Audit Opinion Dilemmas

A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.

In Association with:-

Online CPD for Accountants &
Professional Advisors

Audit Opinion Dilemmas

Presenter:
Des O’Neill CPA; A.C.I.S; ACCA

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Supporting Documentation Index

Contents Page

Slide Set 1 – 13

Audit Completion Memorandum 14 – 28

Going Concern Samples 29 – 30

Bulletin 2006/1 31 – 68

Financial Statement Extracts

Tamorbrick Limited 69 – 77

Merlin Developments Limited 78 – 79

Becbay 80 – 86

Cicol Limited 87 – 88

Bloomburg Limited 89 – 92

Harcourt Developments 93 – 98

Bluefort Properties Limited 99 – 100

Landmark Fundamental Uncertainty BDO 101 – 102

CG Hotels 103 – 107

Ashford Castle 108 – 111

Slieve Russell Hotel Limited 112 – 120

Vesway Limited 121 – 125

Bishopscourt 126 – 136

McSweeney Pharmacy KPMG 137 – 139

Merrion Pharmaceuticals Ireland 140 – 146

Mount Carmel Medical Group 147 – 150

Setanta Sports Channel Ireland 151 – 152

Shannon Castle and Banquets PWC 153

Smithfield Property 154


Supporting Documentation Index – Continued

Contents Page

Extracts from Recent Financial Statements 155 – 157

DCD Builders 158 – 166

D2 Private Limited KPMG 167 – 169

Irish Car Rentals Limited 170 – 171

Irish Press Plc. 172 – 175

Lalco Holdings Limited 176 – 177

Robert Butler Holdings Limited 178 – 179


Forming Audit Opinions in 2011
• Going Concern and the Crystal Ball

• Forming Unqualified and Modified opinions

• Gathering and Documenting the Evidence
to support the opinions

• What is happening in the market place?

The Auditing Standards
• ISA 570 Going Concern
• ISA 700 The Auditors Report on Financial
Statements
• ISA 705 Modifications to the Opinion in the
Independent Auditors Report
• ISA 706 Emphasis of Matter Paragraphs

OmniPro Education & Training Page 1 of 179


Forming Opinions
Nature of Matter Auditor’s Judgment about the
Giving Rise to the Pervasiveness of the Effects or Possible
Modification Effects on the Financial Statements
Material but Not Material and
Pervasive Pervasive
Financial
statements are Qualified opinion Adverse opinion
materially
misstated
Inability to obtain
sufficient Qualified opinion Disclaimer of opinion
appropriate
audit evidence

ISA 570 – Going Concern
• Obtain sufficient appropriate audit evidence
regarding managements use of the going
concern assumption
• Conclude based on the evidence obtained
whether significant material uncertainty
exists
• Determine the implications for the auditors
report
• The auditor should consider any relevant
disclosures in the financial statements

• Managements Responsibility
• Going concern a fundamental principle on
which financial statements are prepared
• Continuing successfully in business for the
foreseeable future
• Realise its assets and discharge its
liabilities in the normal course of business
• Self fulfilling prophecy



• Auditors Responsibilities
• Planning the audit
– events conditions or risks that cast doubt on GC
• Throughout the audit
– Detecting conditions or events that indicate that GC
may be an issue
– Evaluate managements assessment
– A minimum of 12 months after the balance sheet date
– Auditor not limited to same period as management
assessment. Must enquire of and investigate issues
beyond period of assessment

• Risk assessment procedures and related
activities
• Management assessment
• Where management has not yet performed an
assessment request them to make their
assessment
• Evaluating management’s plans for the future
• Evaluating the reliability of the underlying
information used to prepare cashflow projections
• Assess the assumptions used in the projection

Going Concern Testing
• Overall financial review
• Cash flow forecasts
• Discussion with directors
• Order book review
• Review of lending facilities and terms
• Creditor payment periods
• Subsequent events on financial transactions
• Action plan review
• Specific representations



Going Concern Testing
• Looking into the crystal ball
• ISA 540 management estimate approach
• Cashflows form the basis for the opinion
• Assumptions are tested and assessed
• 3rd party documentary evidence
• Documented assessment of assumptions

• Document the extent of the auditors concern if
applicable about the entity’s ability to continue
as a going concern
• Narrative supported by facts and figures
supported substantively
• Are the disclosures sufficient to give a true and
fair view?
• Is the period of assessment of going concern is
less than 12 months?

• Statement that the financial statements have
been prepared on a going concern basis
• Statement of the relevant facts
• Nature of the concern
• Statement of assumptions adopted
distinguishable from pertinent facts
• Details of plans for resolving the issues
• Details of actions taken



ISA 570 - Going Concern
• Company has decided to cease trading
• Going concern no longer appropriate
• Make relevant disclosures
• Assets reduced to realisable values
• Reclassify fixed assets and long term liabilities
as current assets and current liabilities
• Emphasis of matter in relation to basis of
preparation

ISA 700 The Independent Auditors Report

• Title of Report
• Addressee
• Introductory paragraph
• A statement of responsibility of the management
• A statement of the auditors responsibilities
• Scope of the auditors work
• Reference to audit and reporting framework
• Opinion
• Other matters
• Other reporting responsibilities
• Date of the report
• Auditors signature
• Auditors address

