‭-‬

‭Accounting‬‭policies‬

‭Income‬‭-‬‭increase‬‭assets,‬‭decreases‬‭liabilities‬
‭Expenses‬‭-‬‭decreases‬‭assets,‬‭increases‬‭liabilities‬

‭Assets-‬‭present‬‭economic‬‭resource‬‭of‬‭entity‬‭as‬‭a‬‭result‬‭of‬‭past‬‭event‬
‭Liabilities‬‭-‬‭present‬‭obligation‬‭of‬‭entity‬‭to‬‭transfer‬‭economic‬‭resource‬‭as‬‭a‬‭result‬‭of‬‭past‬
‭event‬
‭Derecognise‬‭asset‬‭-‬‭lose‬‭control‬
‭Derecognise‬‭liability‬‭-‬‭no‬‭longer‬‭have‬‭a‬‭present‬‭obligation‬

‭Profit‬‭and‬‭loss‬‭should‬‭be‬‭primary‬‭source‬‭of‬‭information‬
‭-‬ ‭All‬‭income‬‭and‬‭expenses‬‭should‬‭go‬‭to‬‭profit‬‭and‬‭loss‬
‭-‬ ‭Go‬‭to‬‭OCI‬‭by‬‭exception‬‭if‬‭it‬‭provides‬‭more‬‭relevant‬‭information‬‭or‬‭more‬‭faithful‬
‭representation‬
‭-‬ ‭Items‬‭in‬‭OCI‬‭will‬‭be‬‭reclassified‬‭to‬‭profit‬‭and‬‭loss‬‭unless‬‭unable‬‭to‬‭determine‬
‭timing‬‭or‬‭amount.‬

‭IAS1‬‭-‬‭formats‬‭for‬‭classification‬‭and‬‭presentation‬‭of‬‭FS‬‭and‬‭disclosures‬
‭-‬ ‭International‬‭financial‬‭reporting‬‭standards‬‭(IFRS)‬
‭-‬ ‭Conceptual‬‭framework‬
‭-‬ ‭Individual‬‭items‬‭of‬‭income‬‭or‬‭expense‬‭which‬‭are‬‭material‬‭should‬‭be‬‭disclosed‬
‭separately.‬
‭-‬ ‭Impairment‬‭of‬‭assets‬‭is‬‭an‬‭example‬‭of‬‭circumstances‬‭which‬‭may‬‭warrant‬
‭separate‬‭disclosures.‬

‭IFRS18‬‭-‬‭presentation‬‭and‬‭disclosure‬‭statement‬
‭-‬ ‭Review‬‭profit‬‭and‬‭loss‬‭to‬‭ensure‬‭that‬‭income‬‭and‬‭expenses‬‭are‬‭appropriately‬
‭presented‬‭as‬‭operating,‬‭investing‬‭and‬‭financing‬
‭-‬ ‭Inspect‬‭supporting‬‭documents,‬‭such‬‭as‬‭invoices‬‭or‬‭contracts,‬‭for‬‭each‬‭category‬
‭of‬‭income‬‭and‬‭expense‬‭to‬‭ensure‬‭they‬‭have‬‭been‬‭correctly‬‭classified‬
‭-‬ ‭Review‬‭the‬‭prior‬‭year‬‭adjustments‬‭and‬‭comparatives‬‭to‬‭ensure‬‭they‬‭are‬
‭consistent‬‭with‬‭IFRS‬‭18‬‭presentation‬‭adopted‬‭in‬‭current‬‭year‬
 ‭-‬ ‭Discuss‬‭with‬‭management‬‭the‬‭basis‬‭for‬‭aggregation‬‭and‬‭disaggregation‬‭of‬
‭expenses‬‭on‬‭statement‬‭of‬‭profit‬‭or‬‭loss‬‭to‬‭ensure‬‭that‬‭items‬‭are‬‭aggregated‬‭(or‬
‭not)‬‭on‬‭the‬‭basis‬‭of‬‭shared‬‭characteristics‬‭so‬‭that‬‭the‬‭financial‬‭statements‬
‭provide‬‭the‬‭most‬‭useful‬‭structured‬‭summary‬
‭-‬ ‭If‬‭operating‬‭expenses‬‭have‬‭been‬‭classified‬‭by‬‭function,‬‭review‬‭the‬‭adequacy‬
‭and‬‭completeness‬‭of‬‭disclosure:‬‭depreciation,‬‭amortisation,‬‭employee‬‭benefits,‬
‭impairment‬‭losses‬‭/reversals,‬‭write‬‭down.‬‭Reversal‬‭of‬‭inventory‬
‭-‬ ‭Request‬‭a‬‭list‬‭of‬‭all‬‭management‬‭defined‬‭performance‬‭measures‬‭and‬‭discuss‬
‭with‬‭management‬‭to‬‭ensure‬‭that‬‭they‬‭meet‬‭the‬‭definition‬‭of‬‭MPM‬‭and‬
‭recalculate‬‭them‬‭for‬‭accuracy‬
‭-‬ ‭Review‬‭the‬‭disclosures‬‭of‬‭MPMs‬‭to‬‭ensure‬‭enough‬‭information‬‭about‬‭why‬‭the‬
‭MPM‬‭is‬‭reported,‬‭how‬‭it‬‭is‬‭calculated‬‭and‬‭how‬‭it‬‭reconciles‬‭to‬‭an‬‭IFRS‬‭defined‬
‭number‬‭has‬‭been‬‭disclosed.‬
‭-‬ ‭Obtain‬‭management‬‭representation‬‭on‬‭the‬‭adoption‬‭of‬‭IFRS‬‭18‬‭including‬‭their‬
‭basis‬‭for‬‭classifications‬‭of‬‭income‬‭and‬‭expenses‬‭disclosures‬‭relating‬‭to‬‭MPMs‬‭and‬
‭prior‬‭year‬‭restatement.‬

‭IAS‬‭2‬‭inventories‬
‭Are‬‭valued‬‭at‬‭lower‬‭of‬‭cost‬‭and‬‭net‬‭reliable‬‭value‬
‭-‬ ‭Nrv-‬‭selling‬‭price‬‭less‬‭selling‬‭costs‬
‭-‬ ‭Cost‬‭-‬‭include‬‭all‬‭costs‬‭of‬‭getting‬‭item‬‭to‬‭current‬‭location‬‭and‬‭condition‬
‭IAS7‬‭Statement‬‭of‬‭cash‬‭flows‬‭and‬‭cash‬‭equivalents‬
‭-‬ ‭Short‬‭term‬‭highly‬‭liquid‬‭investments‬
‭-‬ ‭Readily‬‭convertible‬‭into‬‭cash‬
‭-‬ ‭Insignificant‬‭risk‬‭of‬‭changes‬‭in‬‭value‬
‭-‬ ‭Can‬‭tell‬‭useful‬‭information‬‭about‬‭ability‬‭of‬‭business‬‭to‬‭generate‬‭cash‬‭and‬‭sources‬
‭and‬‭use‬‭of‬‭cash‬
‭-‬ ‭Ratio‬‭analysis‬‭help‬‭in‬‭interpretation‬

‭IAS8‬‭accounting‬‭policies,‬‭changes‬‭in‬‭accounting‬‭estimates‬‭and‬‭errors‬
‭-‬ ‭Accounting‬‭policies-‬‭principles‬‭applied‬‭by‬‭entity‬‭in‬‭presenting‬‭FS‬
‭-‬ ‭Should‬‭be‬‭consistent‬‭applied‬‭and‬‭disclosed‬
‭-‬ ‭Retrospective‬‭go‬‭back‬‭and‬‭adjust‬‭comparatives‬‭and‬‭opening‬‭balances‬
‭-‬ ‭Accounting‬‭errors-‬‭omissions‬‭or‬‭misstatements‬‭for‬‭prior‬‭period‬‭due‬‭to‬‭failure‬‭or‬
‭misuse‬‭of‬‭reliable‬‭information‬
 ‭-‬ ‭Retrospective‬
‭-‬ ‭Accounting‬‭estimates‬‭-‬‭monetary‬‭amounts‬‭in‬‭FS‬‭subject‬‭to‬‭measurement‬
‭uncertainty‬‭since‬‭it‬‭involves‬‭judgement‬‭and‬‭assumptions‬
‭-‬ ‭Prospective‬‭-‬‭adjust‬‭current‬‭and‬‭future‬

‭Material‬‭error‬‭in‬‭the‬‭FS‬‭must‬‭be‬‭adjusted‬‭retrospectively‬‭by‬‭amending‬‭comparatives‬
‭and‬‭restating‬‭retained‬‭earnings‬‭at‬‭the‬‭beginning‬‭of‬‭the‬‭earliest‬‭period‬‭present.‬
‭-‬ ‭adjustments‬‭not‬‭made‬‭in‬‭FS=‬‭FS‬‭will‬‭contain‬‭material‬‭misstatement,‬‭intangible‬
‭assets‬‭and‬‭retained‬‭earnings‬‭will‬‭both‬‭be‬‭overstated‬‭with‬‭implications‬‭for‬‭the‬
‭auditors‬‭report.‬
‭-‬
‭IAS10‬‭-‬‭events‬‭after‬‭reporting‬‭period‬
‭-‬ ‭Adjusting‬‭-‬‭evidence‬‭conditions‬‭at‬‭year‬‭end‬‭go‬‭back‬‭and‬‭adjust.‬‭If‬‭it‬‭affects‬
‭going‬‭concern‬‭it‬‭is‬‭adjusted.‬
‭-‬ ‭Non‬‭adjusting‬‭-‬‭evidence‬‭after‬‭year‬‭end‬‭,‬‭disclosed‬‭if‬‭material‬‭and‬‭effects‬

‭IAS12‬‭-‬‭income‬‭taxes‬
‭Deferred‬‭tax‬‭-‬‭tax‬‭attributable‬‭to‬‭temporary‬‭differences‬‭in‬‭timing‬‭of‬‭recognition‬‭of‬
‭income‬‭and‬‭expenses‬‭between‬‭IFRS‬‭and‬‭tax‬‭calculation‬
‭-‬ ‭Accounting‬‭for‬‭tax‬‭on‬‭accruals‬‭basis‬
‭-‬ ‭Calculated‬‭by‬‭applying‬‭applicable‬‭tax‬‭rate‬‭on‬‭temporary‬‭differences‬
‭-‬ ‭Cannot‬‭be‬‭discounted‬‭to‬‭present‬‭value‬
‭-assets‬‭and‬‭income‬‭-‬‭pay‬‭more‬‭tax‬‭in‬‭future‬‭-‬‭DTL‬
‭-liabilities‬‭and‬‭expenses-‬‭pay‬‭less‬‭tax‬‭in‬‭future‬‭-‬‭DTA‬
‭Initial‬‭recognition‬‭of‬‭goodwill‬‭is‬‭not‬‭recognised‬‭as‬‭DT.‬
‭-‬ ‭Is‬‭not‬‭mechanical‬‭and‬‭involves‬‭judgments‬‭and‬‭assumptions‬‭in‬‭measuring‬‭the‬
‭balance‬‭and‬‭evaluating‬‭its‬‭recoverability‬
‭-‬ ‭Unlikely‬‭that‬‭junior‬‭will‬‭have‬‭sufficient‬‭detailed‬‭knowledge‬‭of‬‭business‬‭and‬
‭its‬‭projected‬‭future‬‭trading‬‭profits‬‭to‬‭be‬‭able‬‭to‬‭competency‬‭assess‬‭the‬
‭deferred‬‭tax‬‭position‬
‭-‬ ‭Poses‬‭high‬‭audit‬‭risk‬‭and‬‭create‬‭ethical‬‭issue‬
‭-‬ ‭Should‬‭be‬‭assessed‬‭for‬‭materiality,‬‭carefully‬‭reviewed‬‭and‬‭reperformed‬
‭and‬‭discuss‬‭with‬‭management‬
‭-‬ ‭Auditor‬‭doing‬‭tax‬‭calculation‬‭→‬‭Self-review‬‭threat‬‭since‬‭the‬‭calculation‬‭forms‬
‭basis‬‭of‬‭tax‬‭payable‬‭in‬‭note‬‭&‬‭tax‬‭charge‬‭in‬‭P/L.‬
 ‭-‬ ‭The‬‭IESBA‬‭code‬‭of‬‭ethics‬‭says‬‭that‬‭the‬‭auditor‬‭should‬‭not‬‭prepare‬‭tax‬
‭calculations‬‭for‬‭listed‬‭clients.‬‭Threats‬‭to‬‭auditors‬‭objectivity‬‭and‬‭independence‬
‭which‬‭would‬‭be‬‭too‬‭high‬‭and‬‭no‬‭safeguards‬‭can‬‭lower‬‭threats‬‭to‬‭an‬‭acceptable‬
‭level.‬

‭IAS16-‬‭PPE‬
‭-‬ ‭Initial‬‭recognition‬‭at‬‭cost-‬‭all‬‭directly‬‭attributable‬‭costs‬‭including‬‭borrowing‬‭costs‬
‭-‬ ‭Subsequent‬‭recognition‬‭at‬‭cost‬‭or‬‭revaluation‬‭model‬
‭-‬ ‭Recognition‬‭criteria‬‭-‬‭measured‬‭reliably‬
‭-‬ ‭Probable‬‭future‬‭economic‬‭benefits‬‭will‬‭flow‬
‭-‬ ‭Depreciation‬‭starts‬‭when‬‭asset‬‭is‬‭available‬‭to‬‭use‬

‭IAS19‬‭-‬‭Employee‬‭Benefits‬
‭-‬ ‭Defined‬‭contribution‬‭plan‬‭-‬‭fixed‬‭input‬‭;‬‭variable‬‭output‬
‭-‬ ‭Defined‬‭benefit‬‭plan‬‭-‬‭variable‬‭inputs;‬‭fixed‬‭output‬
‭-‬ ‭Short‬‭term‬‭benefits‬‭-‬‭recognises‬‭as‬‭liability‬‭as‬‭employee‬‭renders‬‭services‬
‭-‬ ‭Paid‬‭within‬‭12‬‭months‬
‭-‬ ‭On‬‭accruals‬‭basis‬
‭-‬ ‭Not‬‭discounted‬
‭-‬ ‭Net‬‭pension‬‭amount‬‭cannot‬‭be‬‭more‬‭than‬‭its‬‭recoverable‬‭amount‬

‭IAS20‬‭Government‬‭grants‬
‭Recognition‬‭-‬‭reasonable‬‭assurance‬‭that‬‭entity‬‭will‬‭comply‬‭with‬‭any‬‭conditions‬
‭attached‬‭to‬‭grant‬‭and‬‭grant‬‭will‬‭be‬‭received‬
‭-‬ ‭Capital‬‭grant‬‭-‬‭assets‬
‭-‬ ‭1.‬‭Deferred‬‭income‬‭-‬‭released‬‭to‬‭profit‬‭and‬‭loss‬‭over‬‭life‬‭of‬‭grant‬
‭-‬ ‭2.‬‭Reduce‬‭asset‬‭cost‬‭by‬‭reducing‬‭grant‬‭against‬‭it‬
‭-‬ ‭Revenue‬‭grant‬‭-‬‭income‬
‭-‬ ‭1.‬‭Other‬‭income‬‭-‬‭cancels‬‭out‬‭expense‬‭with‬‭no‬‭effect‬‭on‬‭profit‬
‭-‬ ‭2.‬‭Reduce‬‭expense‬‭by‬‭reducing‬‭grant‬‭against‬‭it‬

‭IAS21‬‭Foreign‬‭currency‬‭transactions‬
‭-‬ ‭Functional‬‭currency‬‭-‬‭currency‬‭of‬‭primary‬‭economic‬‭environment‬‭in‬‭which‬‭entity‬
‭operates‬‭in‬
‭-‬ ‭Presentation‬‭currency‬‭-‬‭currency‬‭in‬‭which‬‭FS‬‭are‬‭presented‬
 ‭-‬ ‭Any‬‭exchange‬‭rate‬‭differences‬‭go‬‭to‬‭OCI‬
‭-‬ ‭Goodwill‬‭is‬‭calculated‬‭at‬‭acquisition‬‭and‬‭reviewed‬‭each‬‭year‬‭for‬‭impairment.‬

‭IAS23‬‭Borrowing‬‭Costs‬
‭-‬ ‭Expense‬‭in‬‭the‬‭profit‬‭or‬‭loss‬
‭-‬ ‭Can‬‭be‬‭capitalised‬‭for‬‭quantifying‬‭asset‬‭-‬‭takes‬‭a‬‭substantial‬‭amount‬‭of‬‭time‬‭to‬
‭be‬‭ready‬‭for‬‭its‬‭intended‬‭use‬
‭-‬ ‭Start‬‭capitalising‬‭-‬‭activities‬‭or‬‭borrowing‬‭costs‬‭start‬
‭-‬ ‭Stop‬‭capitalising‬‭-‬‭before,‬‭after‬‭and‬‭suspended‬‭construction.‬

‭IAS‬‭24:‬‭Related‬‭parties‬

‭●‬ ‭Person‬‭→‬‭control,‬‭joint‬‭control,‬‭significant‬‭influence,‬‭key‬‭management‬
‭●‬ ‭Entity‬‭→‬‭member‬‭of‬‭same‬‭group,‬‭post-employment‬‭benefit‬‭plan‬
‭●‬ ‭Related‬‭Parties‬‭transactions‬‭are‬‭material‬‭by‬‭nature‬‭&‬‭should‬‭be‬‭disclosed‬
‭●‬ ‭No‬‭disclosure‬‭is‬‭required‬‭for‬‭intragroup‬‭transactions‬‭in‬‭consolidation‬
‭●‬ ‭IFRS‬‭Practice‬‭Statement‬‭gives‬‭guidance‬‭in‬‭making‬‭material‬‭judgements‬‭on‬
‭disclosures‬

‭IAS‬‭28‬‭Investment‬‭in‬‭associates‬‭and‬‭joint‬‭ventures‬

‭●‬ ‭Subsidiaries‬‭→‬‭more‬‭than‬‭50%‬‭of‬‭share‬‭capital‬‭→‬‭control‬
‭○‬ ‭Consolidation‬‭in‬‭full‬
‭○‬ ‭Intragroup‬‭transactions‬‭are‬‭eliminated‬

‭●‬ ‭Associates‬‭→‬‭20%‬‭≤‬‭50%‬‭of‬‭share‬‭capital‬‭→‬‭significant‬‭influence‬
‭○‬ ‭Not‬‭consolidated‬‭→‬‭accounted‬‭using‬‭equity‬‭method‬
‭○‬ ‭Intragroup‬‭transactions‬‭are‬‭not‬‭eliminated‬

