AUDIT REPORT STANDARDS / BULLETINS

ISA 700 (DEC 04)– THE AUDITOR’S REPORT ON F.S. DRAFT ISA 700 (JULY 05) – UNMODIFIED REPORTS DRAFT ISA 705 (APRIL 05) - MODIFIED ( EXCEPT EMPHASIS

OF MATTER) DRAFT ISA 706 (APRIL 05)– EMPHASIS OF MATTER /

OTHER REPORTS DRAFT APB BULLETIN 2005/4 (NOV 05)– E.G.’S OF UK

REPORTS UNDER SAS’S 700,705,706 ( SUPERCEEDED) DRAFT BULLETIN 2006/06 (SEPT 06) – UPDATED AS NEED

TO REPORT ON CONSISTENCY OF DIRECTORS’ REPORT

AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/6 E.G.3 (UNLISTED/INDIVIDUAL A/CS)

Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which

comprise P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared under the a/c policies set out therein.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report and

the financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the fin. statements in accordance with relevant legal and regulatory requirements and ISA’s (UK & Ire).

AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/6 E.G.3 (UNLISTED/INDIVIDUAL A/CS)

Respective responsibilities of directors and auditors (cont’d)We report to you our opinion as to whether the F/S give a T/F view

and are properly prepared etc re the Coys Act 1985.We also report to you whether in our opinion the info given in the

Directors’ Report is consistent with the F.S.In addition we also report to you ….(exception reporting items) .

We read other info in the Annual Report, and consider if it is consistent with the audited F.S. This other info comprises …. Our responsibilities do not extend to any other information.

AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2006/ E.G.3

Basis of audit opinionWe conducted our audit in accordance with ISA’s on Auditing (UK &

Ire). An audit includes an examination on a test basis etcOpinionIn our opinion: the F.S. give a T/F view, in accordance with UK GAAP, of the

state of the company’s affairs as at …. and of its profit (loss) for the year then ended;and

the F.S. have been properly prepared in accordance with the Companies Act 1985

the information given in the Directors’ Report is consistent with the financial statements.

Registered auditors AddressDate

AUDIT QUALIFICATIONS

Problem Material Pervasive

Disagreement “Except” “Adverse”

Uncertainty – Scope “ Except” “Disclaimer”

E.G. 7 DISAGREEMENT - EXCEPT

Disagreement re accounting treatment

Included in debtors shown on the B/S is an amount of £Y due from a company which has ceased trading . XYZ plc has no security for this debt. In our opinion the company is unlikely to receive any payment and full provision of £Y should have been made,reducing profit before tax and net assets by that amount.

Except for the absence of this provision, in our opinion etc …

E.G. 10 ADVERSE OPINION

As more fully explained in note ….no provision has been made for the losses expected to arise on certain long term contracts currently in progress, as the directors consider that such losses should be off-set against amounts recoverable on other long-term contracts. In our opinion, provision should have been made for foreseeable losses on individual contracts as required by SSAP 9 . If losses had been so recognised the effect would have been to reduce profit and contract WIP at 31 Dec 2002 by £…

In view of the failure to provide for the losses referred to above, in our opinion the financial statements do not give a true and fair view etc

E.G 8: SCOPE LIMITATION - EXCEPT

(Basis of opinion – excerpt)

….However,the evidence available to us was limited because £…. of the company’s recorded turnover comprises cash sales over which there was no system of control on which we could rely for the purposes of our audit

Except for any adjustments that might have been found to be necessary had we been able to obtain sufficient evidence concerning cash sales, in our opinion etc

E.G. 9 DISCLAIMER

(Basis of opinion – excerpt)

….However,the evidence available to us was limited because we were appointed auditors on …. And in consequence were unable to carry out auditing procedures to obtain adequate assurance re stock and WIP appearing in the B/S at £……

Because of the possible effect of the limitation in evidence available to us ,we are unable to form an opinion as to whether the financial statements give a true and fair view of the …… etc

DRAFT ISA 706 - EMPHASIS OF MATTER/ OTHER MATTER PARAGRAPHS

Distinction between "emphasis of matter”/

“other matter” reports Emphasis of matter - when matter of

fundamental importance to F.S and unusual. OM – when referring to matters other than

those in the F.S. e.g. director’s report or chairman’s statement (ED ISA 706 E.G. 1)

“EMPHASIS OF MATTER” SITUATIONS (OTHER THAN GOING CONCERN)

Significant uncertainties e.g. litigation Significant and unusual RP transactions Subsequent event disclosed in F.S. Major catastrophe , which is disclosed but

continues to have a significant impact on business

REVIEW OF FINANCIAL REPORTS –ISRE 2400 (ISA 910)

Obtain an understanding of the business Enquiries re a/c practices,a/c records and

procedures re summarising info for report Enquiries re material assertions in report Analytical procedures – budgets/prior periods Negative opinion Moderate assurance

UNQUALIFIED REVIEW REPORT

REVIEW REPORT TO

We have reviewed the B/S ,P&L and cash flows of ABC Ltd

for the year ended ….

