensions,
superannuation allowances and gratuities of the officers, agents and servants and technical or
other advisers of the FEA. In FEA statement of comprehensive income for 2015, Personnel
costs payment is relevant with Division 5 section 22 subsection 1.
Additionally under Division 5 General Financial Provisions under section 23, it is stated that
Any funds of the Authority not immediately required to be expended in the meeting of any
obligation or the discharge of any functions of the FEA may be invested from time to time in
securities authorized for the time being for the investment of trust funds. Statement of
financial Position for 2015, a relevant account is short term deposits relevant with Cap 180
section 23. Under it notes, it is explained that this account it is a $20 million deposit in
Westpac Banking Corporation that will mature in three months which make it considered as
cash or cash equivalent.

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Before the initial audit begins, there are certain preconditions for the audit process to begin.

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