‭IAS‬‭32‬‭Financial‬‭instruments‬‭-‬‭presentation‬

‭●‬ ‭Financial‬‭Assets‬‭→‬‭purchased‬‭/‬‭acquired‬
‭●‬ ‭Financial‬‭Liability‬‭→‬‭issued‬‭+‬‭no‬‭realistic‬‭alternative‬
‭●‬ ‭Equity‬‭→‬‭issued‬
 ‭●‬ ‭Measurement‬‭(Initial)‬‭→‬‭fair‬‭value‬‭+‬‭transaction‬‭costs‬
‭Subsequent‬‭measurement‬‭→‬‭amortised‬‭cost‬‭or‬‭fair‬‭value‬‭depending‬‭on‬
‭instrument‬
‭●‬ ‭Short‬‭term‬‭shares‬‭→‬‭FV‬‭through‬‭P+L‬
‭●‬ ‭Impairment‬‭of‬‭FA‬‭→‬‭remeasured‬‭at‬‭FV‬‭&‬‭impair‬‭themselves‬

‭IAS‬‭36‬‭→‬‭Impairment‬‭of‬‭Assets‬

‭●‬ ‭Impairment‬‭test‬‭done‬‭if‬‭there‬‭is‬‭an‬‭impairment‬‭indicator‬
‭○‬ ‭External‬‭indicators‬‭→‬‭fall‬‭in‬‭market‬‭value,‬‭adverse‬‭changes‬
‭○‬ ‭Internal‬‭indicators‬‭→‬‭physical‬‭damage,‬‭performance‬‭worse‬
‭●‬ ‭Impairment‬‭=‬‭carrying‬‭amount‬‭≥‬‭recoverable‬‭amount‬
‭●‬ ‭Annual‬‭impairment‬‭test‬‭required‬‭even‬‭if‬‭no‬‭indicator‬‭for:‬
‭○‬ ‭Goodwill,‬‭intangible‬‭not‬‭ready‬‭for‬‭use,‬‭or‬‭indefinite‬‭useful‬‭life‬
‭●‬ ‭Cashflows‬‭cannot‬‭be‬‭measured‬‭reliably‬‭→‬‭cash-generating‬‭unit‬
‭●‬ ‭Individual‬‭assets‬‭cannot‬‭be‬‭written‬‭down‬‭below‬‭recoverable‬‭amount‬
‭●‬ ‭Impairment‬‭loss‬‭reversal‬‭is‬‭permitted‬‭if‬‭recoverable‬‭amount‬‭increases‬‭and‬‭is‬
‭higher‬‭of‬‭recoverable‬‭&‬‭carrying‬‭amount‬
‭○‬ ‭Goodwill‬‭can‬‭never‬‭be‬‭reversed‬
‭●‬ ‭Impairment‬‭losses‬‭are‬‭charged‬‭to‬‭profit‬‭+‬‭loss‬
‭●‬ ‭Asset‬‭previously‬‭revalued‬‭→‬‭impairments‬‭are‬‭charged‬‭to‬‭OCI‬‭until‬‭the‬
‭revaluation‬‭reserve‬‭relating‬‭to‬‭asset‬‭is‬‭reduced‬‭to‬‭nil.‬

‭IAS‬‭37‬‭→‬‭Provisions‬

‭●‬ ‭Recognised‬‭at‬‭present‬‭value‬‭of‬‭best‬‭estimate‬‭of‬‭outflow‬‭required‬
‭●‬ ‭Need:‬

‭○‬ ‭Present‬‭obligation‬
‭○‬ ‭Reliable‬‭measure‬
‭○‬ ‭Probable‬‭outflow‬‭of‬‭economic‬‭benefits‬
‭■‬ ‭contingent‬‭liability‬
‭■‬ ‭→‬‭possible‬‭=‬‭disclose‬‭in‬‭notes‬
‭■‬ ‭Contingent‬‭Asset‬
‭■‬ ‭→‬‭certain‬‭=‬‭recognise‬
‭■‬ ‭→‬‭probable‬‭=‬‭disclosure‬
‭■‬ ‭→‬‭possible‬‭=‬‭nothing‬
‭Provision‬‭for‬‭restructuring‬‭:‬

‭●‬ ‭Detailed‬‭formal‬‭plan‬
‭●‬ ‭Valid‬‭expectation‬‭made‬
‭●‬ ‭Only‬‭direct‬‭expenditure‬

‭Provision‬‭of‬‭loss-making‬‭contract‬‭(onerous)‬‭→‬‭for‬‭unavoidable‬‭costs‬
‭No‬‭provision‬‭for‬‭→‬‭retraining,‬‭reallocation,‬‭marketing,‬‭investments‬‭in‬‭new‬‭systems,‬‭future‬
‭operating‬‭losses‬

‭A‬‭provision‬‭should‬‭be‬‭recognised‬‭if‬‭there‬‭is‬‭a‬

‭-‬ ‭Present‬‭obligation‬‭as‬‭a‬‭result‬‭of‬‭past‬‭event‬
‭-‬ ‭A‬‭probable‬‭outflow‬‭of‬‭economic‬‭benefits‬
‭-‬ ‭Reliable‬‭estimates‬‭can‬‭be‬‭made.‬
‭-‬ ‭A‬‭provision‬‭which‬‭is‬‭not‬‭appropriately‬‭recognised-‬‭overstated‬‭profit‬‭and‬
‭understated‬‭liabilities.‬
‭-‬ ‭Risk‬‭that‬‭contingent‬‭liabilities‬‭have‬‭not‬‭been‬‭disclosed‬‭accurately‬‭and‬
‭completely‬‭-‬‭fines‬‭for‬‭non‬‭compliance,‬‭recognised‬‭as‬‭a‬‭provision‬‭or‬‭contingent‬
‭liabilities.‬‭Evidence‬‭-‬‭review‬‭draft‬‭disclosure‬‭notes‬‭to‬‭FS‬‭where‬‭provisions‬‭and‬
‭contingent‬‭liabilities‬‭have‬‭been‬‭discussed.‬

‭IAS‬‭38:‬‭Intangible‬‭assets‬

‭●‬ ‭Can‬‭control,‬‭right‬‭to‬‭future‬‭economic‬‭benefits,‬‭arises‬‭from‬‭contractual‬‭/‬‭legal‬
‭rights‬
‭●‬ ‭Recognition‬‭:‬‭measured‬‭reliably‬‭+‬‭probable‬‭future‬‭economic‬‭benefits‬
‭●‬ ‭Initial‬‭→‬‭cost‬
‭●‬ ‭Subsequent‬‭→‬‭cost‬‭or‬‭revaluation‬‭model‬
‭●‬ ‭Rare:‬‭since‬‭only‬‭by‬‭reference‬‭of‬‭active‬‭market‬‭&‬‭if‬‭IA‬‭are‬‭unique‬
‭●‬ ‭Acquired‬‭through‬‭business‬‭combination‬‭→‬‭fair‬‭value‬
‭●‬ ‭Capitalisation‬‭→‬‭all‬‭criteria‬‭need‬‭to‬‭be‬‭met:‬
‭Probable‬‭future‬‭economic‬‭benefits‬
‭Intention‬‭to‬‭use‬‭/‬‭sell‬‭assets‬
‭Resources‬‭available‬‭to‬‭use‬‭/‬‭sell‬‭assets‬
‭Ability‬‭to‬‭use‬‭/‬‭sell‬
 ‭Technical‬‭feasibility‬
‭Expenditure‬‭can‬‭be‬‭measured‬‭reliably‬

‭●‬ ‭Never‬‭capitalise‬‭→‬‭internally‬‭generated,‬‭start-up‬‭costs,‬‭training,‬‭advertising,‬
‭relocations‬

‭Amortisation‬

‭●‬ ‭Finite‬‭useful‬‭life‬‭→‬‭amortise‬‭over‬‭useful‬‭life‬
‭●‬ ‭Indefinite‬‭useful‬‭life‬‭→‬‭no‬‭amortisation‬‭→‬‭test‬‭yearly‬‭for‬‭impairment‬
‭Research‬‭-‬‭Expensed‬
‭Development-‬‭under‬‭IAS38‬

‭IAS‬‭40:‬‭Investment‬‭property‬

‭●‬ ‭Initial‬‭recognition‬‭→‬‭at‬‭cost‬
‭●‬ ‭Subsequent‬‭recognition‬‭→‬‭at‬‭cost‬‭or‬‭revaluation‬‭model‬
‭○‬ ‭Less‬‭depreciation‬‭→‬‭no‬‭depreciation‬

‭IAS‬‭41:‬‭Agriculture‬

‭●‬ ‭Biological‬‭asset‬‭→‬‭fair‬‭value‬‭less‬‭costs‬‭to‬‭sell‬
‭●‬ ‭Agricultural‬‭produce‬‭→‬‭fair‬‭value‬‭less‬‭costs‬‭to‬‭sell‬‭@‬‭point‬‭of‬‭harvest‬
‭○‬ ‭Inventories‬‭once‬‭harvested‬

‭IFRS‬‭2:‬‭Share‬‭Based‬‭Payment‬

‭●‬ ‭Recognise‬‭over‬‭vesting‬‭period‬‭determined‬‭by‬‭vesting‬‭conditions‬
‭●‬ ‭No‬‭vesting‬‭conditions‬‭→‬‭expense‬‭immediately‬‭through‬‭P+L‬
‭●‬ ‭Measured‬‭at‬‭fair‬‭value‬
‭○‬ ‭Performance‬‭conditions‬‭→‬‭update‬‭vesting‬‭conditions‬
‭Market‬‭conditions‬‭→‬‭ignore‬‭since‬‭already‬‭considered‬‭in‬‭FV‬
‭●‬ ‭Cancellations‬‭→‬‭expense‬‭amount‬‭in‬‭P+L‬‭→‬‭Dr‬‭Expense‬
‭●‬ ‭Settlement‬‭→‬‭treat‬‭as‬‭repurchase‬‭of‬‭equity‬‭→‬‭Dr‬‭Equity‬
‭●‬ ‭Equity‬‭settled‬‭-‬‭at‬‭grant‬‭date‬‭@‬‭fair‬‭value‬
‭●‬ ‭Cash‬‭settled‬‭-‬‭at‬‭each‬‭reporting‬‭date‬‭until‬‭settlement‬‭@‬‭fair‬‭value‬

‭IFRS‬‭15:‬‭Revenue‬
 ‭●‬ ‭Recognise‬‭revenue‬‭as‬‭each‬‭performance‬‭obligation‬‭is‬‭satisfied‬
‭○‬ ‭Overtime‬‭→‬‭customer‬‭simultaneously‬‭receives‬‭&‬‭consumes‬‭benefits‬
‭Dr‬‭Accrued‬‭income‬‭/‬‭Cr‬‭Revenue‬
‭○‬ ‭At‬‭point‬‭in‬‭time‬‭→‬‭recognised‬‭when‬‭control‬‭&‬‭risk‬‭&‬‭rewards‬‭are‬
‭transferred‬‭→‬‭Dr‬‭Cash‬‭/‬‭Cr‬‭Revenue‬

‭●‬ ‭Costs‬‭capitalised‬‭if‬‭incremental‬‭costs‬‭of‬‭obtaining‬‭contract‬‭if:‬
‭○‬ ‭Expected‬‭to‬‭be‬‭recovered‬
‭○‬ ‭Can‬‭be‬‭specifically‬‭identified‬
‭○‬ ‭Generate‬‭resources‬‭to‬‭satisfy‬‭performance‬‭obligation‬

‭●‬ ‭Warranties‬‭→‬‭separate‬‭performance‬‭obligation‬
‭○‬ ‭Recognised‬‭as‬‭revenue‬‭if‬‭it‬‭can‬‭be‬‭purchased‬‭separately‬
‭○‬ ‭Recognised‬‭as‬‭provision‬‭if‬‭cannot‬‭be‬‭purchased‬‭separately‬

‭●‬ ‭Sale‬‭with‬‭right‬‭to‬‭return‬‭:‬

‭○‬ ‭Recognise‬‭cash,‬‭refund‬‭liability‬‭&‬‭asset‬
‭○‬ ‭Refund‬‭lapses‬‭→‬‭derecognise‬‭refund‬‭liability,‬‭recognise‬‭revenue‬

‭●‬ ‭Paid‬‭upfront,‬‭not‬‭performed‬‭→‬‭contract‬‭liability‬
‭●‬ ‭Performed‬‭but‬‭not‬‭paid‬‭→‬‭contract‬‭asset‬
‭●‬ ‭Consignment‬‭arrangements‬‭→‬‭control‬‭of‬‭goods‬‭do‬‭not‬‭pass‬‭to‬‭third‬‭party‬‭but‬
‭remains‬‭in‬‭accounting‬‭records‬‭of‬‭seller‬
‭○‬ ‭Recognised‬‭as‬‭revenue‬‭once‬‭control‬‭passes‬
‭○‬
‭●‬ ‭Consignment‬‭stock‬‭arrangement‬
‭○‬ ‭Risk‬‭of‬‭recognising‬‭revenue‬‭too‬‭early.‬‭Revenue‬‭is‬‭only‬‭recognised‬‭when‬
‭control‬‭of‬‭goods‬‭transfers‬‭to‬‭the‬‭customer.‬‭Control‬‭remains‬‭with‬‭the‬
‭consignor‬‭(supplier)‬‭until‬‭the‬‭consignee‬‭sells‬‭the‬‭goods‬‭to‬‭the‬‭end‬
‭customer.‬‭Revenue‬‭recognised‬‭early‬‭-‬‭overstatement‬‭of‬‭profit‬‭and‬
‭understated‬‭inventory.‬

‭IFRS‬‭3:‬‭Business‬‭Combinations‬

‭●‬ ‭Transaction‬‭in‬‭which‬‭entity‬‭obtains‬‭control‬‭of‬‭one‬‭or‬‭more‬‭businesses‬
 ‭●‬ ‭Acquisition‬‭method‬‭must‬‭be‬‭applied:‬
‭1.‬ ‭Recognise‬‭&‬‭measure‬‭identified‬‭assets/liabilities‬‭acquired‬‭&‬‭NCI‬
‭2.‬ ‭Recognise‬‭&‬‭measure‬‭Goodwill‬

‭IFRS‬‭5:‬‭Discontinued‬‭operations‬

‭●‬ ‭Disposed‬‭or‬‭held‬‭for‬‭sale‬
‭●‬ ‭Represents‬‭a‬‭separate‬‭major‬‭line‬‭of‬‭business‬‭or‬‭geographical‬‭area‬
‭●‬ ‭Consolidated‬‭but‬‭in‬‭a‬‭separate‬‭line‬‭from‬‭continuing‬‭operations‬

‭Assets‬‭held‬‭for‬‭sale‬

‭●‬ ‭Available‬‭for‬‭immediate‬‭sale‬‭in‬‭present‬‭condition‬
‭●‬ ‭Separate‬‭line‬‭in‬‭SOFP‬
‭●‬ ‭Assets‬‭not‬‭depreciated‬
‭●‬ ‭Sale‬‭needs‬‭to‬‭be‬‭highly‬‭probable‬‭→‬‭if‬‭so:‬
‭○‬ ‭Move‬‭out‬‭of‬‭PPE‬‭→‬‭include‬‭for‬‭sale‬
‭○‬ ‭Any‬‭loss‬‭recognised‬‭in‬‭P+L‬‭as‬‭impairment‬

‭IFRS‬‭8:‬‭Operating‬‭segments‬

‭●‬ ‭Disclose‬‭segment‬‭separately‬‭if‬‭it‬‭represents‬‭10%‬‭or‬‭more‬‭of:‬
‭○‬ ‭Total‬‭assets‬‭or‬‭total‬‭revenues‬

‭IFRS‬‭10:‬‭Consolidated‬‭Financial‬‭Statements‬

‭●‬ ‭Investments‬‭in‬‭subsidiaries,‬‭associates‬‭or‬‭joint‬‭ventures‬‭are‬‭accounted‬‭for‬‭in‬‭the‬
‭investor’s‬‭own‬‭books:‬

‭○‬ ‭@‬‭cost‬
‭○‬ ‭@‬‭fair‬‭value‬
‭○‬ ‭@‬‭using‬‭equity‬‭method‬

‭●‬ ‭The‬‭parent‬‭cannot‬‭exclude‬‭the‬‭subsidiary‬‭from‬‭consolidation.‬
‭IFRS‬‭11:‬‭Joint‬‭arrangements‬‭→‬‭two‬‭or‬‭more‬‭parties‬‭have‬‭joint‬‭control‬

‭●‬ ‭Joint‬‭operations‬‭→‬‭rights‬‭to‬‭assets‬‭&‬‭obligations‬‭to‬‭liabilities‬
‭○‬ ‭Accounted‬‭based‬‭on‬‭relevant‬‭share‬
‭○‬ ‭No‬‭adjustment‬‭required‬‭on‬‭consolidation‬
‭-‬ ‭Joint‬‭venture‬‭→‬‭rights‬‭to‬‭net‬‭assets‬
‭●‬ ‭Accounted‬‭using‬‭equity‬‭method‬‭in‬‭consolidated‬‭financial‬‭statements‬

‭IFRS‬‭16:‬‭Lessee‬‭Accounting‬

‭●‬ ‭Depreciate‬‭at‬‭earlier‬‭of‬‭useful‬‭life‬‭&‬‭lease‬‭term‬
‭●‬ ‭Exemptions‬‭→‬‭short-term‬‭leases‬‭&‬‭asset‬‭of‬‭low‬‭value‬
‭●‬ ‭Recognise‬‭lease‬‭liability‬‭&‬‭right‬‭of‬‭use‬‭asset‬
‭Finance‬‭lease‬‭→‬‭transfers‬‭all‬‭risks‬‭&‬‭rewards‬‭of‬‭ownership‬
‭○‬ ‭Derecognised‬‭from‬‭lessor’s‬‭books‬
‭○‬ ‭Replaced‬‭with‬‭lease‬‭receivable‬
‭●‬ ‭Operating‬‭lease‬‭→‬‭does‬‭not‬‭transfer‬‭all‬‭risks‬‭&‬‭rewards‬‭of‬‭asset‬
‭○‬ ‭Asset‬‭is‬‭retained‬‭in‬‭books‬‭of‬‭lessor‬‭&‬‭depreciated‬‭over‬‭useful‬‭life‬

‭IAS‬‭33:‬‭EPS‬

‭●‬ ‭Bonus‬‭issue‬‭→‬‭treat‬‭as‬‭if‬‭it‬‭had‬‭always‬‭been‬‭in‬‭issue‬
‭-‬ ‭Restate‬‭comparative‬‭EPS‬
‭●‬ ‭Rights‬‭issue‬‭→‬‭treat‬‭partly‬‭as‬‭bonus‬‭issue,‬‭partly‬‭as‬‭issue‬‭at‬‭full‬‭market‬‭price‬

‭IFRS‬‭1:‬‭First‬‭time‬‭adoption‬‭of‬‭IFRS‬

‭1.‬ ‭Recognise‬‭assets‬‭&‬‭liabilities‬‭according‬‭to‬‭IFRS‬‭standards‬
‭2.‬ ‭Derecognise‬‭assets‬‭&‬‭liabilities‬‭that‬‭do‬‭not‬‭comply‬
‭3.‬ ‭Measure‬‭A‬‭&‬‭L‬‭according‬‭to‬‭IFRS‬‭standards‬
‭4.‬ ‭Classify‬‭according‬‭to‬‭IFRS‬‭standards‬
‭●‬ ‭Gains‬‭&‬‭losses‬‭arising‬‭at‬‭date‬‭of‬‭transition‬‭are‬‭recorded‬‭in‬‭Retained‬‭earnings‬