We conducted our review in accordance with the ISA applicable to review engagements.This standard requires that we plan & perform the review to obtain moderate assurance as to whether the F/S are free of material misstatement. A review is limited primarily to enquiries of personnel and analytical procedures and thus provides less assurance than an audit.

Based on our review, nothing has come to our attention etc

SAS 610 COMMUNICATION OF AUDIT MATTERS TO THOSE CHARGED WITH CORPORATE GOVERNANCE

Those charged with governance include the directors,partners,proprietors,management committee

Listed companyAuditors disclose in writing to audit committee: Relationships with client entity /related

entities relevant to independence Related safeguards in place Confirm firm independent / staff objective

SAS 610 ( CONT’D)

Auditors should communicate: Expected modifications to the auditors’ report Unadjusted misstatements Material weaknesses in internal control Views re qualitative aspects of a/c & fin

reporting Any other relevant matters

SMALL COMPANY AUDIT PROBLEMS

Simple book-keeping and accounting controls Emphasis on personal participation by

management – opportunity to override controls

Easy access by staff to assets Informal procedures of

reporting,analysis,planning and control Accountancy services etc often provided by

auditor (when regulations permit)

CHARITIES – INTERNAL CONTROLS

Cash Donations – numbered/sealed tins,2 people count

Postal Receipts – 2 people / post list GAD’s – follow-up o/s amounts / reconcile to tax

repayments Legacies – correspondence files retained / follow up

o/s legacies Fund raising activities – records maintained / receipts

for cash takings / 2 people count

CHARITIES – AUDIT WORK

Substantive tests designed to check: Incompleteness of income Overstatement of expenses / grants Misanalysis or misuse in application of funds Misstatement or omission of assets Appropriateness of a/c policies e.g. income

gross / accruals basis

APB BULLETIN 2001/2 WORDING OF AUDITORS’ REPORTS (LISTED)

Independent Auditors’ Report to the Shareholders of XYZ Plc (Extracts)

We have audited the financial statements etc

Respective responsibilities of directors and auditors

The directors’ responsibilities etc

Our responsibility is to audit the fin.statements in accordance with relevant legal and regulatory requirements,UK standards and the Listing Rules of the FSA.

We report to you etc……info specified by law or Listing Rules re directors’ remuneration and transactions with the company.

APB BULLETIN 2001/2 WORDING OF AUDITORS’ REPORTS (LISTED- CONT’D)

We review whether the Corporate Governance Statement reflects the company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls,or form an opinion on the effectiveness of the company’s (group’s) corporate governance procedures or its risk and control procedures.

We read other info contained in the Annual Report and consider whether it is consistent etc

APB BULLETIN2001/1 THE ELECTRONIC PUBLICATION OF AUDITORS’ REPORTS

1)Where it is not possible to use page no.s to identify the location of parts of fin info on a web site – the report should specify the location/ description in another way.

2) Possible footnotes to report re integrity of web site / legislation The maintenance and integrity of the XYZ plc website is the

directors’ responsibility;the work carried out by the auditors does not involve consideration of these matters,and accordingly, the auditors accept no responsibility for any changes that may have occurred to the fin. statements since they were initially presented on the website.

Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

APB BULLETIN 2001/2 REVISIONS TO THE WORDING OF AUDITORS’ REPORTS (UNLISTED)

Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which

comprise P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared etc

Respective responsibilities of directors and auditorsThe directors' responsibilities for preparing the Annual Report and

the financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the fin. statements in accordance with relevant regulatory requirements and UK standards. We also report to you ….(exception reporting items) Our responsibilities do not extend to any other information.

APB BULLETIN 2001/2 REVISIONS TO THE WORDING OF AUDITORS’ REPORTS (UNLISTED)

Basis of audit opinionWe conducted our audit in accordance with international

auditing standards etcWe planned and performed our audit so as to obtain all

the info & explanations etcOpinionIn our opinion the financial statements. give a true and

fair view of the state of the company’s affairs as at and of its profit for the year then ended and have been properly prepared in accordance with the Companies Act 1985.

Registered auditors /Date Address

AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2005/4 (UNLISTED)

Independent Auditors’ Report to Shareholders of XYZ Ltd We have audited the fin statements of … for the y/e ….which comprise

P/L ,B/S,Cash Flow Statement,STRGL and the related notes.These fin. statements have been prepared etc

Respective responsibilities of directors and auditorsThe directors' responsibilities for preparing the Annual Report and the

financial statements in accordance with applicable law and UK A/c standards are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the fin. statements in accordance with relevant regulatory requirements and ISA’s (UK & Ire). We also report to you ….(exception reporting items) . We read other info in the Annual Report, and consider if it is consistent with the audited F.S. This other info comprises …. Our responsibilities do not extend to any other information.

AUDITOR’S REPORTS ON F.S. DRAFT APB BULLETIN 2005/4 (UNLISTED)

Basis of audit opinionWe conducted our audit in accordance with ISA’s on Auditing (UK

& Ire). An audit includes an examination on a test basis etcOpinionIn our opinion: the F.S. give a T/F view, in accordance with UK GAAP, of the

state of the company’s affairs as at …. and of its profit (loss) for the year then ended;and

the F.S. have been properly prepared in accordance with the Companies Act 1985

Registered auditors AddressDate