Association, Auditor’s Reports ,
Special Reports Overview,
Independence
Class 2

Agenda

• Association
• Audit reports
• Assurance and related services (special reports) overview • Independence

2

Association

(HB Section 5020)

CPA associates himself with information when he/she:

◦

Performs services in respect of that information

◦

Consents to the use of his/her name in connection with that information Read up on:
How does CPA discharge professional responsibilities?
What CPA must ensure before consenting to use of CPA’s name?
What to do if CPA becomes aware of an inappropriate use of his name?
What to do if information is issued without CPA’s communication?

3

Professional ethics and auditor responsibilities Rules of professional conduct established by the ICAO govern members, students and firms (see February
2014 version posted on Avenue)
5 fundamental principles of ethics






Professional behavior
Integrity and due care
Professional competence
Confidentiality
Objectivity (independence)

4

Independence..
Required for assurance engagements and when issuing a report on the results of applying specified auditing procedures
Must be independent in fact and appearance
Rule 204 – pages 18 – 46 of the ICAO rules of professional conduct (Feb 2014)
Act in capacity of management Audit own work

5

Knowledge check..
In which of the following would an auditor’s independence be considered to be not impaired?
a)

b)

c)
d)

Provides valuation services on a business being acquired by the client
Compiling statements of a material subsidiary which are to be included in the financial statements of the client
Holding a material direct investment in the client
Accepts a parking sticker from the client allowing auditor to park in the client’s parking lot for free

6

Attest Engagement Vs Direct Reporting
Engagement
Section 5025
The practitioner's communication will vary depending on whether the assurance engagement is an attest engagement or a direct reporting engagement.
In an attest engagement the practitioner's conclusion will be on a written assertion prepared by the accountable party. The assertion evaluates, using suitable criteria, the subject matter for which the accountable party is responsible.
In a direct reporting engagement, the practitioner's conclusion will evaluate directly, using suitable criteria, the subject matter for which the accountable party is responsible.

No user reliance,
Nobody from outside
Relies on this report.

General Purpose Audit reports


Two reasons for qualifications in reports:
◦ Financial statements contain a departure from
GAAP including inadequate disclosure.
Qualified
Opinion

Materiality

Adverse
Opinion

◦ Scope limitation (extent of audit work has been limited) inability to obtain sufficient evidence.
Qualified
Opinion

Materiality

Denial of
Opinion

9

General Purpose Audit reports


Emphasis of matters paragraph
◦ Matter that is appropriately disclosed and/or presented but is fundamental to the user’s understanding of the f/s
◦ E.g. – going concern, litigation, major subsequent event affecting the f/s, early adoption of accounting standards, etc. 

Other matters paragraph
◦ Matter other than those presented/disclosed but relevant to user’s understanding of the financial statements
◦ E.g. restriction and limitation of use

10

Review of assurance and related services..
• Assurance (audit and review) and related services:
• Financial statements:
• Audit (CAS 700)
• Review (8100, 8200, AuG 20, AuG 47)
• Compilation (of financial statements or part) (9200, AuG 5)

• Single financial statements and specific elements, accounts or items of a financial statement

• Audit (CAS 805)
• Review (Section 8500)

Review of assurance and other services… • Reports on compliance with agreement or regulatory requirements • Audit (Section 5815)
• Review (Section 8600)

• Internal controls
• Reporting on internal controls at a service organization
(CSAE 3416)

• Agreed upon procedures