‭4‬‭Materiality‬‭judgement‬‭steps‬‭:‬

‭1.‬ ‭Identify‬‭any‬‭potential‬‭material‬‭items‬
‭2.‬ ‭Assess‬‭materiality‬‭from‬‭quantitative‬‭&‬‭qualitative‬‭view‬
‭3.‬ ‭Organise‬‭in‬‭a‬‭sensible‬‭way‬‭so‬‭that‬‭items‬‭are‬‭shown‬‭clearly‬
 ‭4.‬ ‭Review‬‭FS‬‭as‬‭a‬‭whole‬‭once‬‭prepared‬

‭Risks‬‭of‬‭misstatement‬‭in‬‭FS‬‭arising‬‭from‬‭environmental‬‭matters‬

‭●‬ ‭IAS‬‭37‬‭→‬‭Provision‬‭may‬‭be‬‭required‬‭to‬‭cover‬‭environmental‬‭damage‬‭&‬‭costs‬‭of‬
‭restoration‬
‭●‬ ‭IAS‬‭16‬‭→‬‭Decommissioning‬‭costs‬‭should‬‭be‬‭capitalised‬‭on‬‭initial‬‭recognition‬
‭IFRS‬‭3‬‭→‬‭In‬‭a‬‭business‬‭combination,‬‭contingent‬‭liabilities‬‭for‬‭environmental‬
‭damage‬‭must‬‭be‬‭recognised‬‭as‬‭provision‬
‭●‬ ‭IAS‬‭36‬‭→‬‭Environmental‬‭damage‬‭may‬‭result‬‭in‬‭impairment‬‭of‬‭assets‬

‭Auditor’s‬‭responsibility‬‭for‬‭subsequent‬‭events‬‭ISA560‬

‭●‬ ‭Before‬‭date‬‭of‬‭auditor’s‬‭report‬‭→‬‭proactive‬‭duty‬‭to‬‭identify‬
‭●‬ ‭After‬‭date‬‭of‬‭auditor’s‬‭report‬‭→‬‭duty‬‭to‬‭only‬‭respond‬‭to‬‭facts‬‭which‬‭become‬
‭known‬

‭(After‬‭financial‬‭year‬‭end‬‭but‬‭before‬‭audit‬‭report,‬‭anything‬‭after‬‭audit‬‭report‬‭are‬
‭management’s‬‭responsibility)‬

‭Mistake‬‭in‬‭previous‬‭year’s‬‭audit‬

‭-‬ ‭Audit‬‭firms‬‭may‬‭be‬‭reluctant‬‭to‬‭request‬‭an‬‭adjustment‬‭to‬‭be‬‭made‬‭in‬‭last‬‭year’s‬
‭financial‬‭statements‬‭as‬‭this‬‭will‬‭amount‬‭to‬‭an‬‭admission‬‭of‬‭negligence‬‭while‬
‭performing‬‭the‬‭prior‬‭year’s‬‭audit‬‭which‬‭may‬‭lead‬‭to‬‭legal‬‭action‬‭being‬‭taken‬
‭against‬‭the‬‭firm.‬
‭-‬ ‭Disclosure‬‭to‬‭client‬‭must‬‭be‬‭made‬‭in‬‭interest‬‭of‬‭professionalism‬‭and‬
‭integrity‬
‭-‬ ‭Audit‬‭should‬‭include‬‭procedures‬‭to‬‭ensure‬‭that‬‭prior‬‭year‬‭adjustments‬‭has‬‭been‬
‭properly‬‭made‬‭and‬‭relevant‬‭disclosures‬‭have‬‭been‬‭given‬‭in‬‭notes‬‭of‬‭FS.‬
‭-‬ ‭Raises‬‭doubts‬‭about‬‭the‬‭quality‬‭control‬‭procedures‬‭which‬‭were‬‭applied‬‭to‬‭last‬
‭years‬‭audit.‬
‭-‬ ‭Consider‬‭a‬‭detailed‬‭review‬‭of‬‭last‬‭year’s‬‭audit‬‭to‬‭understand‬‭how‬‭a‬
‭material‬‭balance‬‭could‬‭have‬‭been‬‭left‬‭unaudited.‬
‭-‬ ‭Proper‬‭review‬‭procedures‬‭did‬‭not‬‭take‬‭place‬
‭-‬ ‭Audit‬‭was‬‭not‬‭properly‬‭directed‬‭and‬‭supervised‬
 ‭-‬ ‭Consider‬‭if‬‭any‬‭other‬‭balances‬‭and‬‭transactions‬‭in‬‭prior‬‭year‬‭FS‬‭should‬‭be‬
‭reviewed.‬
‭-‬ ‭Audit’s‬‭quality‬‭control‬‭procedures‬‭as‬‭a‬‭whole‬‭should‬‭be‬‭reviewed‬‭to‬
‭ensure‬‭they‬‭are‬‭adequate‬‭and‬‭comply‬‭with‬‭ISQM‬‭1‬‭and‬‭ISA220‬

‭IFAC’s‬‭Code‬‭of‬‭Ethics‬

‭Significance‬‭of‬‭any‬‭threat‬‭to‬‭objectivity‬‭should‬‭be‬‭evaluated‬

‭●‬ ‭Safeguards‬‭applied‬‭when‬‭necessary‬‭→‬‭eliminate‬‭threat‬‭or‬‭reduce‬‭it‬‭to‬‭an‬
‭acceptable‬‭level‬
‭○‬ ‭If‬‭cannot‬‭be‬‭reduced‬‭to‬‭acceptable‬‭level‬‭→‬‭reject‬‭engagement‬

‭●‬ ‭Negotiating‬‭financial‬‭agreements‬‭on‬‭behalf‬‭of‬‭audit‬‭client‬
‭○‬ ‭Advocacy‬‭and‬‭self‬‭review‬‭threat‬‭to‬‭objectivity.‬
‭○‬ ‭Audit‬‭firm‬‭perceived‬‭as‬‭taking‬‭on‬‭a‬‭management‬‭role‬
‭○‬ ‭compromise‬‭independence‬

‭●‬ ‭Contingent‬‭fees‬‭(fees‬‭dependent‬‭on‬‭the‬‭outcome‬‭of‬‭the‬‭engagement)‬‭→‬‭not‬
‭allowed‬‭for‬‭audit‬‭engagements‬
‭○‬ ‭Self-interest‬‭threat‬‭to‬‭objectivity‬

‭Accountants‬‭are‬‭permitted‬‭to‬‭advertise‬‭subject‬‭to‬‭the‬‭requirements‬‭in‬‭the‬‭ACCA‬‭Code‬
‭of‬‭Ethics‬‭&‬‭Conduct‬‭that‬‭advert‬‭should‬‭not‬‭reflect‬‭adversely‬‭on‬‭the‬‭professional‬
‭accountant,‬‭ACCA‬‭or‬‭the‬‭accounting‬‭profession.‬

‭●‬ ‭Cannot‬‭suggest‬‭that‬‭other‬‭firms‬‭charge‬‭inappropriately‬‭high‬‭fees‬‭&‬‭that‬‭quality‬
‭of‬‭service‬‭is‬‭questionable.‬
‭●‬ ‭Cannot‬‭undervalue‬‭services‬‭offered‬‭by‬‭other‬‭professional‬‭accountants.‬
‭●‬ ‭Cannot‬‭imply‬‭our‬‭company‬‭offers‬‭superior‬‭services.‬

‭Misleading‬‭statements‬‭→‬‭unlikely‬‭to‬‭be‬‭one‬‭of‬‭the‬‭largest‬‭accountancy‬‭firms‬‭&‬‭offer‬‭the‬
‭most‬‭comprehensive‬‭range‬‭of‬‭services‬‭→‬‭must‬‭be‬‭withdrawn‬‭from‬‭advertisement.‬
 ‭●‬ ‭Country‬‭is‬‭leading‬‭in‬‭tax‬‭teams‬‭→‬‭not‬‭possible‬‭to‬‭measure‬‭effectiveness‬‭of‬‭tax‬
‭teams‬‭&‬‭no‬‭such‬‭measure‬‭currently‬‭exists.‬
‭●‬ ‭To‬‭save‬‭client‬‭money‬‭→‬‭no‬‭such‬‭guarantees‬‭can‬‭be‬‭made‬‭since‬‭tax‬
‭professionals‬‭must‬‭apply‬‭relevant‬‭tax‬‭legislation‬‭in‬‭an‬‭objective‬‭manner.‬
‭○‬ ‭May‬‭lead‬‭to‬‭questions‬‭about‬‭professional‬‭behaviour‬‭of‬‭practitioners‬‭if‬‭the‬
‭regulations‬‭are‬‭not‬‭applied‬‭appropriately.‬

‭●‬ ‭Guaranteeing‬‭to‬‭be‬‭cheaper‬‭than‬‭other‬‭service‬‭provider:‬
‭○‬ ‭Lowballing-‬‭tempted‬‭to‬‭cut‬‭corners,‬‭reduce‬‭testing,‬‭or‬‭assign‬‭less‬
‭experienced‬‭staff‬‭-‬‭affect‬‭quality‬‭of‬‭audit‬
‭○‬ ‭Self-interest‬‭threat‬‭to‬‭objectivity‬
‭○‬ ‭Threaten‬‭professional‬‭competence‬‭&‬‭due‬‭care‬‭if‬‭practitioner‬‭is‬‭unable‬‭to‬
‭apply‬‭the‬‭appropriate‬‭professional‬‭standards‬‭for‬‭that‬‭level‬‭of‬‭fee.‬
‭○‬ ‭Offering‬‭services‬‭for‬‭free‬‭as‬‭part‬‭of‬‭promotion‬‭is‬‭not‬‭prohibited-‬‭as‬‭long‬‭as‬
‭independence,‬‭objectivity‬‭and‬‭professional‬‭competence‬‭are‬‭maintained,‬
‭and‬‭there’s‬‭no‬‭contingency‬‭based‬‭on‬‭the‬‭outcome.‬
‭○‬ ‭Increases‬‭threat‬‭to‬‭competence‬‭&‬‭due‬‭care‬‭if‬‭sufficient‬‭time‬‭&‬‭resources‬
‭are‬‭not‬‭allocated‬‭to‬‭the‬‭task.‬
‭○‬ ‭Advice‬‭services‬‭offered‬‭by‬‭audit‬‭firms‬‭as‬‭it‬‭may‬‭be‬‭perceived‬‭as‬‭being‬‭a‬
‭promotional‬‭tool‬‭as‬‭opposed‬‭to‬‭a‬‭professional‬‭service.‬
‭○‬ ‭Offer‬‭free‬‭evaluations‬‭→‬‭permitted‬‭&‬‭does‬‭not‬‭create‬‭any‬‭specific‬‭threat.‬
‭○‬ ‭Not‬‭permitted‬‭to‬‭use‬‭the‬‭term‬‭‘‬‭chartered‬‭certified‬‭accountants’‬‭because‬
‭less‬‭than‬‭50%‬‭of‬‭partners‬‭of‬‭the‬‭firm‬‭are‬‭ACCA‬‭members.‬

‭Internal‬‭audit‬
‭-‬ ‭ISA610-‬‭using‬‭the‬‭work‬‭of‬‭internal‬‭auditors‬‭contains‬‭requirements‬‭relating‬‭to‬‭the‬
‭evaluation‬‭of‬‭the‬‭internal‬‭audit‬‭function‬‭to‬‭determine‬‭in‬‭what‬‭areas,‬‭to‬‭what‬
‭extent,‬‭the‬‭work‬‭of‬‭internal‬‭audit‬‭can‬‭be‬‭used‬‭by‬‭external‬‭audit‬‭firm‬
‭-‬ ‭It‬‭is‬‭beneficial‬‭for‬‭company‬‭to‬‭use‬‭internal‬‭audit‬‭team‬‭as‬‭it‬‭may‬‭result‬‭in‬‭a‬‭more‬
‭efficient‬‭strategy‬
‭-‬ ‭Internal‬‭audit‬‭teams‬‭monitoring‬‭of‬‭controls‬‭should‬‭have‬‭resulted‬‭in‬‭a‬
‭strong‬‭control‬‭environment‬‭&‬‭less‬‭substantive‬‭procedures‬‭approach‬‭can‬
‭be‬‭used‬‭on‬‭audit.‬
 ‭-‬ ‭Internal‬‭audit‬‭team‬‭can‬‭provide‬‭external‬‭audit‬‭team‬‭with‬‭systems‬
‭documentation‬‭and‬‭information‬‭on‬‭control‬‭activities‬‭which‬‭have‬‭been‬
‭implemented‬
‭-‬ ‭Help‬‭audit‬‭firm‬‭to‬‭build‬‭knowledge‬‭and‬‭understanding‬‭of‬‭new‬‭audit‬‭client‬
‭-‬ ‭Audit‬‭firm‬‭may‬‭decide‬‭to‬‭rely‬‭on‬‭audit‬‭work‬‭performed‬‭by‬‭internal‬‭audit‬‭team‬
‭but‬‭there‬‭will‬‭be‬‭a‬‭limit‬‭to‬‭the‬‭amount‬‭of‬‭work‬‭that‬‭can‬‭be‬‭delegated‬‭to‬‭internal‬
‭audit‬
‭-‬ ‭Before‬‭deciding‬‭to‬‭what‬‭extent‬‭the‬‭work‬‭of‬‭internal‬‭audit‬‭can‬‭be‬‭used,‬
‭external‬‭auditor‬‭should‬‭evaluate‬‭various‬‭matters‬‭including:‬
‭-‬ ‭Extent‬‭to‬‭which‬‭the‬‭internal‬‭audits‬‭policies‬‭and‬‭procedures‬‭support‬
‭the‬‭objectivity‬‭of‬‭function‬
‭-‬ ‭Level‬‭of‬‭competence‬‭of‬‭internal‬‭audit‬‭team‬
‭-‬ ‭Whether‬‭internal‬‭audit‬‭function‬‭applies‬‭a‬‭systematic‬‭or‬‭disciplined‬
‭approach‬
‭-‬ ‭Audit‬‭firms‬‭should‬‭discuss‬‭the‬‭work‬‭of‬‭the‬‭team‬‭with‬‭management‬‭including‬‭the‬
‭level‬‭of‬‭supervision,‬‭review‬‭and‬‭documentation‬‭of‬‭work‬‭performed‬‭and‬‭review‬
‭qualifications‬‭held‬‭by‬‭members‬‭of‬‭the‬‭team.‬
‭-‬ ‭Internal‬‭audit‬‭team‬‭does‬‭report‬‭to‬‭an‬‭independent‬‭audit‬‭committee‬‭which‬‭may‬
‭reduce‬‭the‬‭reliance‬‭that‬‭can‬‭be‬‭placed‬‭on‬‭their‬‭work‬‭as‬‭it‬‭affects‬‭the‬‭objectivity‬
‭of‬‭work‬‭performed‬
‭-‬ ‭Audit‬‭committee‬‭requesting‬‭group‬‭audit‬‭fee‬‭to‬‭remain‬‭the‬‭same‬‭as‬‭last‬‭year‬‭is‬
‭an‬‭intimidation‬‭threat‬‭to‬‭objectivity‬
‭-‬ ‭Audit‬‭firm‬‭being‬‭pressured‬‭to‬‭reduce‬‭inappropriately‬‭extent‬‭of‬‭work‬
‭performed‬‭in‬‭order‬‭to‬‭reduce‬‭fees‬
‭-‬ ‭Audit‬‭fee‬‭will‬‭not‬‭necessarily‬‭be‬‭reduced‬‭by‬‭reliance‬‭on‬‭internal‬‭audit‬
‭-‬ ‭External‬‭audit‬‭firm‬‭may‬‭choose‬‭to‬‭place‬‭reliance‬‭on‬‭internal‬‭audit‬‭firm‬‭but‬‭only‬
‭after‬‭careful‬‭consideration‬‭of‬‭their‬‭competence‬‭and‬‭objectivity‬
‭-‬ ‭Communication‬‭between‬‭external‬‭and‬‭internal‬‭audit‬‭teams‬‭must‬‭be‬
‭carefully‬‭planned‬‭for.‬

