Accg925 Auditing And Assurance Services Assessment Answers

1.The key changes to audit report. With focus on the similarities as well as any differences between PCAOB and the International Auditing and Assurance Standards Board (IAASB) auditing reporting requirements.

2.Explain the reasons/motivation for the changes and critique whether these changes are likely to achieve their aims.

3.Outline the likely impact of the audit reporting on audit practice.

Solution 1

Preparation of audit report is the work of an auditor. It is the duty of the auditor to make a true and fair opinion over the accuracy of the financial statements. Financial statement may be used by various persons for their general purposes which are commonly known as Users of the financial statement (Arens, et. al., 2012). Some of the users of financial statements are Management, Investors, Creditors and lenders, employees, government, and society.

Differences and Similarities between PCAOB and the International auditing and assurance standards board (IAASB) regarding audit report requirement are as given below:

Definition of KAM: Key Audit Matters (KAM) are those matters that are having most significance in the financial statement’s audit of the current period. These matters are selected from the matters communicated with TCWG.

Solution 2

The following are the changes in the audit reporting requirement made by IAASB and PCAOB

Going Concern Concept: Financial statement of account of a company is prepared as per going concern concept. Going concern basically, means the operations of an entity will continue for a foreseeable period (Messier Jr, et. al., 2015). The IAASB wants to express the impossibilities that happened in the financial background that can affect the concept of going concern in the Company.

It is assumed that entity has neither the intention nor the necessity of liquidation of the business.

Critical Audit Matters: Critical Audit Matters as like of Key Audit Matters introduced by IAASB. These audit matters which are critical are used by PCAOB to determine the significant areas of accounts of financial statements that are most important for the procedure of audit. But these matters determined by the auditors independently.

Representation of other items: Financial statement accounts of an entity comprised of other items also which cannot be presented in the balance sheet and statement of profit and loss account of the company for a year. However, the information can be material to financial health as well as the financial position of the Company. In the new IAASB audit report, it is mandatory to present this information in the new format provided by the IAASB.

Key Audit Matters: KAM is some of the important matters that required to be reported in the audit report prepared by the auditor. Key Audit Matters can be identified by the auditor with the help of communicating to higher management and those charged with governance.

KAM can affect the financial strength as well as the financial position of the Company.

Solution 3

The audit report includes three paragraphs in its report as a format which is as follows:

(a)Responsibility of the concerned auditor while doing his work,

(b)Areas covered by him in the audit procedure while conducting the audit and

(c)The opinion of the auditor on the accuracy of financial statement accounts of the Company.However, Auditor cannot be held responsible for nondetection of those frauds and errors which are perpetrated into the accounts of an entity by the management and nondetection of which is not possible during normal examination provided. Auditor worked with due care and due skill and without negligence (Public Company Accounting Oversight Board (PCAOB), 2011). That’s why users of the financial statement find the audited balance sheet and profit and loss accounts be more trustworthy than the non-audited one. The audited financial statements at the end will help the stakeholder in protecting their interest.

References

Arens, A.A., Elder, R.J. and Mark, B., 2012. Auditing and assurance services: an integrated approach. Boston: Prentice Hall.

Burns, J. and Fogarty, J., 2010. Approaches to auditing standards and their possible impact on auditor behavior. International Journal of Disclosure and Governance, 7(4), pp.310-319.

Carson, E., Fargher, N.L., Geiger, M.A., Lennox, C.S., Raghunandan, K. and Willekens, M., 2012. Audit reporting for going-concern uncertainty: A research synthesis. Auditing: A Journal of Practice & Theory, 32(sp1), pp.353-384.

Messier Jr, W.F., Martinov-Bennie, N. and Eilifsen, A., 2015. A review and integration of empirical research on materiality: Two decades later. Auditing: A Journal of Practice & Theory, 24(2), pp.153-187.

Public Company Accounting Oversight Board (PCAOB), 2011. Concept release on possible revisions to PCAOB standards related to reports on audited financial statements.