(ii) From the information provided above, recommend the matters which should be included as ‘findingsfrom the audit’ in your report to those charged with governance, and explain the reason for theirinclusion. (7 marks)
题目
(ii) From the information provided above, recommend the matters which should be included as ‘findings
from the audit’ in your report to those charged with governance, and explain the reason for their
inclusion. (7 marks)
参考答案和解析
正确答案: (ii) Control weakness ISA 260 contains guidance on the type of issues that should be communicated. One of the matters identified is a control weakness in the capital expenditure transaction cycle. The assets for which no authorisation was obtained amount to 0·3% of total assets (225,000/78 million x 100%), which is clearly immaterial. However, regardless of materiality, the auditor should ensure that the weakness is brought to the attention of the management, with a clear indication of the implication of the weakness, and recommendations as to how the control weakness should be eliminated. The auditor is providing information to help those charged with governance improve the internal systems and controls and ultimately reduce business risk. In this case there is a high risk of fraud, as the lack of authorisation for purchase of office equipment could allow expenditure on assets not used for bona fide business purposes. Disagreement with accounting treatment of brand Audit procedures have revealed a breach of IAS 38 Intangible Assets, in which internally generated brand names are specifically prohibited from being recognised. Blod Co has recognised an internally generated brand name which is material to the statement of financial position (balance sheet) as it represents 12·8% of total assets (10/78 x 100%). The statement of financial position (balance sheet) therefore contains a material misstatement. The report to those charged with governance should clearly explain the rules on recognition of internally generated brand names, to ensure that the management has all relevant technical facts available. In the report the auditors should request that the financial statements be corrected, and clarify that if the brand is not derecognised, then the audit opinion will be qualified on the grounds of a material disagreement – an ‘except for’ opinion would be provided. Once the breach of IAS 38 is made clear to the management in the report, they then have the opportunity to discuss the matter and decide whether to amend the financial statements, thereby avoiding a qualified audit opinion. Audit inefficiencies Documentation relating to inventories was not always made readily available to the auditors. This seems to be due to poor administration by the client rather than a deliberate attempt to conceal information. The report should contain a brief description of the problems encountered by the audit team. The management should be made aware that significant delay to the receipt of necessary paperwork can cause inefficiencies in the audit process. This may seem a relatively trivial issue, but it could lead to an increase in audit fee. Management should react to these comments by ensuring as far as possible that all requested documentation is made available to the auditors in a timely fashion.