‭Matters‬‭to‬‭be‬‭included‬‭in‬‭audit‬‭proposal‬
‭-‬ ‭Brief‬‭outline‬‭of‬‭audit‬‭firm‬
‭-‬ ‭Description‬‭of‬‭different‬‭services‬‭offered‬
‭-‬ ‭Outline‬‭of‬‭firms‬‭international‬‭locations‬
‭-‬ ‭Outline‬‭range‬‭of‬‭services‬‭provided‬
 ‭-‬ ‭Any‬‭specialism‬‭firm‬‭has‬‭in‬‭that‬‭industry‬
‭-‬ ‭Specialism‬‭of‬‭the‬‭company‬
‭-‬ ‭If‬‭company‬‭is‬‭in‬‭special‬‭industry,‬‭audit‬‭firm‬‭need‬‭to‬‭be‬‭specialised‬‭in‬
‭auditing‬‭of‬‭this‬‭sector‬
‭-‬ ‭needs‬‭to‬‭highlight‬‭that‬‭an‬‭experienced‬‭audit‬‭team‬‭can‬‭be‬‭assembled‬‭to‬
‭provide‬‭high‬‭quality‬‭audit.‬
‭-‬ ‭Identity‬‭audit‬‭requirements‬
‭-‬ ‭Outline‬‭the‬‭statutory‬‭audit‬‭requirements‬‭in‬‭country‬‭which‬‭firm‬‭is‬
‭incorporated‬
‭-‬ ‭Confirm‬‭that‬‭firm‬‭needs‬‭a‬‭full‬‭audit‬‭of‬‭FS‬
‭-‬ ‭Outline‬‭regulatory‬‭framework‬
‭-‬ ‭Outline‬‭duties‬‭of‬‭auditors‬‭and‬‭management‬‭in‬‭relation‬‭to‬‭audit‬
‭requirements‬
‭-‬ ‭Audit‬‭approach‬
‭-‬ ‭Description‬‭of‬‭proposed‬‭audit‬‭approach‬
‭-‬ ‭Outline‬‭stages‬‭of‬‭audit‬‭process‬
‭-‬ ‭Outline‬‭audit‬‭methodology‬‭used‬‭by‬‭firm‬
‭-‬ ‭Audit‬‭will‬‭be‬‭conducted‬‭in‬‭according‬‭with‬‭ISA‬
‭-‬ ‭Emphasize‬‭need‬‭to‬‭thorough‬‭testing‬‭of‬‭opening‬‭balances‬‭and‬
‭comparatives‬‭given‬‭if‬‭FS‬‭is‬‭first‬‭year‬‭will‬‭be‬‭audited‬
‭-‬ ‭Risk‬‭based‬‭nature‬‭of‬‭audit‬‭methodology‬‭explained‬
‭-‬ ‭Invoice‬‭assessment‬‭of‬‭accounting‬‭systems‬‭and‬‭internal‬‭controls‬
‭-‬ ‭Communications‬
‭-‬ ‭Audit‬‭team‬‭will‬‭require‬‭input‬‭from‬‭firms‬‭employees‬‭and‬‭need‬‭to‬‭make‬
‭themselves‬‭available‬‭to‬‭respond‬‭to‬‭audit‬‭firms‬‭requests‬‭for‬‭information‬
‭-‬ ‭Include‬‭an‬‭outline‬‭of‬‭various‬‭communications‬‭that‬‭will‬‭be‬‭made‬‭to‬‭those‬
‭charged‬‭with‬‭governance‬‭during‬‭audit‬‭process‬
‭-‬ ‭Highlight‬‭value‬‭added‬‭from‬‭such‬‭communications‬
‭-‬ ‭Deadlines‬
‭-‬ ‭Clarify‬‭timescale‬‭to‬‭be‬‭used‬‭for‬‭audit‬
‭-‬ ‭If‬‭timescale‬‭is‬‭reasonable‬‭with‬‭audit‬
‭-‬ ‭If‬‭timescale‬‭is‬‭not‬‭reasonable‬‭-‬‭audit‬‭firm‬‭may‬‭wish‬‭to‬‭propose‬‭a‬‭later‬‭date‬
‭emphasising‬‭that‬‭it‬‭is‬‭impossible‬‭to‬‭conduct‬‭a‬‭quality‬‭audit‬‭in‬‭such‬‭a‬‭short‬
‭time‬‭frame‬
‭-‬ ‭Additional‬‭non-audit‬‭and‬‭assurance‬‭services‬
 ‭-‬ ‭Audit‬‭proposal‬‭describe‬‭various‬‭non-audit‬‭and‬‭assurance‬‭related‬‭services‬
‭which‬‭audit‬‭firm‬‭will‬‭offer‬
‭-‬ ‭Clearly‬‭state‬‭that‬‭provision‬‭of‬‭such‬‭services‬‭is‬‭subject‬‭to‬‭meeting‬‭ethical‬
‭requirements‬‭and‬‭will‬‭be‬‭completely‬‭separate‬‭from‬‭audit‬‭service.‬
‭Corporate‬‭governance‬‭requirements‬‭may‬‭prohibit‬‭audit‬‭from‬‭from‬
‭offering‬‭this‬‭service‬
‭-‬ ‭It‬‭should‬‭be‬‭stated‬‭that‬‭these‬‭services‬‭can‬‭only‬‭be‬‭provided‬‭subject‬‭to‬
‭meeting‬‭the‬‭ethical‬‭requirements‬‭by‬‭which‬‭the‬‭firm‬‭is‬‭bound.‬‭Threats‬‭to‬
‭objectivity‬‭may‬‭be‬‭created.‬‭Safeguards‬‭must‬‭be‬‭outlined‬‭to‬‭reduce‬‭risks‬
‭to‬‭an‬‭acceptable‬‭level.‬
‭-‬ ‭Audit‬‭-‬‭related‬‭services‬‭may‬‭be‬‭required‬
‭-‬ ‭Listed‬‭status-‬‭additional‬‭audit‬‭work‬‭might‬‭want‬‭to‬‭be‬‭performed‬‭such‬‭as‬
‭reporting‬‭requirements‬‭relevant‬‭to‬‭corporate‬‭governance‬‭and‬‭internal‬
‭controls.‬

‭Matters‬‭considered‬‭to‬‭determine‬‭audit‬‭fee‬

‭-‬ ‭Cost‬‭of‬‭providing‬‭audit‬‭services‬
‭-‬ ‭Assessing‬‭number‬‭of‬‭seniority‬‭of‬‭audit‬‭team‬‭members‬
‭-‬ ‭Amount‬‭of‬‭time‬‭spent‬‭on‬‭audit‬
‭-‬ ‭Costs‬‭of‬‭audit‬‭experts‬‭engaged‬‭if‬‭necessary‬
‭-‬ ‭Standard‬‭charge‬‭audit‬‭rates‬‭used‬‭to‬‭estimate‬‭total‬‭fee‬
‭-‬ ‭Costs‬‭such‬‭as‬‭travel‬‭costs‬‭also‬‭needs‬‭to‬‭be‬‭considered‬
‭-‬ ‭Company‬‭wants‬‭low‬‭audit‬‭fee‬
‭-‬ ‭Can‬‭affect‬‭audit‬‭quality‬
‭-‬ ‭Audit‬‭firms‬‭could‬‭be‬‭tempted‬‭to‬‭cut‬‭corners‬‭and‬‭have‬‭insufficient‬‭audit‬
‭evidence‬‭to‬‭support‬‭audit‬‭opinion‬
‭-‬ ‭Save‬‭time‬‭in‬‭order‬‭to‬‭minimise‬‭costs‬‭of‬‭audit‬
‭-‬ ‭Lowballing‬‭-‬‭offering‬‭an‬‭unrealistic‬‭low‬‭audit‬‭fee‬‭which‬‭is‬‭below‬‭market‬
‭rate‬‭to‬‭win‬‭or‬‭retain‬‭clients.‬‭This‬‭is‬‭not‬‭prohibited‬‭but‬‭clients‬‭must‬‭not‬‭be‬
‭misled‬‭about‬‭the‬‭amount‬‭of‬‭work‬‭which‬‭will‬‭be‬‭performed‬‭and‬‭outputs‬‭of‬
‭the‬‭audit.‬‭Unlikely‬‭to‬‭be‬‭sustainable‬‭in‬‭the‬‭long‬‭run‬‭leading‬‭to‬‭unwelcome‬
‭fee‬‭increases‬‭in‬‭subsequent‬‭years.‬
‭-‬ ‭Audit‬‭fee‬‭linked‬‭with‬‭success‬‭of‬‭company‬
 ‭-‬ ‭Audit‬‭fee‬‭is‬‭being‬‭determined‬‭on‬‭contingent‬‭fee‬‭basis‬‭fees‬‭calculated‬‭on‬
‭a‬‭predetermined‬‭basis‬‭relating‬‭to‬‭the‬‭outcome‬‭of‬‭a‬‭transaction‬‭or‬‭services‬
‭performed.‬‭This‬‭creates‬‭a‬‭self‬‭interest‬‭threat‬‭which‬‭is‬‭so‬‭significant‬‭that‬‭no‬
‭safeguards‬‭could‬‭reduce‬‭the‬‭threat‬‭to‬‭an‬‭acceptable‬‭level.‬
‭-‬ ‭Should‬‭be‬‭determined‬‭by‬‭the‬‭level‬‭of‬‭audit‬‭work‬‭needed‬‭to‬‭be‬‭performed‬
‭and‬‭cannot‬‭be‬‭linked‬‭to‬‭success‬‭of‬‭the‬‭company‬‭or‬‭advice‬‭given‬‭to‬‭the‬
‭firm‬‭by‬‭its‬‭auditors.‬
‭-‬ ‭This‬‭should‬‭be‬‭determined‬‭by‬‭the‬‭grade‬‭of‬‭staff‬‭who‬‭make‬‭up‬‭the‬‭audit‬
‭team‬‭and‬‭time‬‭spent‬‭by‬‭each‬‭of‬‭them‬‭on‬‭audit.‬

‭Matters‬‭considered‬‭to‬‭considered‬‭before‬‭accepting‬‭additional‬‭engagement‬
‭-‬ ‭Terms‬‭of‬‭engagement‬‭should‬‭be‬‭in‬‭an‬‭engagement‬‭letter‬‭which‬‭is‬‭separate‬‭from‬
‭audit‬‭engagement‬‭letter‬
‭-‬ ‭Management‬‭responsibility‬
‭-‬ ‭Prepare‬‭the‬‭work‬‭including‬‭all‬‭assumption‬‭used‬
‭-‬ ‭Provide‬‭auditor‬‭with‬‭all‬‭relevant‬‭information‬‭and‬‭source‬‭data‬‭used‬‭in‬
‭developing‬‭assumptions‬
‭-‬ ‭Clarify‬‭roles‬‭of‬‭management‬‭and‬‭reduce‬‭scope‬‭of‬‭misunderstanding‬
‭-‬ ‭Intended‬‭use‬‭of‬‭the‬‭additional‬‭engagement‬
‭-‬ ‭Report‬‭distributed‬‭to‬‭third‬‭parties-‬‭establish‬‭potential‬‭liabilities‬‭of‬‭audit‬‭firm‬
‭to‬‭third‬‭parties‬‭and‬‭help‬‭determine‬‭need‬‭and‬‭extent‬‭of‬‭any‬‭liability‬
‭disclaimer‬‭that‬‭may‬‭be‬‭considered‬‭necessary‬
‭-‬ ‭Elements‬‭included‬‭in‬‭additional‬‭engagement‬
‭-‬ ‭Extent‬‭agreed‬‭to‬‭help‬‭determine‬‭the‬‭scope‬‭of‬‭work‬‭involved‬‭in‬‭and‬‭its‬
‭complexity‬
‭-‬ ‭Period‬‭needed‬‭to‬‭be‬‭covered‬
‭-‬ ‭Confirmed‬‭when‬‭agreeing‬‭terms‬‭of‬‭engagement‬
‭-‬ ‭More‬‭speculative‬‭as‬‭length‬‭of‬‭period‬‭covered‬‭increases‬‭and‬‭increase‬‭risk‬
‭of‬‭engagement‬
‭-‬ ‭Nature‬‭of‬‭assumptions‬
‭-‬ ‭Based‬‭on‬‭best‬‭estimates‬‭or‬‭are‬‭hypothetical‬
‭-‬ ‭ISAE3400-‬‭auditors‬‭should‬‭not‬‭accept‬‭or‬‭should‬‭withdraw‬‭from‬
‭engagement‬‭when‬‭assumptions‬‭are‬‭clearly‬‭unrealistic‬‭or‬‭when‬‭auditor‬
‭believes‬‭that‬‭the‬‭prospective‬‭financial‬‭information‬‭will‬‭be‬‭inappropriate‬
‭for‬‭its‬‭intended‬‭use‬
 ‭-‬ ‭Planned‬‭contents‬‭of‬‭assurance‬‭report‬
‭-‬ ‭Engagement‬‭letters‬‭should‬‭confirm‬‭planned‬‭elements‬‭to‬‭avoid‬
‭misunderstanding‬‭with‬‭engagement‬
‭-‬ ‭Contain‬‭negative‬‭assurance‬‭as‬‭to‬‭whether‬‭assumptions‬‭provide‬
‭reasonable‬‭basis‬‭for‬‭prospective‬‭financial‬‭information‬
‭-‬ ‭An‬‭opinion‬‭as‬‭to‬‭whether‬‭prospective‬‭financial‬‭information‬‭is‬‭properly‬
‭prepared‬‭on‬‭the‬‭basis‬‭of‬‭assumption‬‭and‬‭is‬‭presented‬‭in‬‭accordance‬‭with‬
‭the‬‭relevant‬‭financial‬‭reporting‬‭framework.‬

‭Professional‬‭&‬‭Ethical‬‭Matters‬‭before‬‭accepting‬‭engagement‬

‭Opening‬‭balances‬‭if‬‭new‬‭audit‬‭client‬

‭●‬ ‭Risk‬‭of‬‭misstatement‬‭in‬‭opening‬‭balance.‬
‭●‬ ‭Procedures‬‭planned‬‭to‬‭ensure‬‭opening‬‭balances‬‭have‬‭been‬‭brought‬‭forward‬
‭correctly‬‭&‬‭reflect‬‭the‬‭application‬‭of‬‭appropriate‬‭accounting‬‭policies.‬

‭Lack‬‭of‬‭internal‬‭controls‬

‭●‬ ‭One‬‭person‬‭preparing‬‭management‬‭information‬‭→‬‭increases‬‭scope‬‭for‬
‭segregation‬‭of‬‭duties‬‭or‬‭for‬‭authorisation‬‭&‬‭approval‬‭controls.‬
‭●‬ ‭Do‬‭not‬‭perform‬‭a‬‭detailed‬‭review‬‭of‬‭accounts.‬
‭●‬ ‭May‬‭not‬‭necessarily‬‭mean‬‭increased‬‭risk‬‭of‬‭fraud‬‭or‬‭error,‬‭but‬‭auditors‬‭should‬
‭assess‬‭the‬‭suitability‬‭of‬‭systems‬‭in‬‭place‬‭for‬‭each‬‭specific‬‭client’s‬‭purpose‬‭when‬
‭establishing‬‭a‬‭client’s‬‭risk‬‭profile.‬

‭Preparation‬‭of‬‭financial‬‭statements‬

‭●‬ ‭Providing‬‭clients‬‭with‬‭preparation‬‭of‬‭financial‬‭statements‬‭provides‬‭a‬‭self-review‬
‭threat‬‭to‬‭objectivity‬‭&‬‭independence‬‭when‬‭firms‬‭subsequently‬‭audits‬‭financial‬
‭statements.‬
‭●‬ ‭IESBA’s‬‭Code‬‭of‬‭Ethics‬‭→‬‭For‬‭a‬‭client‬‭with‬‭no‬‭public‬‭interest,‬‭it‬‭is‬‭acceptable‬‭to‬
‭provide‬‭accounting‬‭services‬‭if‬‭appropriate‬‭safeguards‬‭can‬‭reduce‬‭threat‬‭to‬‭an‬
‭acceptable‬‭level.‬
‭●‬ ‭The‬‭audit‬‭firm‬‭considers‬‭if‬‭it‬‭has‬‭sufficient‬‭resources‬‭to‬‭enable‬‭this‬‭safeguard‬‭to‬‭be‬
‭put‬‭into‬‭place.‬
 ‭●‬ ‭Bookkeeping‬‭service‬‭provided‬‭should‬‭be‬‭of‬‭a‬‭routine‬‭&‬‭mechanical‬‭nature‬‭to‬
‭avoid‬‭auditor‬‭making‬‭judgements‬‭that‬‭amount‬‭to‬‭involvement‬‭in‬‭FS.‬
‭●‬ ‭Clients‬‭should‬‭pre-approve‬‭journal‬‭entries‬‭made.‬

‭Conflict‬‭of‬‭interest‬

‭●‬ ‭Audit‬‭firm‬‭providing‬‭audit‬‭service‬‭to‬‭competitors.‬
‭○‬ ‭Code‬‭identifies‬‭this‬‭as‬‭a‬‭potential‬‭threat‬‭to‬‭objectivity.‬
‭●‬ ‭Significance‬‭of‬‭threat‬‭should‬‭be‬‭evaluated‬‭&‬‭appropriate‬‭safeguards‬
‭considered.-‬‭*use‬‭of‬‭confidentiality‬‭agreements‬‭signed‬‭by‬‭both‬‭parties‬‭and‬
‭conduct‬‭procedures‬‭to‬‭limit‬‭access‬‭of‬‭information‬

‭○‬ ‭Disclosing‬‭conflict‬‭to‬‭all‬‭relevant‬‭parties.‬
‭○‬ ‭Requesting‬‭consent‬‭of‬‭two‬‭entities‬‭involved.‬
‭○‬ ‭Use‬‭of‬‭separate‬‭engagement‬‭teams.‬

‭Statement‬‭of‬‭cashflows‬
‭IAS‬‭7‬‭→‬‭all‬‭entities‬‭that‬‭prepare‬‭FS‬‭according‬‭with‬‭IFRS‬‭are‬‭required‬‭to‬‭present‬‭a‬
‭statement‬‭of‬‭cash‬‭flow.‬
‭ISA‬‭210‬‭→‬‭management‬‭should‬‭acknowledge‬‭&‬‭understand‬‭its‬‭responsibility‬‭for‬‭the‬
‭preparation‬‭of‬‭FS.‬

‭●‬ ‭The‬‭auditor‬‭has‬‭the‬‭right‬‭to‬‭access‬‭all‬‭information‬‭that‬‭is‬‭relevant‬‭to‬‭preparation‬
‭of‬‭FS‬‭including‬‭minutes‬‭of‬‭meeting.‬
‭●‬ ‭ISA‬‭210‬‭→‬‭Auditor‬‭should‬‭obtain‬‭the‬‭agreement‬‭of‬‭management‬‭to‬‭provide‬‭such‬
‭information‬‭as‬‭one‬‭of‬‭the‬‭preconditions‬‭offering‬‭audit‬‭engagement‬
‭acceptance.‬
‭●‬ ‭Auditors‬‭have‬‭the‬‭principle‬‭of‬‭confidentiality.‬

‭Technical‬‭assistance‬‭→‬‭do‬‭not‬‭create‬‭threats‬‭to‬‭independence‬‭provided‬‭that‬‭firm‬‭does‬
‭not‬‭assume‬‭a‬‭management‬‭responsibility‬‭for‬‭the‬‭client.‬

‭Provision‬‭of‬‭bookkeeping‬‭services‬‭is‬‭generally‬‭not‬‭allowed‬‭to‬‭listed‬‭clients.‬

‭●‬ ‭Except‬‭in‬‭emergency‬‭situations,‬‭an‬‭audit‬‭firm‬‭shall‬‭not‬‭prepare‬‭tax‬‭calculations‬
‭of‬‭current‬‭&‬‭deferred‬‭tax‬‭liabilities‬‭or‬‭assets‬‭for‬‭the‬‭purpose‬‭of‬‭preparing‬
 ‭accounting‬‭entries‬‭that‬‭are‬‭material‬‭to‬‭FS‬‭on‬‭which‬‭the‬‭firm‬‭will‬‭express‬‭an‬
‭opinion.‬

‭ISA220‬

‭Audit‬‭engagement‬‭partner‬‭has‬‭responsibility‬‭to‬‭monitor‬‭ethical‬‭requirements‬‭throughout‬
‭the‬‭audit‬‭process.‬

‭●‬ ‭Relationship‬‭with‬‭someone‬‭in‬‭an‬‭audit‬‭client‬‭firm‬‭means‬‭that‬‭there‬‭is‬‭a‬‭familiarity‬
‭threat‬‭&‬‭lack‬‭of‬‭professional‬‭integrity‬‭if‬‭the‬‭auditor‬‭lacks‬‭to‬‭report.‬
‭●‬ ‭The‬‭firm's‬‭procedures‬‭for‬‭assigning‬‭staff‬‭to‬‭audit‬‭&‬‭for‬‭reporting‬‭personal‬
‭relationships‬‭with‬‭clients‬‭must‬‭be‬‭reviewed‬‭in‬‭light‬‭of‬‭this‬‭responsibility.‬
‭●‬ ‭Report‬‭lack‬‭of‬‭skill‬‭&‬‭up-to-date‬‭knowledge‬‭&‬‭independence‬‭issues‬‭if‬‭tax‬‭is‬
‭calculated‬‭by‬‭auditor.‬

‭ISQM1‬

‭Firm’s‬‭Risk‬‭Assessment‬‭Process‬

‭-‬ ‭Firm‬‭must‬‭identify‬‭and‬‭assess‬‭quality‬‭risks‬‭in‬‭engagements.‬
‭-‬ ‭If‬‭quality‬‭risks‬‭aren’t‬‭identified,‬‭significant‬‭misstatements‬‭in‬‭FS‬‭(e.g.,‬‭revenue‬
‭cut-off‬‭errors)‬‭may‬‭go‬‭undetected.‬

