Discussed September 17 - Extract of ISA 570 - Wording Responsibilities of Management and Auditor Seperate
Discussed September 17 - Extract of ISA 570 - Wording Responsibilities of Management and Auditor Seperate
Discussed September 17 - Extract of ISA 570 - Wording Responsibilities of Management and Auditor Seperate
Illustration 1 – Unmodified Opinion When a Material Uncertainty Exists. Disclosure in the Financial
Statements Is Adequate and a Going Concern Section is included in the Auditor’s Report
For purposes of this illustrative auditor’s report, the following circumstances are assumed:
• Audit of a complete set of financial statements of a listed entity using a fair presentation framework.
The audit is not a group (i.e., ISA 6001 does not apply).
• The financial statements are prepared by management of the entity in accordance with IFRSs (a
general purpose reporting framework).
• The terms of the audit engagement reflect the description of management’s responsibility for the
financial statements in ISA 210 2.
• The auditor has concluded an unmodified (i.e., “clean”) opinion is appropriate based on the audit
evidence obtained.
• The relevant ethical requirements that apply to the audit of the financial statements are those of
the jurisdiction
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty exists
related to events or conditions that may cast doubt on the entity’s ability to continue as a going
concern. The disclosure of the material uncertainty in the financial statements is adequate.
• Key audit matters have been communicated in accordance with proposed ISA 701.
• Other information has been obtained at the date of the auditor’s report (i.e., proposed ISA 720
(Revised) applies).
• Those responsible for oversight of the financial statements differ from those responsible for the
preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities
required under local law.
1
ISA 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors
2
ISA 210, Agreeing the Terms of Audit Engagements
3
The sub-title “Report on the Audit of the Financial Statements” is unnecessary in circumstances when the second sub-title “Report
on Other Legal and Regulatory Requirements” is not applicable.
IAASB Main Meeting (September 2014)
As part of our audit, we conclude regarding the appropriateness of management’s use of the going concern
basis of accounting in the preparation of the financial statements in the context of the applicable financial
reporting framework. We also conclude, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in the auditor’s report to the disclosures in the financial statements about the material uncertainty
or, if such disclosures are inadequate, to modify the opinion on the financial statements. Our conclusions
are based on information available to us at the date of the auditor’s report. However, future events or
conditions may cause an entity to cease to continue as a going concern.
Other Information [or another title if appropriate such as “Information Other than the Financial
Statement and the Auditor’s Report Thereon]
[Reporting in accordance with proposed ISA 720 – see illustration 1 in proposed ISA 700 (Revised).]
Responsibilities of Management4 and Those Charged with Governance for the Financial Statements
With respect to these financial statements, management is responsible for their preparation and fair
presentation in accordance with IFRSs, 5 and such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
[Those charged with governance] are responsible for overseeing the Company’s financial reporting
process.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control.6
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
4
Throughout the illustrative auditor’s reports in the Proposed ISAs, the term management may need to be replaced by another
term that is appropriate in the context of the legal framework in the particular jurisdiction. For example, those charged with
governance, rather than management, may have these responsibilities.
5
Where management’s responsibility is to prepare financial statements that give a true and fair view, this may read: “Management
is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial
Reporting Standards, and for such ...”
6
This sentence would be modified, as appropriate, in circumstances when the auditor also has responsibility to issue an opinion
on the effectiveness of internal control in conjunction with the audit of the financial statements.
IAASB Main Meeting (September 2014)
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We are required to communicate with [those charged with governance] regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We are also required to provide [those charged with governance] with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with [those charged with governance], we are required to determine those
matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We are required to describe these matters in our auditor’s report unless
law or regulation preclude public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter that has not otherwise been publicly disclosed should not be communicated in our report
in view of the significance of the adverse consequences that can reasonably be expected to arise as a result of
such communication.