Audit and Assurance Dramatic Insights · The value of ICAEW membership 1 World class library ........
Transcript of Audit and Assurance Dramatic Insights · The value of ICAEW membership 1 World class library ........
Practitioners’ Essentials Roadshow 2017: Audit and Assurance – Dramatic Insights
F
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I N T E L L I G E N C E A N D I N S I G H T
APRIL 2015 | ICAEW.COM/ECONOMIA ISSUE 37 | ACCOUNTANCY | FINANCE | BUSINESS
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SPEAKER BIOGRAPHY
John Selwood ACA
John is an ICAEW Chartered Accountant and independent training
consultant, who lectures for the major trainers, accountancy practices and
publishers. He speaks on money laundering, ethics, auditing and financial
reporting. Previously, he has been the technical partner for a top 30 firm of
accountants and Head of CharterGroup, the accountancy network.
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Audit and Assurance
Dramatic InsightsSpring
2017
Presented by John Selwood
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Highlights
False Assurance
AAF News round up
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• The increase in audit exemptions thresholds
• Independence, ethics and quality control
• The impact of FRS 102
• Audit judgements, understanding and testing complex revenue models, and substantive analytical review
• Future challenges
2015 QAD
Report
What the QAD say
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Quality Assurance visit outcomes
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• 1. ISA 500 Audit evidence
• 2. ISA 230 Documentation
• 3. ISA 315 Risk assessment
• 4. ISA 530 Audit sampling
• 5. ISA 240 Fraud
2015 Quality
Assurance Top five
weaknesses
The pursuit of better audit quality
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• Risk assessment
• Accounting estimates
• Related parties
• Audit team discussions
• Fraud risks
• Independence and audit partner rotation
• Communication with management
• Written and verbal representations
• Audit evidence
A fresh look
at hot audit topics
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False Assurance – Part 1
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What are your observations about the auditor’s role in
the Audit and Risk Committee meeting?
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• Risk assessment
• Significant risk?
• Starts with understanding the entity
• Experts?
Accounting estimates
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The S1A asset was purchased
• Is this a separate Cash Generating Unit?
? ?
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I don’t think any of us are in a
position to second guess the expertsAudit and risk committee
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What do you think about the chat at the drinks party?
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Audit planning
Record all related parties
Fraud risk assessment
Fieldwork
Special scrutiny of RP
transactions
Unrecorded RPs require extra
special scrutiny
Related parties
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Cyber-security meeting
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What do you think about the audit
partner rotation?
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• Management incentives
• Accounting estimates
• Cyber security
• Related parties
• Fraud/bribery/laws and regulations
• Going concern
• Independence threats?
Part 1 Sum up
Risk assessment
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False Assurance – Part 2
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Audit team discussion – Fraud!
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What does this meeting outside the
drinks party teach us?
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The auditors are being inconsistent
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..what about this meeting?
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What do you think of how the Premintel expenses
were dealt with?
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• Fraud risks and related parties
• Integrity
• The need for scepticism
• A problem for new (junior?) audit partners
• The value of verbal/written representations
Part 2 Sum up
Audit evidence
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False Assurance – Part 3
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What audit risk is this?
..and this?
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S1D Cancellations
IT overspend
IMPACT ON AUDIT?
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Remember this chat about the IT invoice?
What went well?
What went less well?
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How would you have managed the meeting
with Alex Frayn?
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• Fraud risks are significant because fraud is hidden
• The importance of scepticism
• The value of seeking an understanding of the entity from broad sources
• Consider who you approach regarding fraud
Part 3 Sum up
Dealing with fraud
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False Assurance – Part 4
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What would you have done?
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AAF News – Audit reports
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• Bulletin: Compendium of illustrative auditor’ reports on United Kingdom private sector financial statements for periods commencing on or after 17 June 2016
Published
October 2016
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Earlier periods
Old regime
PC 1 Jan 2015
SI2015/ 980
Early adopters
PC 1 Jan 2016
SI2015/ 980
All
PC 17 June 2016
Full new regime
Audit reporting regimes
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Example – Entity only prepares a directors’ report
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Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of our audit:
• the information given in the directors’ report for the
financial year for which the financial statements are
prepared is consistent with the financial statements;
and
• the directors’ report has been prepared in accordance
with applicable legal requirements.
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Example – Entity prepares both a directors’ report
and a strategic report
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Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
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Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
company and its environment obtained in the course of
the audit, we have not identified material misstatements
in the directors’ report.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
company and its environment obtained in the course of
the audit, we have not identified material misstatements
in the strategic report or the directors’ report.
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Earlier periods
Old regime
PC 1 Jan 2015
SI2015/ 980
Early adopters
PC 1 Jan 2016
SI2015/ 980
All
PC 17 June 2016
Full new regime
Audit reporting regimes
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• Report by exceptionNo material uncertainty
exists
• ‘Material Uncertainty Related to Going Concern’
Material uncertainty exists but is adequately disclosed
Going Concern
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AAF News – Accountant’s reports
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• TECH07/16AAF – Chartered Accountants’ reports on the Compilation of Financial Information of Incorporated Entities; and
• TECH08/16AAF – Chartered Accountants’ reports on the Compilation of historical Financial Information of Unincorporated Entities.
• ACCA has a similar factsheet
• ICAS has its Accounting Framework
ICAEW guidance
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• Up to date templates
• Review
• Disclosure checklists
• Training
Quality control
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Engagement letters
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AAF News – Hospitality
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•No gifts or hospitality
•Unless trivial or inconsequential
Gifts and hospitality
Para 4.61D
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OK?
Hospitality
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“When there is a
judgement call, the
question you now need to
ask is not do you think it is
alright, it’s would a
reasonably informed third
party knowing all the facts
and circumstances think it
is alright.” ’
Tony Bromell
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AAF News – Auditor resignation
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• Changes at Companies House
• Changes to statements of circumstances
• Changes to ICAEW notifications
What?
• Resignations for periods commencing 1 October 2015When?
Changes to auditor resignation
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• An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that
a. they do not take office until any previous auditor or auditors cease to hold office, and
b. they cease to hold office at the end of the next ‘period for appointing auditors’ unless re-appointed
S487(1)
Automatic reappointment
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• The auditor is deemed to be re-appointed unless,
a. he was appointed by the directors, or
b. the company’s articles require actual re-appointment, or
c. the deemed re-appointment is prevented by the members under s488, or
d. the members have resolved that he should not be re-appointed, or
e. the directors have resolved that no auditor or auditors should be appointed for the financial year in question.
S487(2)
Automatic reappointment
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• the auditor ceases to practise as an auditor
• the company that the auditor is ceasing to act for qualifies for one of the exemptions from audit under the Companies Act 2006
• the auditor is ceasing to act for a ‘subsidiary’ company of a UK incorporated parent because the accounts of the subsidiary are to be audited as part of the audit of the group accounts by the parent’s auditor; and
• the company that the auditor is ceasing to act for is being liquidated through an insolvency procedure.
S519 Statement of
circumstances
‘exempt’ reasons
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