‭Governance‬‭&‬‭Leadership‬

‭-‬ ‭Leadership‬‭must‬‭promote‬‭a‬‭culture‬‭of‬‭quality,‬‭set‬‭tone‬‭at‬‭the‬‭top,‬‭assign‬‭clear‬
‭responsibilities.‬
‭-‬ ‭Weak‬‭leadership‬‭focuses‬‭on‬‭fees‬‭over‬‭quality‬‭→‬‭pressure‬‭to‬‭reduce‬‭testing‬‭→‬
‭higher‬‭risk‬‭of‬‭material‬‭misstatement‬‭(MM).‬
‭-‬ ‭Audit‬‭teams‬‭prioritise‬‭deadlines‬‭over‬‭quality‬‭→‬‭incomplete‬‭testing‬‭→‬‭FS‬
‭misstatements.‬
‭-‬ ‭Inspect‬‭minutes‬‭of‬‭partner‬‭meetings‬‭for‬‭discussion‬‭on‬‭audit‬‭quality;‬‭review‬
‭communications‬‭from‬‭leadership‬‭about‬‭quality‬‭priorities.‬

‭Relevant‬‭Ethical‬‭Requirements‬

‭-‬ ‭Compliance‬‭with‬‭independence,‬‭integrity,‬‭objectivity,‬‭etc.‬
‭-‬ ‭Breach‬‭of‬‭independence‬‭may‬‭cause‬‭bias‬‭→‬‭FS‬‭errors‬‭not‬‭challenged‬‭(e.g.,‬
‭overstatement‬‭of‬‭assets).‬
 ‭-‬ ‭Independence‬‭threat‬‭→‬‭auditor‬‭bias‬‭→‬‭misstatements‬‭unchallenged.‬
‭-‬ ‭Review‬‭independence‬‭confirmations‬‭from‬‭all‬‭staff;‬‭inspect‬‭records‬‭of‬‭ethical‬
‭training‬‭completion.‬

‭Acceptance‬‭&‬‭Continuance‬‭of‬‭Client‬‭Relationships‬‭and‬‭Engagements‬

‭-‬ ‭Evaluate‬‭integrity‬‭of‬‭clients‬‭and‬‭firm’s‬‭competence‬‭before‬‭taking‬‭on/continuing‬
‭work.‬
‭-‬ ‭Accepting‬‭high-risk‬‭clients‬‭without‬‭proper‬‭evaluation‬‭→‬‭higher‬‭likelihood‬‭of‬
‭misstatements‬‭(e.g.,‬‭fraud‬‭in‬‭FS).‬
‭-‬ ‭High-risk‬‭clients‬‭accepted‬‭→‬‭increased‬‭likelihood‬‭of‬‭FS‬‭fraud‬‭or‬‭error.‬
‭-‬ ‭Inspect‬‭client‬‭acceptance‬‭forms;‬‭check‬‭background‬‭searches‬‭and‬‭integrity‬
‭checks‬‭were‬‭documented.‬

‭Engagement‬‭Performance‬

‭-‬ ‭Supervision,‬‭review,‬‭consultation,‬‭and‬‭use‬‭of‬‭specialists.‬
‭-‬ ‭Inadequate‬‭supervision‬‭→‬‭complex‬‭estimates‬‭(e.g.,‬‭impairment)‬‭misstated‬‭in‬‭FS.‬
‭-‬ ‭Lack‬‭of‬‭supervision/review‬‭→‬‭incorrect‬‭audit‬‭conclusions.‬
‭-‬ ‭Review‬‭working‬‭papers‬‭for‬‭evidence‬‭of‬‭partner‬‭review;‬‭confirm‬‭use‬‭of‬‭technical‬
‭consultations‬‭for‬‭complex‬‭accounting‬‭matters.‬

‭Resources‬

‭-‬ ‭Having‬‭enough‬‭competent‬‭staff,‬‭time,‬‭and‬‭tools.‬
‭-‬ ‭Under-resourcing‬‭→‬‭insufficient‬‭testing‬‭→‬‭errors‬‭in‬‭FS‬‭remain‬‭uncorrected.‬
‭-‬ ‭Junior‬‭or‬‭inexperienced‬‭staff‬‭on‬‭complex‬‭areas‬‭→‬‭errors‬‭in‬‭FS‬‭remain‬
‭undetected.‬
‭-‬ ‭Inspect‬‭staff‬‭assignment‬‭schedules;‬‭review‬‭qualifications‬‭and‬‭training‬‭logs;‬‭check‬
‭hours‬‭budgeted‬‭vs‬‭actual.‬

‭Information‬‭&‬‭Communication‬

‭-‬ ‭Ensure‬‭timely,‬‭relevant‬‭info‬‭flows‬‭within‬‭the‬‭firm‬‭and‬‭to/from‬‭engagement‬‭teams.‬
‭-‬ ‭Poor‬‭communication‬‭→‬‭key‬‭risk‬‭areas‬‭missed,‬‭e.g.,‬‭undisclosed‬‭liabilities‬‭in‬‭FS.‬
‭-‬ ‭Key‬‭audit‬‭findings‬‭not‬‭escalated‬‭→‬‭material‬‭misstatements‬‭missed.‬
‭-‬ ‭Review‬‭internal‬‭memos‬‭for‬‭timely‬‭communication‬‭of‬‭technical‬‭updates;‬‭inspect‬
‭evidence‬‭of‬‭discussions‬‭between‬‭engagement‬‭team‬‭and‬‭specialists.‬
‭Monitoring‬‭&‬‭Remediation‬

‭-‬ ‭Ongoing‬‭evaluation‬‭of‬‭the‬‭SoQM‬‭and‬‭addressing‬‭deficiencies.‬
‭-‬ ‭If‬‭deficiencies‬‭aren’t‬‭fixed,‬‭recurring‬‭FS‬‭misstatements‬‭(e.g.,‬‭incorrect‬‭revenue‬
‭recognition)‬‭may‬‭persist‬‭across‬‭years.‬
‭-‬ ‭Same‬‭mistakes‬‭repeated‬‭in‬‭multiple‬‭audits‬‭→‬‭recurring‬‭FS‬‭errors.‬
‭-‬ ‭Inspect‬‭results‬‭of‬‭internal‬‭file‬‭reviews;‬‭review‬‭remedial‬‭action‬‭plans‬‭and‬‭evidence‬
‭of‬‭follow-up‬‭on‬‭deficiencies.‬

‭OFFSHORING‬‭AUDIT‬‭WORK‬

‭●‬ ‭Increasingly‬‭common‬‭in‬‭the‬‭audit‬‭profession.‬
‭●‬ ‭Global‬‭audit‬‭firms‬‭using‬‭low-cost‬‭overseas‬‭audit‬‭offices‬‭to‬‭perform‬‭some‬‭audit‬
‭procedures.‬
‭●‬ ‭No‬‭regulation‬‭to‬‭prohibit‬‭practice‬‭but‬‭quality‬‭control‬‭implications‬‭may‬‭be‬
‭brought‬‭to‬‭question.‬
‭●‬ ‭Performing‬‭only‬‭low-risk‬‭&‬‭non-judgemental‬‭work‬‭→‬‭risk‬‭that‬‭audit‬‭quality‬‭is‬
‭relatively‬‭low.‬
‭●‬ ‭More‬‭subjective‬‭tasks‬‭included‬‭in‬‭offshore‬‭arrangement‬‭→‬‭work‬‭that‬‭should‬‭be‬
‭performed‬‭by‬‭an‬‭auditor‬‭with‬‭sufficient‬‭knowledge‬‭&‬‭understanding‬‭of‬‭auditing‬
‭to‬‭be‬‭able‬‭to‬‭identify‬‭matters‬‭which‬‭are‬‭significant.‬
‭Unlikely‬‭that‬‭auditors‬‭in‬‭overseas‬‭offices‬‭will‬‭have‬‭direct‬‭understanding‬‭&‬
‭expertise.‬
‭●‬ ‭Controls‬‭must‬‭be‬‭put‬‭in‬‭place‬‭to‬‭ensure‬‭that‬‭only‬‭appropriate‬‭tasks‬‭are‬‭included‬
‭in‬‭arrangement‬‭&‬‭that‬‭monitoring‬‭&‬‭review‬‭procedures‬‭are‬‭performed‬‭to‬‭give‬
‭comfort‬‭on‬‭quality‬‭of‬‭work‬‭performed.‬
‭●‬ ‭Audit‬‭firms‬‭must‬‭ensure‬‭that‬‭firm-wide‬‭procedures‬‭adhere‬‭to‬‭requirements‬‭of‬
‭ISQM1‬
‭●‬ ‭Commercial‬‭considerations‬‭should‬‭not‬‭take‬‭priority‬‭over‬‭performance‬‭of‬
‭high-quality‬‭audits.‬

‭LOSS‬‭OF‬‭ACCOUNTING‬‭RECORDS‬

‭●‬ ‭Lack‬‭of‬‭audit‬‭evidence.‬
‭●‬ ‭Written‬‭statements‬‭are‬‭not‬‭sufficient‬‭evidence‬‭on‬‭which‬‭to‬‭base‬‭a‬‭conclusion‬
‭regarding‬‭these‬‭balances‬‭that‬‭are‬‭material‬‭to‬‭FS.‬
 ‭●‬ ‭Consider‬‭whether‬‭audit‬‭procedures‬‭alternative‬‭to‬‭those‬‭planned‬‭gather‬
‭sufficient‬‭appropriate‬‭evidence.‬
‭○‬ ‭e.g.‬‭procedures‬‭performed‬‭on‬‭manual‬‭reconstruction‬‭of‬‭accounting‬
‭records.‬
‭●‬ ‭Rely‬‭on‬‭cooperation‬‭of‬‭the‬‭company‬‭to‬‭allow‬‭audit‬‭firms‬‭access‬‭to‬‭its‬
‭accounting‬‭records‬‭&‬‭reconstruction.‬
‭●‬ ‭Request‬‭extension‬‭to‬‭agreed‬‭deadline‬‭for‬‭completion‬‭of‬‭audit‬‭to‬‭perform‬‭such‬
‭additional‬‭work.‬
‭●‬ ‭The‬‭accounting‬‭system‬‭is‬‭affected‬‭on‬‭an‬‭ongoing‬‭basis‬‭→‬‭possible‬‭to‬‭obtain‬
‭sufficient‬‭appropriate‬‭evidence‬‭for‬‭the‬‭majority‬‭of‬‭transactions‬‭that‬‭occurred‬
‭during‬‭the‬‭year,‬‭only‬‭a‬‭small‬‭proportion‬‭of‬‭transactions‬‭cannot‬‭be‬‭confirmed‬
‭which‬‭may‬‭be‬‭immaterial.‬
‭●‬ ‭No‬‭further‬‭evidence‬‭to‬‭be‬‭obtained‬‭for‬‭balances.‬

‭ISA‬‭705‬‭→‬‭insufficient‬‭evidence‬‭obtained‬‭on‬‭material‬‭matters‬‭giving‬‭rise‬‭to‬‭modification‬
‭→‬‭placed‬‭before‬‭opinion‬‭paragraph.‬

‭Possible‬‭effects‬‭on‬‭FS‬‭of‬‭undetected‬‭misstatement:‬

‭MATERIAL‬‭BUT‬‭NOT‬‭PERVASIVE‬‭→‬‭Qualified‬‭opinion‬

‭●‬ ‭Except‬‭for‬‭possible‬‭effects‬‭of‬‭potential‬‭misstatements,‬‭FS‬‭gives‬‭a‬‭true‬‭&‬‭fair‬‭view.‬

‭MATERIAL‬‭&‬‭PERVASIVE‬‭→‬‭Disclaimer‬‭of‬‭opinion‬

‭●‬ ‭Sufficient‬‭appropriate‬‭evidence‬‭has‬‭not‬‭been‬‭obtained‬‭to‬‭provide‬‭a‬‭basis‬‭for‬‭an‬
‭audit‬‭opinion‬‭&‬‭accordingly‬‭the‬‭auditor‬‭does‬‭not‬‭express‬‭an‬‭opinion‬‭on‬‭FS.‬
‭●‬ ‭Potential‬‭modifications‬‭should‬‭be‬‭explained‬‭to‬‭TCWG.‬
‭●‬ ‭Reasons‬‭for‬‭modifications‬‭should‬‭be‬‭explained‬‭&‬‭TCWG‬‭may‬‭be‬‭able‬‭to‬‭provide‬
‭the‬‭auditor‬‭with‬‭further‬‭information.‬

‭A‬‭member‬‭of‬‭the‬‭audit‬‭team‬‭recently‬‭served‬‭as‬‭employee‬‭of‬‭audit‬‭client‬

‭→‬‭self-interest,‬‭self-review‬‭or‬‭familiarity‬‭threats‬‭&‬‭perception‬‭of‬‭lack‬‭of‬‭independence‬‭of‬
‭audit‬‭firm.‬

‭●‬ ‭IESBA‬‭code‬‭→‬‭if‬‭a‬‭member‬‭had‬‭influence‬‭over‬‭preparation‬‭of‬‭client’s‬
‭accounting‬‭records‬‭or‬‭FS‬‭on‬‭which‬‭an‬‭audit‬‭firm‬‭will‬‭have‬‭to‬‭express‬‭opinion‬‭→‬‭a‬
‭person‬‭may‬‭not‬‭be‬‭included‬‭in‬‭the‬‭audit‬‭team.‬
‭Retained‬‭shareholding‬‭in‬‭company‬

‭→‬‭self-interest‬‭threat‬‭since‬‭a‬‭person‬‭will‬‭act‬‭in‬‭such‬‭a‬‭way‬‭to‬‭maximise‬‭financial‬‭interest‬
‭until‬‭shares‬‭are‬‭disposed‬‭of.‬

‭●‬ ‭If‬‭financial‬‭interest‬‭exists,‬‭it‬‭should‬‭be‬‭disposed‬‭of‬‭immediately‬‭in‬‭case‬‭of‬‭an‬‭audit‬
‭team‬‭member.‬
‭→‬‭Not‬‭an‬‭audit‬‭team‬‭member‬‭→‬‭disposed‬‭ASAP.‬

‭Cross-selling‬‭of‬‭non-audit‬‭services‬

‭●‬ ‭Self-interest‬‭threat‬‭→‬‭audit‬‭team‬‭member‬‭has‬‭a‬‭financial‬‭interest‬‭in‬‭successful‬
‭cross-selling.‬
‭●‬ ‭May‬‭result‬‭in‬‭selling‬‭services‬‭which‬‭are‬‭inappropriate‬‭to‬‭the‬‭client.‬
‭●‬ ‭Should‬‭not‬‭be‬‭evaluated‬‭or‬‭compensated‬‭based‬‭on‬‭the‬‭success‬‭in‬‭selling‬
‭non-assurance‬‭services‬‭to‬‭an‬‭audit‬‭client.‬
‭●‬ ‭Not‬‭prohibited‬‭for‬‭audit‬‭team‬‭members‬‭to‬‭cross-sell,‬‭but‬‭safeguards‬‭must‬‭be‬‭in‬
‭place‬‭to‬‭reduce‬‭potential‬‭threat‬‭to‬‭acceptable‬‭levels.‬

‭The‬‭audit‬‭team‬‭must‬‭increase‬‭their‬‭scepticism‬‭of‬‭all‬‭evidence‬‭provided‬‭by‬
‭management.‬

‭●‬ ‭Written‬‭representations‬‭obtained‬‭from‬‭management‬‭may‬‭be‬‭subject‬‭to‬‭bias‬‭&‬
‭evaluation‬‭which‬‭they‬‭could‬‭potentially‬‭manipulate.‬

‭Analytical‬‭procedures‬

‭●‬ ‭ISA‬‭520‬‭→‬‭Auditors‬‭should‬‭design‬‭&‬‭perform‬‭analytical‬‭procedures‬‭at‬‭year‬‭end‬‭of‬
‭audit‬‭to‬‭assist‬‭the‬‭auditor‬‭when‬‭forming‬‭their‬‭opinion‬‭as‬‭to‬‭whether‬‭FS‬‭are‬
‭consistent‬‭with‬‭auditor’s‬‭understanding‬‭of‬‭the‬‭entity.‬
‭●‬ ‭Failure‬‭to‬‭do‬‭so‬‭could‬‭mean‬‭that‬‭errors‬‭are‬‭not‬‭found‬‭and‬‭the‬‭auditor‬‭will‬‭not‬‭be‬
‭able‬‭to‬‭check‬‭that‬‭the‬‭presentation‬‭of‬‭FS‬‭conforms‬‭to‬‭requirements‬‭of‬‭the‬
‭applicable‬‭financial‬‭reporting‬‭framework.‬
‭●‬ ‭Lack‬‭of‬‭final‬‭analytical‬‭review‬‭increases‬‭audit‬‭risk.‬‭-‬‭required‬‭by‬‭ISA520‬
 ‭●‬ ‭Skipping‬‭it‬‭means‬‭the‬‭auditor‬‭might‬‭miss‬‭unusual‬‭trends,‬‭inconsistencies,‬‭or‬
‭misstatements‬‭that‬‭a‬‭final‬‭overall‬‭review‬‭could‬‭reveal.‬
‭●‬ ‭An‬‭audit‬‭client‬‭being‬‭assessed‬‭as‬‭low‬‭risk‬‭does‬‭not‬‭negate‬‭the‬‭need‬‭for‬
‭analytical‬‭review‬‭to‬‭be‬‭performed.‬

‭Management’s‬‭responsibility‬‭that‬‭laws‬‭&‬‭regulations‬‭are‬‭followed‬

‭●‬ ‭Important‬‭for‬‭auditors‬‭to‬‭consider‬‭obligations‬‭in‬‭the‬‭event‬‭of‬‭any‬‭initial‬‭breach‬‭of‬
‭laws‬‭&‬‭regulations.‬
‭●‬ ‭However,‬‭auditors‬‭are‬‭not‬‭expected‬‭to‬‭prevent‬‭or‬‭detect‬‭non-compliance,‬
‭especially‬‭those‬‭having‬‭limited‬‭impact‬‭on‬‭FS.‬
‭●‬ ‭ISA‬‭250‬‭→‬‭Auditor‬‭is‬‭required‬‭to‬‭become‬‭aware‬‭of‬‭suspected‬‭non-compliance,‬
‭an‬‭understanding‬‭of‬‭nature‬‭of‬‭act‬‭&‬‭circumstances‬‭in‬‭which‬‭it‬‭occurred‬
‭obtained.‬

