Audit
Answers
Fundamentals Level – Skills Module, Paper F8 (UK) Audit and Assurance (United Kingdom) 1 (a) (i) Importance of reporting to those charged with governance
June 2013 Answers
In accordance with ISA 260 (UK and Ireland) Communication with those charged with governance, it is important for the auditors to report to those charged with governance as it helps in the following ways: (1) It assists the auditor and those charged with governance in understanding matters related to the audit, and in developing a constructive working relationship. This relationship is developed while maintaining the auditor’s independence and objectivity. (2) It helps the auditor in obtaining, from those charged with governance, information relevant to the audit. For example, those charged with governance may assist the auditor in understanding the entity and its environment, in identifying appropriate sources of audit evidence and in providing information about specific transactions or events. (3) It helps those charged with governance in fulfilling their responsibility to oversee the financial reporting process, thereby reducing the risks of material misstatement of the financial statements. (ii) Matters to be communicated to those charged with governance – – – – – – – – – – – The auditor’s responsibilities with regards to providing an opinion on the financial statements and that they have carried out their work in accordance with International Standards on Auditing (UK and Ireland). The auditor should explain the planned approach to the audit as well as the audit timetable. Any key audit risks identified during the planning stage should be communicated. In addition, any significant difficulties encountered during the audit should be communicated. Also significant matters arising during the audit, as well as significant accounting adjustments. During the audit any significant deficiencies in the internal control system identified should be communicated in writing or
Fundamentals Level – Skills Module, Paper F8 (UK) Audit and Assurance (United Kingdom) 1 (a) (i) Importance of reporting to those charged with governance
June 2013 Answers
In accordance with ISA 260 (UK and Ireland) Communication with those charged with governance, it is important for the auditors to report to those charged with governance as it helps in the following ways: (1) It assists the auditor and those charged with governance in understanding matters related to the audit, and in developing a constructive working relationship. This relationship is developed while maintaining the auditor’s independence and objectivity. (2) It helps the auditor in obtaining, from those charged with governance, information relevant to the audit. For example, those charged with governance may assist the auditor in understanding the entity and its environment, in identifying appropriate sources of audit evidence and in providing information about specific transactions or events. (3) It helps those charged with governance in fulfilling their responsibility to oversee the financial reporting process, thereby reducing the risks of material misstatement of the financial statements. (ii) Matters to be communicated to those charged with governance – – – – – – – – – – – The auditor’s responsibilities with regards to providing an opinion on the financial statements and that they have carried out their work in accordance with International Standards on Auditing (UK and Ireland). The auditor should explain the planned approach to the audit as well as the audit timetable. Any key audit risks identified during the planning stage should be communicated. In addition, any significant difficulties encountered during the audit should be communicated. Also significant matters arising during the audit, as well as significant accounting adjustments. During the audit any significant deficiencies in the internal control system identified should be communicated in writing or