‭○‬ ‭Discuss‬‭matters‬‭with‬‭TCWG‬‭&‬‭management.‬
‭○‬ ‭Potential‬‭impact‬‭of‬‭non-compliance‬‭should‬‭be‬‭evaluated‬‭such‬‭as‬‭further‬
‭legal‬‭action,‬‭fines‬‭&‬‭penalties‬‭from‬‭regulatory‬‭authorities‬‭&‬‭potential‬
‭jeopardy‬‭of‬‭going‬‭concern.‬
‭○‬ ‭If‬‭potential‬‭effects‬‭are‬‭considered‬‭to‬‭be‬‭material‬‭to‬‭FS,‬‭legal‬‭advice‬‭may‬
‭need‬‭to‬‭be‬‭obtained.‬
‭○‬ ‭Management‬‭should‬‭be‬‭encouraged‬‭to‬‭report‬‭non-compliance‬‭to‬
‭relevant‬‭authorities.‬
‭○‬ ‭obtain‬‭more‬‭information‬‭on‬‭non-compliance‬‭suspicions.‬

‭Breach‬‭of‬‭regulations‬‭→‬‭auditor‬‭has‬‭statutory‬‭duty‬‭to‬‭report‬‭to‬‭relevant‬‭regulator.‬

‭The‬‭auditor‬‭suspects‬‭that‬‭members‬‭of‬‭senior‬‭management‬‭are‬‭involved‬‭in‬
‭non-compliance‬‭→‬‭report‬‭matters‬‭to‬‭the‬‭next‬‭higher‬‭authority.‬

‭●‬ ‭If‬‭management‬‭fails‬‭to‬‭make‬‭the‬‭disclosure,‬‭the‬‭auditor‬‭should‬‭consider‬‭making‬
‭necessary‬‭disclosure.‬
‭●‬ ‭Ethically‬‭not‬‭acceptable‬‭to‬‭disclose‬‭content‬‭related‬‭to‬‭management/external‬
‭parties‬‭due‬‭to‬‭professional‬‭duty‬‭to‬‭maintain‬‭confidentiality‬‭of‬‭client‬‭information.‬
 ‭●‬ ‭However,‬‭information‬‭otherwise‬‭confidential‬‭may‬‭be‬‭assessed‬‭&‬‭justified‬‭in‬‭public‬
‭interest.‬

‭Determination‬‭:‬

‭●‬ ‭Where‬‭the‬‭balance‬‭of‬‭public‬‭interest‬‭lies‬‭requires‬‭very‬‭careful‬‭consideration‬‭&‬‭it‬‭is‬
‭appropriate‬‭to‬‭take‬‭legal‬‭advice‬‭before‬‭making‬‭a‬‭decision.‬
‭●‬ ‭Reasons‬‭underlying‬‭any‬‭decision‬‭whether‬‭to‬‭disclose‬‭or‬‭not‬‭should‬‭be‬‭fully‬
‭documented.‬
‭●‬ ‭Need‬‭to‬‭determine‬‭whether‬‭provision‬‭should‬‭be‬‭recognised‬‭in‬‭accordance‬‭with‬
‭IAS‬‭37‬‭or‬‭whether‬‭note‬‭to‬‭FS‬‭regarding‬‭non-adjusting‬‭events‬‭should‬‭be‬‭made.‬

‭Remuneration‬‭depending‬‭on‬‭bonus‬‭on‬‭successful‬‭sale‬‭of‬‭non-audit‬‭service‬‭→‬
‭self-interest‬‭threat.‬

‭●‬ ‭Proportion‬‭of‬‭individual’s‬‭compensation‬‭that‬‭is‬‭based‬‭on‬‭sales‬‭of‬‭such‬‭services.‬
‭●‬ ‭Role‬‭of‬‭individuals‬‭on‬‭the‬‭audit‬‭team.‬
‭●‬ ‭Whether‬‭promotion‬‭decisions‬‭are‬‭influenced‬‭by‬‭sale‬‭of‬‭such‬‭services.‬

‭Key‬‭audit‬‭partner‬‭should‬‭not‬‭be‬‭remunerated‬‭based‬‭on‬‭his‬‭success‬‭in‬‭selling‬
‭non-assurance‬‭services‬‭to‬‭partner’s‬‭audit‬‭client‬‭→‬‭creates‬‭unacceptable‬‭threat‬‭to‬
‭objectivity‬‭due‬‭to‬‭his‬‭influential‬‭position‬‭in‬‭the‬‭audit‬‭team.‬

‭Managers‬‭may‬‭be‬‭remunerated‬‭as‬‭such‬‭if‬‭safeguards‬‭are‬‭put‬‭into‬‭place‬‭to‬‭reduce‬
‭threat‬‭to‬‭objectivity‬‭to‬‭an‬‭acceptable‬‭level.‬

‭Close‬‭business‬‭relationship‬‭between‬‭audit‬‭firm‬‭&‬‭audit‬‭client‬

‭●‬ ‭Self-interest‬‭or‬‭intimidation‬‭threats.‬
‭●‬ ‭Perception‬‭of‬‭independence‬‭is‬‭affected.‬
‭●‬ ‭Seen‬‭as‬‭working‬‭together‬‭for‬‭mutual‬‭financial‬‭gain.‬
‭●‬ ‭Should‬‭not‬‭be‬‭entered‬‭into‬‭unless‬‭financial‬‭interest‬‭is‬‭immaterial‬‭&‬‭business‬
‭relationship‬‭is‬‭insignificant.‬
‭Provision‬‭of‬‭non-audit‬‭services‬‭→‬‭taking‬‭management‬‭responsibilities.‬

‭Internal‬‭audit‬‭service‬‭by‬‭external‬‭audit‬‭firm‬‭→‬‭self-review‬‭threat.‬

‭●‬ ‭The‬‭audit‬‭team‬‭will‬‭use‬‭results‬‭of‬‭internal‬‭audit‬‭service‬‭without‬‭exercising‬‭the‬
‭same‬‭level‬‭of‬‭professional‬‭scepticism‬‭as‬‭would‬‭be‬‭exercised‬‭if‬‭work‬‭was‬
‭performed‬‭externally.‬

‭Acceptable‬‭safeguard‬‭:‬

‭1.‬ ‭performed‬‭by‬‭a‬‭separate‬‭team.‬
‭2.‬ ‭Performing‬‭second‬‭partner‬‭review‬
‭3.‬ ‭Confirm‬‭that‬‭client‬‭understands‬‭assumptions‬‭used‬
‭4.‬ ‭Ensure‬‭separate‬‭engagement‬‭letter‬‭and‬‭separate‬‭billing‬‭arrangement‬
‭5.‬ ‭Obtain‬‭pre-approval‬‭from‬‭TCWG.‬
‭●‬ ‭Increases‬‭possibility‬‭that‬‭firms‬‭providing‬‭internal‬‭audit‬‭services‬‭will‬‭assume‬
‭management‬‭responsibility‬‭→‬‭cannot‬‭be‬‭reduced‬‭to‬‭an‬‭acceptable‬‭level.‬
‭●‬ ‭IF‬‭PIE‬‭-‬‭prohibited‬‭to‬‭provide‬‭internal‬‭audit‬‭services‬‭-‬‭cannot‬‭be‬‭reduced‬‭to‬‭an‬
‭acceptable‬‭level.‬
‭●‬ ‭If‬‭non-audit‬‭service‬‭provided‬‭involves‬‭a‬‭significant‬‭degree‬‭of‬‭subjectivity‬‭or‬‭a‬
‭high‬‭level‬‭of‬‭materiality,‬‭self-review‬‭cannot‬‭be‬‭reduced‬‭to‬‭an‬‭acceptable‬‭level‬
‭by‬‭application‬‭of‬‭any‬‭safeguards:‬

‭○‬ ‭Not‬‭provide‬‭non-audit‬‭service.‬
‭○‬ ‭Resign‬‭from‬‭providing‬‭audit‬‭service.‬

‭Allocation‬‭of‬‭Staff‬

‭●‬ ‭Decision‬‭of‬‭audit‬‭firm‬‭&‬‭should‬‭not‬‭be‬‭influenced‬‭by‬‭wishes‬‭of‬‭client.‬

‭●‬ ‭Staff‬‭should‬‭be‬‭allocated‬‭to‬‭the‬‭audit‬‭team‬‭based‬‭on‬‭the‬‭needs‬‭of‬‭the‬‭audit.‬

‭●‬ ‭Should‬‭comprise‬‭staff‬‭with‬‭a‬‭mix‬‭of‬‭skills,‬‭experience‬‭&‬‭technical‬‭knowledge‬
‭appropriate‬‭to‬‭size‬‭&‬‭complexity‬‭of‬‭audit.‬
 ‭●‬ ‭The‬‭auditor‬‭is‬‭too‬‭sympathetic‬‭or‬‭trusting‬‭due‬‭to‬‭close‬‭relationships.‬

‭Family‬‭or‬‭personal‬‭relationship‬‭between‬‭member‬‭of‬‭audit‬‭team‬‭&‬‭employee‬‭of‬‭audit‬
‭client:‬

‭1.‬ ‭Familiarity‬‭→‬‭Fail‬‭to‬‭approach‬‭audit‬‭with‬‭professional‬‭scepticism.‬

‭2.‬ ‭Intimidation‬‭→‬‭Influence‬‭conclusions‬‭on‬‭work‬‭performed.‬

‭3.‬ ‭Self-interest‬‭→‬‭Unwilling‬‭to‬‭challenge‬‭audit‬‭client‬‭about‬‭accounting‬‭matters‬‭for‬
‭fear‬‭of‬‭causing‬‭problems.‬

‭●‬ ‭The‬‭degree‬‭of‬‭threat‬‭depends‬‭on‬‭the‬‭level‬‭of‬‭seniority‬‭of‬‭close‬‭family‬‭members.‬

‭●‬ ‭Direct‬‭&‬‭significant‬‭influence‬‭over‬‭FS‬‭→‬‭Significant.‬

‭Referral‬‭Fees‬

‭●‬ ‭Not‬‭prohibited‬‭by‬‭IESBA’s‬‭Code‬‭of‬‭Ethics.‬
‭●‬ ‭Self-interest‬‭threats‬‭can‬‭arise‬‭as‬‭the‬‭audit‬‭firm‬‭gains‬‭a‬‭financial‬‭benefit‬‭by‬‭each‬
‭referral.‬

‭●‬ ‭Can‬‭continue‬‭as‬‭long‬‭as‬‭safeguards‬‭are‬‭put‬‭in‬‭place:‬

‭1.‬ ‭Disclosing‬‭to‬‭audit‬‭clients‬‭that‬‭referral‬‭fee‬‭arrangement‬‭exists‬‭&‬‭details‬‭of‬
‭arrangement.‬
‭2.‬ ‭Receive‬‭confirmation‬‭from‬‭audit‬‭firms‬‭that‬‭they‬‭are‬‭aware‬‭of‬‭referral‬
‭arrangements.‬
‭3.‬ ‭Receive‬‭confirmation‬‭from‬‭all‬‭employees‬‭that‬‭they‬‭have‬‭no‬‭interest‬‭in‬
‭other‬‭companies.‬

‭Audit‬‭team‬‭may‬‭place‬‭reliance‬‭on‬‭system‬‭without‬‭testing‬

‭●‬ ‭Produce‬‭data‬‭which‬‭will‬‭be‬‭used‬‭directly‬‭in‬‭preparation‬‭of‬‭FS.‬
 ‭●‬ ‭Design‬‭&‬‭implementation‬‭of‬‭IT‬‭systems‬‭forming‬‭part‬‭of‬‭internal‬‭control‬‭or‬‭general‬
‭accounting‬‭records.‬

‭Company‬‭tax‬‭computation‬‭→‬‭Self-review‬‭threat:‬

‭●‬ ‭Reviews‬‭work‬‭that‬‭the‬‭auditors‬‭themselves‬‭performed.‬

‭●‬ ‭Auditors‬‭will‬‭not‬‭be‬‭sufficiently‬‭objective‬‭in‬‭performing‬‭the‬‭audit‬‭&‬‭may‬‭fail‬‭to‬
‭identify‬‭any‬‭shortcomings‬‭in‬‭their‬‭own‬‭work.‬

‭Advocacy‬‭threat‬‭→‬‭Auditor‬‭is‬‭seen‬‭to‬‭promote‬‭the‬‭interests‬‭of‬‭a‬‭third‬‭party‬‭such‬‭as‬‭tax‬
‭authorities.‬

‭●‬ ‭The‬‭auditor‬‭will‬‭be‬‭biased‬‭in‬‭favour‬‭of‬‭the‬‭client‬‭&‬‭cannot‬‭be‬‭fully‬‭objective.‬

‭According‬‭to‬‭IESBA‬‭Code‬‭of‬‭Ethics‬‭for‬‭Professional‬‭Accountants:‬

‭●‬ ‭Completing‬‭tax‬‭returns‬‭does‬‭not‬‭generally‬‭create‬‭a‬‭threat‬‭to‬‭independence‬
‭provided‬‭management‬‭takes‬‭responsibility‬‭for‬‭their‬‭returns‬‭including‬‭any‬
‭judgments‬‭made.‬

‭Tax‬‭calculations‬‭prepared‬‭by‬‭an‬‭auditor‬‭for‬‭the‬‭purpose‬‭of‬‭preparing‬‭accounting‬
‭entries‬‭→‬‭Acceptable‬‭for‬‭audited‬‭audit‬‭client‬‭&‬‭firm‬‭should‬‭consider‬‭implementing‬
‭safeguards‬‭in‬‭order‬‭to‬‭reduce‬‭self-review‬‭threat‬‭to‬‭an‬‭acceptable‬‭level.‬

‭Attending‬‭meeting‬‭with‬‭bank‬

‭●‬ ‭Provide‬‭assurance‬‭→‬‭Request‬‭should‬‭be‬‭declined,‬‭explaining‬‭that‬‭firm’s‬
‭responsibilities‬‭extend‬‭to‬‭reporting‬‭to‬‭management‬‭&‬‭owners‬‭of‬‭company‬‭&‬‭not‬
‭to‬‭third‬‭parties.‬

‭●‬ ‭Role‬‭of‬‭providing‬‭due‬‭diligence‬‭→‬‭Possible‬‭to‬‭attend‬‭but‬‭must‬‭be‬‭made‬‭clear‬
‭that‬‭no‬‭members‬‭of‬‭the‬‭audit‬‭team‬‭will‬‭be‬‭able‬‭to‬‭attend‬‭&‬‭firms‬‭not‬‭permitted‬
‭to‬‭make‬‭any‬‭representations‬‭to‬‭banks.‬

‭●‬ ‭Written‬‭representation‬‭should‬‭be‬‭obtained‬‭from‬‭management‬‭clarifying‬‭their‬
‭points.‬
‭Issue‬‭with‬‭Outgoing‬‭Auditor‬

‭●‬ ‭New‬‭auditor‬‭should‬‭obtain‬‭sufficient‬‭information‬‭to‬‭consider‬‭a‬‭range‬‭of‬‭matters‬
‭before‬‭accepting‬‭engagement:‬
‭→‬‭Integrity‬‭of‬‭owners‬‭&‬‭management.‬

‭●‬ ‭Should‬‭communicate‬‭with‬‭outgoing‬‭auditors‬‭about‬‭this‬‭matter‬‭&‬‭should‬‭not‬
‭accept‬‭engagement‬‭if‬‭not‬‭satisfied‬‭that‬‭they‬‭obtained‬‭sufficient‬‭information.‬

‭Disagreement‬‭with‬‭outgoing‬‭auditor‬‭regarding‬‭accounting‬

‭→‬‭Management‬‭not‬‭applying‬‭correct‬‭treatment.‬

‭●‬ ‭If‬‭the‬‭effect‬‭on‬‭FS‬‭is‬‭material‬‭→‬‭lead‬‭to‬‭modification.‬

‭●‬ ‭Unwilling‬‭to‬‭accept‬‭their‬‭responsibility‬‭to‬‭apply‬‭appropriate‬‭accounting‬
‭treatment‬‭→‬‭preconditions‬‭for‬‭accepting‬‭audit‬‭according‬‭to‬‭ISA‬‭210‬‭are‬‭not‬‭met‬
‭&‬‭can‬‭therefore‬‭doubt‬‭over‬‭integrity‬‭of‬‭management‬‭→‬‭do‬‭not‬‭accept.‬

‭●‬ ‭If‬‭management‬‭not‬‭at‬‭fault‬‭&‬‭outgoing‬‭auditor‬‭is‬‭negligent:‬

‭○‬ ‭Obtain‬‭further‬‭information‬‭from‬‭management.‬
‭○‬ ‭Request‬‭to‬‭see‬‭any‬‭communications‬‭with‬‭experts‬‭as‬‭it‬‭is‬‭likely‬‭that‬
‭additional‬‭expertise‬‭was‬‭sought‬‭to‬‭determine‬‭if‬‭the‬‭auditor‬‭acted‬
‭negligently‬‭or‬‭not.‬
‭Request‬‭to‬‭review‬‭information‬‭relating‬‭matter‬‭&‬‭use‬‭their‬‭own‬‭expertise‬‭to‬
‭determine‬‭appropriate‬‭accounting‬‭treatment.‬

‭●‬ ‭Can‬‭proceed‬‭with‬‭engagement‬‭after‬‭consulting‬‭their‬‭own‬‭legal‬‭team‬‭given‬
‭potentially‬‭litigious‬‭nature.‬
‭●‬ ‭Incorrect‬‭treatment‬‭or‬‭insignificant‬‭information‬‭to‬‭enable‬‭a‬‭satisfactory‬
‭conclusion‬‭→‬‭decline‬‭engagement.‬

‭Valuation‬‭services‬‭→‬‭Should‬‭not‬‭provide‬‭for‬‭listed‬‭client‬‭if‬‭valuation‬‭has‬‭a‬‭material‬
‭effect‬‭on‬‭FS.‬
‭Inventory‬‭obsolete‬‭→‬‭Written‬‭off‬‭in‬‭FS.‬

‭●‬ ‭Restrict‬‭to‬‭audit‬‭→‬‭imposed‬‭limitation‬‭on‬‭scope‬‭of‬‭audit.‬
‭●‬ ‭If‬‭they‬‭do‬‭not‬‭obtain‬‭satisfactory‬‭evidence‬‭→‬‭may‬‭lead‬‭to‬‭modification‬‭of‬‭the‬
‭auditor's‬‭report.‬
‭●‬ ‭Report‬‭matters‬‭to‬‭TCWG‬‭&‬‭request‬‭they‬‭provide‬‭access‬‭to‬‭the‬‭necessary‬
‭evidence.‬
‭●‬ ‭Explain‬‭repercussions‬‭on‬‭the‬‭auditor's‬‭report‬‭if‬‭they‬‭fail‬‭to‬‭comply.‬

‭Conflict‬‭of‬‭Interest‬

‭●‬ ‭Firm‬‭providing‬‭services‬‭to‬‭clients‬‭whose‬‭interests‬‭are‬‭in‬‭conflict.‬
‭●‬ ‭Significant‬‭threat‬‭to‬‭objectivity‬‭for‬‭audit‬‭firms‬‭as‬‭it‬‭may‬‭be‬‭seen‬‭as‬‭acting‬‭in‬‭the‬
‭interests‬‭of‬‭one‬‭party‬‭at‬‭the‬‭expense‬‭of‬‭the‬‭other.‬
‭●‬ ‭Auditors‬‭might‬‭have‬‭private‬‭information‬‭obtained‬‭during‬‭their‬‭time‬‭as‬‭auditor‬
‭which‬‭one‬‭might‬‭not‬‭have‬‭become‬‭aware‬‭of‬‭during‬‭normal‬‭due‬‭diligence‬
‭procedures.‬
‭→‬‭Give‬‭potential‬‭unfair‬‭advantage‬‭&‬‭breach‬‭of‬‭confidentiality.‬
‭●‬ ‭Can‬‭be‬‭reduced‬‭by‬‭using‬‭different‬‭teams.‬
‭●‬ ‭Auditors‬‭may‬‭wish‬‭to‬‭resign‬‭from‬‭engagement‬‭to‬‭protect‬‭reputation‬‭&‬‭protect‬
‭themselves‬‭from‬‭being‬‭implicated‬‭in‬‭a‬‭legal‬‭case.‬

‭Going‬‭Concern‬

‭→‬‭Unlikely‬‭for‬‭subsidiaries‬‭to‬‭be‬‭considered‬‭as‬‭going‬‭concern‬‭without‬‭support‬‭from‬
‭parents.‬
‭→‬‭Professional‬‭scepticism‬‭requires‬‭the‬‭auditor‬‭to‬‭remain‬‭alert‬‭for‬‭any‬‭circumstances‬
‭which‬‭may‬‭cause‬‭FS‬‭to‬‭be‬‭materially‬‭misstated‬‭especially‬‭in‬‭relation‬‭to‬‭going‬‭concern.‬

‭Internally‬‭Generated‬‭Evidence‬

‭●‬ ‭Must‬‭be‬‭sceptical‬‭of‬‭the‬‭form‬‭of‬‭evidence‬‭since‬‭it‬‭is‬‭prepared‬‭by‬‭management.‬
‭●‬ ‭Not‬‭as‬‭reliable‬‭as‬‭other‬‭forms‬‭of‬‭externally‬‭generated‬‭evidence.‬
‭●‬ ‭Need‬‭to‬‭be‬‭sceptical‬‭of‬‭all‬‭judgements‬‭made‬‭by‬‭management‬‭in‬‭relation‬‭to‬
‭forecasts‬‭prepared‬‭to‬‭assist‬‭with‬‭assessment‬‭of‬‭going‬‭concern.‬
 ‭→‬‭Might‬‭be‬‭overoptimistic‬‭in‬‭their‬‭estimate‬‭in‬‭order‬‭to‬‭make‬‭forecasts‬‭appear‬
‭better‬‭than‬‭reasonably‬‭expected.‬

‭Verbal‬‭Pledge‬‭&‬‭Reliable‬‭Evidence‬

‭●‬ ‭A‬‭verbal‬‭pledge‬‭of‬‭support‬‭is‬‭not‬‭considered‬‭sufficient‬‭reliable‬‭evidence‬‭.‬
‭→‬‭Need‬‭letter‬‭of‬‭support‬‭&‬‭written‬‭representation.‬
‭→‬‭Need‬‭to‬‭obtain‬‭sufficient‬‭appropriate‬‭evidence.‬
‭→‬‭Representations‬‭from‬‭legal‬‭advisers‬‭represent‬‭third‬‭party‬‭evidence‬‭→‬‭more‬
‭reliable.‬
‭→‬‭Representations‬‭from‬‭management‬‭lack‬‭reliability.‬

‭Consequence‬‭of‬‭Not‬‭Receiving‬‭Information‬

‭●‬ ‭If‬‭additional‬‭evidence‬‭&‬‭recommended‬‭adjustments‬‭not‬‭made‬‭→‬‭modification‬
‭of‬‭auditor’s‬‭report.‬
‭●‬ ‭If‬‭necessary‬‭audit‬‭evidence‬‭being‬‭withheld‬‭→‬‭limitation‬‭of‬‭scope‬‭→‬‭may‬‭result‬‭in‬
‭qualified‬‭opinion‬‭&‬‭disclaimer‬‭of‬‭opinion‬‭being‬‭issued.‬

‭Group‬‭Auditor‬‭Opinion‬‭on‬‭Subsidiary‬

‭●‬ ‭The‬‭auditor‬‭of‬‭the‬‭subsidiary‬‭is‬‭responsible‬‭for‬‭determining‬‭the‬‭final‬‭audit‬‭opinion.‬
‭●‬ ‭If‬‭based‬‭upon‬‭evidence‬‭obtained,‬‭the‬‭auditor‬‭of‬‭a‬‭subsidiary‬‭believes‬‭that‬
‭modification‬‭of‬‭the‬‭auditor's‬‭report‬‭is‬‭necessary‬‭→‬‭this‬‭should‬‭be‬‭done.‬
‭●‬ ‭The‬‭group‬‭partner’s‬‭oversight‬‭of‬‭the‬‭whole‬‭audit‬‭is‬‭irrelevant.‬
‭●‬ ‭Transferring‬‭debt‬‭to‬‭parents‬‭without‬‭any‬‭matching‬‭liability‬‭is‬‭a‬‭form‬‭of‬‭accounting‬
‭manipulation‬‭used‬‭to‬‭disguise‬‭the‬‭true‬‭financial‬‭position‬‭of‬‭the‬‭group‬‭&‬‭may‬
‭constitute‬‭fraud.‬

‭Audit‬‭Firm‬‭Represents‬‭Audit‬‭Client‬‭in‬‭Tax‬‭Dispute‬

‭●‬ ‭Advocacy‬‭threat‬‭→‬‭Audit‬‭firm‬‭will‬‭take‬‭position‬‭to‬‭promote‬‭client’s‬‭interests‬‭at‬
‭tribunal‬‭→‬‭threat‬‭to‬‭objectivity.‬
 ‭●‬ ‭Self-review‬‭threat‬‭→‬‭Investigation‬‭&‬‭tribunal‬‭will‬‭have‬‭impact‬‭on‬‭FS‬‭on‬‭which‬
‭audit‬‭firm‬‭will‬‭express‬‭opinion.‬

‭Existence‬‭&‬‭significance‬‭of‬‭threat‬‭depends‬‭on:‬

‭1.‬ ‭If‬‭the‬‭firm‬‭provided‬‭advice‬‭subject‬‭to‬‭tax‬‭dispute.‬
‭2.‬ ‭Extent‬‭of‬‭which‬‭outcome‬‭of‬‭dispute‬‭will‬‭have‬‭material‬‭effect‬‭on‬‭the‬‭financial‬
‭statements‬‭on‬‭which‬‭firm‬‭will‬‭express‬‭an‬‭opinion.‬

‭Significance‬‭of‬‭any‬‭threat‬‭shall‬‭be‬‭evaluated‬‭&‬‭safeguards‬‭applied‬‭when‬
‭necessary‬‭to‬‭eliminate‬‭threat‬‭or‬‭reduce‬‭it‬‭to‬‭an‬‭acceptable‬‭level:‬

‭1.‬ ‭Using‬‭professionals‬‭not‬‭members‬‭of‬‭the‬‭audit‬‭team‬‭to‬‭perform‬‭the‬‭service.‬
‭2.‬ ‭Having‬‭a‬‭tax‬‭professional‬‭provide‬‭advice‬‭to‬‭the‬‭audit‬‭team‬‭on‬‭the‬‭group's‬
‭tax‬‭position‬‭&‬‭refusing‬‭FS‬‭treatment.‬

‭●‬ ‭Advocate‬‭for‬‭audit‬‭client‬‭before‬‭court‬‭&‬‭amounts‬‭involved‬‭are‬‭material‬‭→‬
‭advocacy‬‭threat‬‭is‬‭so‬‭significant‬‭that‬‭no‬‭safeguards‬‭can‬‭eliminate‬‭or‬‭reduce‬
‭threat‬‭to‬‭an‬‭acceptable‬‭level.‬

‭Design,‬‭Implementation‬‭&‬‭Maintenance‬‭of‬‭Internal‬‭Control‬

‭●‬ ‭The‬‭auditor‬‭would‬‭be‬‭assumed‬‭to‬‭have‬‭management‬‭responsibility.‬
‭●‬ ‭Threats‬‭caused‬‭by‬‭adopting‬‭management‬‭responsibilities‬‭are‬‭so‬‭significant‬‭that‬
‭there‬‭are‬‭no‬‭safeguards‬‭which‬‭would‬‭reduce‬‭threats‬‭to‬‭an‬‭acceptable‬‭level.‬
‭●‬ ‭Would‬‭create‬‭potential‬‭self-review,‬‭self-interest‬‭&‬‭familiarity‬‭threat.‬
‭●‬ ‭Listed‬‭client‬‭→‬‭Cannot‬‭provide‬‭internal‬‭audit‬‭services‬‭which‬‭relate‬‭to‬‭a‬‭significant‬
‭part‬‭of‬‭the‬‭internal‬‭controls‬‭relevant‬‭to‬‭financial‬‭reporting.‬

‭Concerns‬‭Regarding‬‭Deterioration‬‭in‬‭Controls‬

‭●‬ ‭Auditor‬‭is‬‭responsible‬‭to‬‭evaluate‬‭the‬‭design‬‭&‬‭implementation‬‭of‬‭client’s‬‭control‬
‭relevant‬‭to‬‭audit‬‭to‬‭assist‬‭with‬‭identification‬‭of‬‭risk‬‭of‬‭material‬‭misstatement.‬
 ‭●‬ ‭Deficiencies‬‭in‬‭internal‬‭controls‬‭identified‬‭→‬‭has‬‭to‬‭assess‬‭the‬‭potential‬‭impact‬‭on‬
‭FS‬‭&‬‭design‬‭a‬‭suitable‬‭response‬‭in‬‭order‬‭to‬‭reduce‬‭audit‬‭risk‬‭to‬‭an‬‭acceptable‬
‭level.‬

‭●‬ ‭The‬‭auditor‬‭is‬‭responsible‬‭for‬‭communicating‬‭significant‬‭deficiencies‬‭in‬‭internal‬
‭control‬‭to‬‭TCWG‬‭on‬‭a‬‭timely‬‭basis.‬

‭●‬ ‭Internal‬‭control‬‭deficiencies‬‭may‬‭suggest‬‭that‬‭the‬‭audit‬‭firm’s‬‭consideration‬‭of‬
‭the‬‭internal‬‭control‬‭system‬‭failed‬‭to‬‭detect‬‭these‬‭potential‬‭problems‬‭which‬‭may‬
‭indicate‬‭ineffective‬‭audit‬‭planning.‬
‭→‬‭Increase‬‭risk‬‭that‬‭audit‬‭procedures‬‭designed‬‭were‬‭inappropriate.‬
‭→‬‭Heightened‬‭risk‬‭that‬‭the‬‭audit‬‭team‬‭failed‬‭to‬‭detect‬‭material‬‭misstatements‬
‭during‬‭the‬‭audit.‬
‭→‬‭Could‬‭also‬‭mean‬‭that‬‭an‬‭inappropriate‬‭audit‬‭opinion‬‭was‬‭issued.‬

‭●‬ ‭Should‬‭examine‬‭audit‬‭file‬‭&‬‭review‬‭documentation‬‭in‬‭relation‬‭to‬‭evaluation‬‭of‬
‭internal‬‭controls.‬

‭●‬ ‭Assess‬‭subsequent‬‭communications‬‭to‬‭management‬‭&‬‭TCWG.‬

‭●‬ ‭Seek‬‭clarification‬‭on‬‭nature‬‭&‬‭extent‬‭of‬‭deficiencies‬‭identified.‬

‭Lack‬‭of‬‭evidence‬

‭●‬ ‭Impact‬‭on‬‭auditor’s‬‭report‬‭&‬‭auditor’s‬‭opinion.‬
‭●‬ ‭Existing‬‭documentation‬‭should‬‭be‬‭carefully‬‭reviewed‬‭—‬‭confirming‬‭balances‬‭&‬
‭transactions.‬
‭●‬ ‭Listed‬‭company‬‭→‬‭modification‬‭of‬‭auditor’s‬‭report‬‭will‬‭be‬‭scrutinised‬‭→‬‭firm‬‭must‬
‭be‬‭sure‬‭of‬‭any‬‭decision‬‭to‬‭modify‬‭report‬‭&‬‭type‬‭of‬‭modification.‬
‭●‬ ‭Engagement‬‭quality‬‭control‬‭reviewer‬‭should‬‭ensure‬‭there‬‭is‬‭adequate‬
‭documentation‬‭regarding‬‭judgements‬‭used‬‭in‬‭forming‬‭audit‬‭opinion‬‭&‬‭that‬‭all‬
‭necessary‬‭matters‬‭have‬‭been‬‭brought‬‭to‬‭the‬‭attention‬‭of‬‭TCWG.‬
‭●‬ ‭Auditor’s‬‭report‬‭may‬‭not‬‭be‬‭signed‬‭&‬‭dated‬‭until‬‭completion‬‭of‬‭engagement‬
‭quality‬‭control‬‭review.‬
 ‭●‬ ‭Consider‬‭the‬‭necessity‬‭of‬‭modification‬‭&‬‭whether‬‭qualified‬‭or‬‭adverse‬‭opinion‬‭is‬
‭appropriate.‬

‭Audit‬‭evidence‬‭to‬‭verify‬‭number‬‭of‬‭serious‬‭accidents‬‭in‬‭workplace‬

‭●‬ ‭Records‬‭held‬‭by‬‭human‬‭resources‬
‭●‬ ‭Incident‬‭reports‬‭/‬‭accident‬‭log‬‭book‬
‭●‬ ‭Serious‬‭accident‬‭criteria‬‭opposed‬‭to‬‭minor‬‭accident‬‭criteria‬
‭●‬ ‭Minutes‬‭of‬‭board‬‭meetings‬‭discussing‬‭incidents‬
‭●‬ ‭Claims‬‭made‬‭under‬‭an‬‭employer’s‬‭insurance‬‭liability‬‭policy‬
‭Correspondence‬‭with‬‭lawyers‬

‭Audit‬‭Evidence‬‭on‬‭Cashflow‬‭Forecast‬

‭●‬ ‭Evidence‬‭of‬‭agreement‬‭of‬‭opening‬‭cash‬‭position‬‭to‬‭cash‬‭book‬‭&‬‭bank‬
‭reconciliation.‬
‭●‬ ‭Reperformance‬‭of‬‭calculations‬‭in‬‭preparing‬‭forecasts‬‭in‬‭order‬‭to‬‭check‬
‭arithmetic‬‭accuracy.‬
‭●‬ ‭Review‬‭of‬‭results‬‭of‬‭market‬‭research‬‭conducted‬‭to‬‭assess‬‭potential‬‭impact.‬
‭●‬ ‭Review‬‭notes‬‭from‬‭meetings‬‭with‬‭management‬‭about‬‭key‬‭assumptions‬‭made‬‭in‬
‭preparation‬‭of‬‭forecast.‬
‭●‬ ‭Assessment‬‭of‬‭consistency‬‭of‬‭assumptions‬‭with‬‭the‬‭auditor’s‬‭knowledge‬‭of‬
‭business‬‭&‬‭evidence‬‭of‬‭assumptions.‬
‭●‬ ‭Evaluation‬‭of‬‭previous‬‭other‬‭financial‬‭forecasts‬‭&‬‭their‬‭outcome‬‭to‬‭assess‬
‭consistency‬‭of‬‭cashflow‬‭forecast‬‭with‬‭actual‬‭data.‬
‭●‬ ‭Obtain‬‭written‬‭representations‬‭from‬‭management‬‭confirming‬‭reasonableness‬‭of‬
‭cashflow‬‭forecast.‬
‭●‬ ‭Review‬‭of‬‭analytical‬‭review‬‭of‬‭items‬‭included‬‭in‬‭cashflow‬‭forecast‬‭in‬‭order‬‭to‬
‭identify‬‭items‬‭which‬‭may‬‭have‬‭been‬‭omitted.‬

‭Audit‬‭Evidence‬‭on‬‭Loan‬

‭●‬ ‭Review‬‭of‬‭correspondence‬‭with‬‭bankers‬‭&‬‭supporting‬‭documentation.‬
‭●‬ ‭Minutes‬‭of‬‭discussions‬‭with‬‭management‬‭on‬‭the‬‭likelihood‬‭of‬‭obtaining‬‭a‬‭loan.‬
‭●‬ ‭Recalculate‬‭finance‬‭cost‬‭&‬‭confirmation‬‭of‬‭finance‬‭cost‬‭&‬‭receipt‬‭of‬‭loan‬‭→‬
‭accurately‬‭reflected‬‭in‬‭cashflow‬‭forecast.‬
 ‭●‬ ‭A‬‭working‬‭paper‬‭detailing‬‭the‬‭review‬‭of‬‭the‬‭documentation‬‭to‬‭agree‬‭with‬‭cost‬‭&‬
‭checking‬‭cash‬‭outflow‬‭is‬‭included‬‭in‬‭the‬‭forecast‬‭at‬‭the‬‭correct‬‭amount‬‭&‬
‭correct‬‭date.‬
‭●‬ ‭Review‬‭of‬‭board‬‭minutes‬‭in‬‭relation‬‭to‬‭the‬‭company's‬‭current‬‭trading‬‭position‬‭&‬
‭ongoing‬‭negotiations‬‭for‬‭proposed‬‭new‬‭bank‬‭finance.‬

‭Audit‬‭Evidence‬‭on‬‭Legal‬‭Claim‬

‭●‬ ‭Review‬‭of‬‭correspondence‬‭with‬‭lawyers‬‭in‬‭relation‬‭to‬‭the‬‭legal‬‭claims.‬
‭●‬ ‭Assess‬‭likelihood‬‭of‬‭losing‬‭claim‬‭&‬‭likely‬‭cost‬‭&‬‭possibility‬‭of‬‭further‬‭claims‬‭arising‬‭in‬
‭future.‬
‭●‬ ‭Confirm‬‭that‬‭settlement‬‭of‬‭legal‬‭claims‬‭has‬‭been‬‭appropriately‬‭included‬‭in‬‭the‬
‭cashflow‬‭forecast.‬
‭●‬ ‭Consideration‬‭of‬‭impact‬‭on‬‭cashflows‬‭&‬‭liquidity‬‭when‬‭company‬‭is‬‭incurring‬
‭additional‬‭costs‬‭of‬‭compliance‬‭with‬‭all‬‭laws‬‭&‬‭regulations.‬

‭Disclaimer‬‭of‬‭Audit‬‭Opinion‬

‭●‬ ‭ISA‬‭705‬‭should‬‭be‬‭used‬‭when‬‭auditor‬‭is‬‭unable‬‭to‬‭obtain‬‭sufficient‬‭appropriate‬
‭audit‬‭evidence‬‭on‬‭which‬‭to‬‭base‬‭opinion‬‭(e.g.,‬‭limitation‬‭of‬‭scope)‬‭→‬‭when‬
‭possible‬‭effect‬‭on‬‭FS‬‭of‬‭undetected‬‭misstatements‬‭could‬‭be‬‭both‬‭material‬‭&‬
‭pervasive‬‭&‬‭not‬‭possible‬‭to‬‭conclude‬‭that‬‭accounting‬‭treatment‬‭is‬‭correct.‬
‭●‬ ‭When‬‭auditor‬‭modifies‬‭audit‬‭opinion,‬‭a‬‭paragraph‬‭should‬‭be‬‭included‬‭in‬‭audit‬
‭report‬‭describing‬‭matter‬‭which‬‭gives‬‭rise‬‭to‬‭the‬‭modification.‬
‭●‬ ‭Due‬‭to‬‭the‬‭significant‬‭matters‬‭described‬‭in‬‭Basis‬‭for‬‭Disclaimer‬‭of‬‭Opinion‬
‭paragraph,‬‭auditor‬‭has‬‭not‬‭been‬‭able‬‭to‬‭obtain‬‭sufficient‬‭appropriate‬‭audit‬
‭evidence‬‭to‬‭provide‬‭a‬‭basis‬‭for‬‭an‬‭audit‬‭opinion,‬‭thus‬‭auditor‬‭does‬‭not‬‭express‬
‭an‬‭opinion‬‭on‬‭FS.‬
‭●‬ ‭Specific‬‭item‬‭concerned‬‭should‬‭be‬‭mentioned.‬
‭●‬ ‭Reference‬‭should‬‭be‬‭made‬‭to‬‭the‬‭relevant‬‭financial‬‭reporting‬‭standard.‬
‭●‬ ‭Potential‬‭impact‬‭on‬‭FS‬‭should‬‭be‬‭quantified.‬
‭●‬ ‭Reference‬‭to‬‭materiality‬‭of‬‭item.‬
‭ISA‬‭705‬‭–‬‭Modification‬‭of‬‭Opinion‬

‭●‬ ‭An‬‭auditor‬‭is‬‭to‬‭modify‬‭an‬‭opinion‬‭in‬‭the‬‭auditor's‬‭report‬‭when‬‭they‬‭conclude‬
‭that‬‭based‬‭on‬‭the‬‭audit‬‭evidence‬‭obtained,‬‭financial‬‭statements‬‭as‬‭a‬‭whole‬‭are‬
‭not‬‭free‬‭from‬‭material‬‭misstatement.‬
‭●‬ ‭Failure‬‭to‬‭include‬‭disclosures‬‭regarding‬‭material‬‭uncertainties‬‭in‬‭relation‬‭to‬‭going‬
‭concern‬‭represents‬‭a‬‭material‬‭omission‬‭→‬‭requires‬‭modification‬‭of‬‭the‬‭auditor's‬
‭opinion.‬
‭●‬ ‭Auditor‬‭must‬‭exercise‬‭professional‬‭judgement‬‭&‬‭assess‬‭whether‬‭absence‬‭of‬
‭disclosure‬‭is:‬

‭Material‬‭but‬‭not‬‭pervasive‬

‭●‬ ‭Qualified‬‭audit‬‭opinion‬‭on‬‭grounds‬‭of‬‭material‬‭misstatements.‬
‭●‬ ‭Qualified‬‭opinion‬‭paragraph‬‭at‬‭start‬‭of‬‭auditor’s‬‭report‬‭stating‬‭that‬‭FS‬‭are‬
‭presented‬‭fairly‬‭in‬‭all‬‭material‬‭respects‬‭“except‬‭for…”.‬
‭●‬ ‭Followed‬‭by‬‭“Basis‬‭for‬‭Qualified‬‭Opinion”‬‭giving‬‭details‬‭of‬‭going‬‭concern‬
‭uncertainties‬‭&‬‭explaining‬‭that‬‭FS‬‭do‬‭not‬‭adequately‬‭disclose‬‭these‬
‭uncertainties.‬

‭Material‬‭and‬‭pervasive‬

‭●‬ ‭Adverse‬‭audit‬‭opinion‬‭since‬‭the‬‭material‬‭misstatement‬‭will‬‭have‬‭a‬‭fundamental‬
‭impact‬‭on‬‭the‬‭users’‬‭understanding‬‭of‬‭FS.‬
‭●‬ ‭Adverse‬‭opinion‬‭paragraph‬‭stating‬‭FS‬‭are‬‭not‬‭presented‬‭fairly‬‭in‬‭all‬‭material‬
‭respects.‬
‭●‬ ‭Followed‬‭by‬‭“Basis‬‭for‬‭Adverse‬‭Opinion”‬‭giving‬‭details‬‭on‬‭ongoing‬‭concern‬
‭uncertainties‬‭&‬‭explaining‬‭that‬‭in‬‭the‬‭opinion‬‭of‬‭the‬‭auditor,‬‭the‬‭issue‬‭is‬
‭fundamental‬‭&‬‭pervasive‬‭to‬‭FS‬‭→‬‭this‬‭requires‬‭adverse‬‭opinion.‬

‭Key‬‭Audit‬‭Matters‬‭(KAM)‬‭→‬‭Any‬‭relevant‬‭for‬‭listed‬‭companies.‬

‭Report‬‭to‬‭TCWG‬
 ‭●‬ ‭Produced‬‭to‬‭communicate‬‭matters‬‭relating‬‭to‬‭external‬‭audit‬‭to‬‭those‬‭who‬‭are‬
‭ultimately‬‭responsible‬‭for‬‭FS.‬

‭●‬ ‭ISA‬‭260‬‭→‬‭Auditor‬‭should‬‭communicate‬‭matters‬‭including‬‭independence‬‭&‬‭other‬
‭ethical‬‭issues‬‭&‬‭significant‬‭findings‬‭from‬‭audit:‬
‭→‬‭Auditor’s‬‭views‬‭about‬‭significant‬‭qualitative‬‭aspects‬‭of‬‭an‬‭entity's‬‭accounting‬
‭practice,‬‭including‬‭accounting‬‭policies‬‭&‬‭circumstances‬‭affecting‬‭form‬‭&‬
‭content‬‭of‬‭auditor’s‬‭report.‬
‭→‬‭Significant‬‭difficulties‬‭encountered‬‭during‬‭audit‬‭such‬‭as‬‭information‬‭delays‬
‭including‬‭the‬‭impact‬‭it‬‭had‬‭on‬‭the‬‭efficiency‬‭of‬‭the‬‭audit‬‭process‬‭together‬‭with‬
‭any‬‭resulting‬‭increase‬‭in‬‭audit‬‭fee.‬

‭●‬ ‭High‬‭risk‬‭matter‬‭→‬‭May‬‭wish‬‭to‬‭implement‬‭controls‬‭&‬‭procedures‬‭to‬‭prevent‬
‭further‬‭breaches.‬

‭●‬ ‭Should‬‭include‬‭full‬‭details‬‭on‬‭significant‬‭deficiency‬‭in‬‭internal‬‭control‬‭&‬‭include‬
‭recommendations‬‭to‬‭management‬‭in‬‭order‬‭to‬‭reduce‬‭the‬‭associated‬‭business‬
‭risk.‬

‭Long‬‭Association‬‭with‬‭Audit‬‭Firm‬

‭●‬ ‭Creates‬‭familiarity‬‭&‬‭self-interest‬‭threats.‬
‭●‬ ‭Long‬‭&‬‭potentially‬‭close‬‭relationship‬‭with‬‭staff‬‭leading‬‭to‬‭being‬‭too‬‭sympathetic‬
‭to‬‭interests‬‭or‬‭too‬‭accepting‬‭of‬‭their‬‭work.‬
‭●‬ ‭Creates‬‭personal‬‭interest‬‭which‬‭may‬‭inappropriately‬‭influence‬‭professional‬
‭judgement‬‭&‬‭behaviour‬‭of‬‭the‬‭auditor.‬
‭●‬ ‭Code‬‭requires‬‭that‬‭the‬‭audit‬‭partner‬‭in‬‭a‬‭listed‬‭entity‬‭should‬‭be‬‭rotated‬‭at‬‭least‬
‭every‬‭7‬‭years.‬
‭●‬ ‭Allow‬‭for‬‭partners‬‭to‬‭serve‬‭additional‬‭years‬‭if‬‭not‬‭possible‬‭due‬‭to‬‭unforeseen‬
‭circumstances‬‭&‬‭apply‬‭appropriate‬‭safeguards.‬

‭Social‬‭&‬‭Environmental‬‭Performance‬
 ‭●‬ ‭Companies‬‭attempt‬‭to‬‭measure‬‭this‬‭by‬‭setting‬‭targets‬‭or‬‭key‬‭performance‬
‭indicators‬‭(KPIs)‬‭&‬‭evaluating‬‭whether‬‭they‬‭have‬‭been‬‭met.‬

‭Difficult‬‭to‬‭Measure:‬

‭1.‬ ‭Targets‬‭&‬‭KPIs‬‭are‬‭not‬‭always‬‭precisely‬‭defined.‬
‭→‬‭It‬‭is‬‭difficult‬‭to‬‭measure‬‭&‬‭compare‬‭performance‬‭unless‬‭target‬‭or‬‭KPI‬‭is‬‭made‬
‭more‬‭specific.‬

‭2.‬ ‭Targets‬‭&‬‭KPIs‬‭may‬‭be‬‭difficult‬‭or‬‭impossible‬‭to‬‭quantify.‬
‭→‬‭Subjective‬‭matters‬‭whose‬‭results‬‭might‬‭be‬‭questionable.‬

‭3.‬ ‭Systems‬‭&‬‭controls‬‭are‬‭often‬‭not‬‭established‬‭well‬‭enough‬‭to‬‭allow‬‭accurate‬
‭measurement.‬
‭→‬‭Not‬‭based‬‭on‬‭reliable‬‭evidence.‬

‭4.‬ ‭Hard‬‭to‬‭compare‬‭target‬‭&‬‭KPIs‬‭between‬‭companies.‬
‭→‬‭Not‬‭strictly‬‭defined‬‭→‬‭Each‬‭company‬‭will‬‭set‬‭its‬‭own‬‭target‬‭&‬‭difficult‬‭to‬‭make‬
‭year-on-year‬‭comparisons‬‭as‬‭targets‬‭may‬‭change‬‭in‬‭response‬‭to‬‭business‬
‭activities.‬

‭Audit‬‭vs.‬‭Limited‬‭Assurance‬‭Review‬

‭Audit‬ ‭Limited‬‭Assurance‬‭Review‬

‭Mandatory‬‭requirement‬ ‭Not‬‭required‬‭by‬‭law‬
‭According‬‭with‬‭auditing‬‭standards‬ ‭Agreed‬‭by‬‭firm‬‭but‬‭according‬‭with‬
‭adopted‬‭by‬‭professional‬‭regulatory‬‭body‬ ‭relevant‬‭standards‬‭on‬‭assurance‬‭services‬
‭adopted‬‭by‬‭professionals‬

‭Wide‬‭range‬‭of‬‭procedures‬‭used‬‭to‬‭obtain‬ ‭Narrower‬‭range‬‭of‬‭procedures‬‭focusing‬
‭evidence‬‭including‬‭both‬‭tests‬‭of‬‭controls‬‭&‬ ‭on‬‭enquiry‬‭&‬‭analytical‬‭procedures‬
‭substantive‬‭procedures‬

‭Level‬‭of‬‭assurance‬‭is‬‭higher‬ ‭Moderate‬‭level‬‭of‬‭assurance‬

‭Reasonable‬‭assurance‬ ‭Do‬‭not‬‭express‬‭opinion‬‭but‬‭express‬‭a‬
‭conclusion‬‭based‬‭on‬‭work‬

‭Expresses‬‭opinion‬‭on‬‭fair‬‭presentation‬‭of‬‭FS‬ ‭Negative‬‭form‬

‭Positive‬‭form‬ ‭—‬

‭Advantages‬‭of‬‭Audit‬

‭●‬ ‭Provide‬‭stronger‬‭assurances‬‭to‬‭users‬‭of‬‭FS‬‭on‬‭their‬‭accuracy‬‭&‬‭credibility.‬
‭●‬ ‭Hold‬‭management‬‭of‬‭the‬‭company‬‭accountable‬‭→‬‭stronger‬‭form‬‭of‬
‭accountability.‬
‭●‬ ‭Bank‬‭loan‬‭required‬‭→‬‭seek‬‭reasonable‬‭level‬‭of‬‭assurance‬‭of‬‭FS.‬
‭●‬ ‭The‬‭internal‬‭management‬‭team‬‭needs‬‭good‬‭quality‬‭information‬‭to‬‭base‬‭their‬
‭operational‬‭&‬‭strategic‬‭decisions‬‭→‬‭increase‬‭confidence‬‭of‬‭management‬‭in‬
‭accuracy‬‭of‬‭information‬‭used.‬
‭●‬ ‭Business‬‭may‬‭soon‬‭exceed‬‭the‬‭threshold‬‭&‬‭be‬‭subject‬‭to‬‭mandatory‬‭audit.‬
‭→‬‭First‬‭audit‬‭is‬‭more‬‭time‬‭consuming‬‭&‬‭expensive‬‭as‬‭the‬‭audit‬‭team‬‭has‬‭to‬‭invest‬
‭more‬‭time‬‭investigating‬‭prior‬‭year‬‭figures.‬
 ‭→‬‭This‬‭would‬‭be‬‭less‬‭onerous‬‭if‬‭firms‬‭began‬‭to‬‭have‬‭FS‬‭audited‬‭now‬‭while‬
‭relatively‬‭small‬‭&‬‭lead‬‭to‬‭a‬‭more‬‭efficient‬‭audit‬‭in‬‭future.‬
‭●‬ ‭Plans‬‭to‬‭expand‬‭customer‬‭base‬‭→‬‭increased‬‭confidence‬‭in‬‭the‬‭financial‬‭position‬
‭of‬‭the‬‭company‬‭&‬‭improved‬‭chances‬‭of‬‭forming‬‭new‬‭trade‬‭partnerships.‬
‭●‬ ‭Audit‬‭incorporates‬‭review‬‭of‬‭effectiveness‬‭of‬‭internal‬‭control‬‭systems‬‭&‬‭any‬
‭deficiencies‬‭are‬‭reported‬‭to‬‭management.‬
‭→‬‭Assess‬‭effectiveness‬‭of‬‭internal‬‭systems‬‭&‬‭make‬‭changes‬‭where‬‭necessary.‬
‭→‬‭More‬‭likely‬‭to‬‭identify‬‭misstatements‬‭or‬‭provide‬‭management‬‭with‬‭more‬
‭reliable‬‭figures‬‭to‬‭base‬‭decisions.‬

‭Disadvantages‬‭of‬‭Audit‬

‭●‬ ‭More‬‭expensive‬‭&‬‭if‬‭audit‬‭is‬‭exempt‬‭→‬‭unnecessary‬‭cost.‬
‭●‬ ‭Assurance‬‭might‬‭be‬‭obtained‬‭on‬‭an‬‭informal‬‭basis‬‭&‬‭insufficient.‬
‭●‬ ‭More‬‭invasive‬‭→‬‭requires‬‭staff‬‭to‬‭provide‬‭more‬‭information‬‭to‬‭the‬‭auditor‬‭&‬‭give‬
‭up‬‭more‬‭of‬‭their‬‭time.‬

‭Non-Audit‬‭Services‬‭to‬‭Audit‬‭Clients‬

‭Advantages‬

‭●‬ ‭The‬‭audit‬‭firm‬‭already‬‭possesses‬‭a‬‭good‬‭knowledge‬‭&‬‭understanding‬‭of‬‭the‬
‭client‬‭&‬‭its‬‭operating‬‭environment.‬
‭●‬ ‭Better‬‭quality‬‭service‬‭provided‬‭deeper‬‭insights.‬
‭●‬ ‭Lead‬‭to‬‭cost‬‭benefits‬‭as‬‭service‬‭will‬‭be‬‭provided‬‭in‬‭a‬‭more‬‭efficient‬‭way.‬
‭●‬ ‭Allows‬‭audit‬‭firms‬‭to‬‭understand‬‭their‬‭client’s‬‭business‬‭&‬‭risks‬‭better‬‭&‬‭obtain‬
‭insights‬‭into‬‭management’s‬‭objectives.‬
‭●‬ ‭Steps‬‭taken‬‭to‬‭assess‬‭potential‬‭threats‬‭to‬‭objectivity‬‭&‬‭adequately‬‭address‬‭those‬
‭risks.‬

‭Disadvantages‬

‭●‬ ‭Threats‬‭to‬‭objectivity‬‭such‬‭as‬‭self-interest‬‭&‬‭self-review‬‭threats.‬
‭●‬ ‭Perception‬‭that‬‭the‬‭auditor‬‭cannot‬‭be‬‭objective.‬
‭Other‬‭Information‬‭Paragraph‬

‭●‬ ‭Financial‬‭&‬‭non-financial‬‭information‬‭included‬‭by‬‭law,‬‭regulation‬‭or‬‭custom‬‭in‬‭a‬
‭document‬‭containing‬‭audited‬‭FS‬‭&‬‭auditor’s‬‭report.‬
‭●‬ ‭The‬‭auditor‬‭is‬‭required‬‭to‬‭read‬‭the‬‭other‬‭information‬‭to‬‭identify‬‭material‬
‭inconsistencies‬‭in‬‭the‬‭audited‬‭FS.‬
‭●‬ ‭Material‬‭inconsistency‬‭→‬‭auditor‬‭considers‬‭whether‬‭FS‬‭or‬‭other‬‭information‬
‭should‬‭be‬‭amended.‬
‭●‬ ‭Management‬‭should‬‭be‬‭asked‬‭to‬‭make‬‭the‬‭necessary‬‭changes.‬
‭●‬ ‭If‬‭management‬‭refuses‬‭&‬‭material‬‭inconsistency‬‭remains:‬
‭→‬‭Auditors‬‭should‬‭include‬‭an‬‭“Other‬‭Matter”‬‭paragraph‬‭in‬‭the‬‭audit‬‭report‬‭to‬
‭describe‬‭material‬‭inconsistency.‬
‭→‬‭Placed‬‭immediately‬‭after‬‭the‬‭Opinion‬‭paragraph‬‭&‬‭Emphasis‬‭of‬‭Matter‬
‭paragraph.‬
‭●‬ ‭The‬‭auditor‬‭may‬‭seek‬‭legal‬‭advice‬‭if‬‭management‬‭refuses.‬
‭●‬ ‭Matters‬‭affecting‬‭the‬‭auditor's‬‭report‬‭should‬‭be‬‭discussed‬‭with‬‭TCWG.‬

‭Performance‬‭Audit‬

‭●‬ ‭Practitioner‬‭provides‬‭assurance‬‭to‬‭management‬‭with‬‭regard‬‭to‬‭effective‬
‭functioning‬‭of‬‭operational‬‭activity‬‭or‬‭agreed‬‭component‬‭of‬‭operations.‬

‭Audit‬‭of‬‭Performance‬‭Information‬

‭●‬ ‭When‬‭a‬‭practitioner‬‭provides‬‭assurance‬‭with‬‭regard‬‭to‬‭specific‬‭performance‬
‭measures‬‭published‬‭by‬‭a‬‭reporting‬‭entity.‬