Audit Report Dates
• Audit report is the date on which the
auditor signed the report
• Audit report should not be dated earlier
than the date on which all other
information contained in the report have
been approved by those charged with
governance




• Scope
• Examining on a test basis, evidence to support the
financial statements amounts and disclosures
• Assessing the accounting policies used in the
preparation of the financial statements
• Assessing the significant estimates made by
management
• Evaluating the overall financial statement presentation


• Opinion
• Financial reporting framework being used
• Financial statements give a true and fair
view
• Presented in accordance with reporting
requirements
• Comply with statutory requirements


• Unqualified Opinion
• Emphasis of matter
• Qualified opinion
• Disclaimer of opinion
• Adverse Opinion



ISA 705 Modifications to the Opinion in The

• Qualified / Adverse / Disclaimer
• Express clearly and appropriately modified
opinion on the financial statements
• FS are not free from material
misstatement
• The auditor is unable to obtain sufficient
appropriate audit evidence to conclude
that the financial statements are free from
material misstatement

ISA 705 Modifications to the Opinion in The

• Unqualified opinion can not be expressed
• Obtained sufficient appropriate audit
evidence
• Misstatements individually or in aggregate
are material
• But not pervasive
• Except for

ISA 705 Modifications to the Opinion in
The Independent Auditors Report
• Unqualified opinion can not be expressed
• Unable to obtain sufficient appropriate audit
evidence
• Possible effects on the financial statements of
undetected misstatements
• Could be material
• But not pervasive
• Limitation in Scope



• Adverse opinion
• Having obtained sufficient appropriate
audit evidence
• Concludes misstatements individually or in
aggregate are both material
• and pervasive
• Disagreement

• Unable to obtain sufficient appropriate
audit evidence on which to base the
opinion
• Concludes possible effects of undetected
misstatements
• Are both material and pervasive
• Limitation in scope

• Adverse opinion
• Having obtained sufficient appropriate
audit evidence
• Concludes misstatements individually or in
aggregate are both material
• and pervasive
• Disagreement



• In extremely rare circumstances involving
multiple significant uncertainties
• Notwithstanding having obtained sufficient
appropriate audit evidence on which to base the
opinion
• It is not possible for form an opinion
• Due to the potential interaction of the
uncertainties and their possible cumulative effect
on the financial misstatements

• Management imposed Limitation in Audit Scope
• If the auditor becomes aware, after accepting an
audit engagement, that those charged with
governance of the entity, or those who
appointed them as auditor, have imposed a
limitation on the scope of the audit work which
they consider likely to result in the need to issue
a disclaimer of opinion on the financial
statements, the auditor should request the
removal of the limitation.

• Limitation in Audit Scope

• Withdraw from the audit where possible under applicable
law or regulation

• If withdrawal not possible disclaim the opinion



Forming Opinions
Nature of Matter Auditor’s Judgment about the
Giving Rise to the Pervasiveness of the Effects or Possible
Modification Effects on the Financial Statements
Material but Not Material and
Pervasive Pervasive
Financial
statements are Qualified opinion Adverse opinion
materially
misstated
Inability to obtain
sufficient Qualified opinion Disclaimer of opinion
appropriate
audit evidence

ISA 706 Emphasis of matter Paragraphs
and Other Matter Paragraphs
• The opinion having been formed
• Draw users attention when necessary to
• Matter although presented and disclosed in the
financial statements is of such importance that it
is fundamental to the users understanding of the
financial statements
• As appropriate and other matter that is relevant
to the users understanding of the audit, the
auditors responsibilities or the audit report

• Include it immediately after the opinion on
the financial statements paragraph
• Use the heading Emphasis of Matter
• Include a reference to the matter being
emphasised
• Indicate that the auditors opinion is not
modified in respect of the matter
emphasised



• Communicate with those charged with
governance regarding the proposed
wording

• Emphasis of matter paragraphs
– ISA 210
– ISA 560
– ISA 570
• Other matter paragraphs
– ISA 560
– ISA 710
– ISA 720 A

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CLIENT NAME: Prepared by: _______

PERIOD END: Reviewed by: _______ A3
AUDIT COMPLETION MEMORANDUM-MEDIUM/LARGE COMPANY

Contents
 Partner Conclusion Summary
 Matters for Partners Attention
 Matters Forward
 Communications with those Charged with Governance
 Section 1 Reporting Requirements
 Section 2 Ethics, Independence & Continuance
 Section 3 Laws & Regulations Review
 Section 4 Deficiencies in Internal Controls
 Section 5 Achieving Audit Objectives
 Section 6 Fraud
 Section 7 & 8 Materiality & Sample Size
 Section 9 Response to Significant Specific Risks identified at Planning stage
 Section 10 Audit Accounting Estimates
 Section 11 Other Matters
A. Related Parties
B. Going Concern
C. Events after the Balance Sheet date
D. Use of Expert and Service Organisation
E. Groups & Consolidations
 Section 12 Independent Partner/Hot File Review/External Consultation
 Section 13 Summary of Errors
 Section 14 Disclosures & Accounting Policies
 Section 15 File Completion
 Section 16 Re-Appointment

KEY TO NOTATIONS BELOW

WP Working Paper
CAF Current Audit File
ACM Audit Conclusion Memo
APM Audit Planning Memo

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Disclaimer

This Audit Conclusion Memo is provided to give guidance in relation to the format and contents of a typical Audit
Conclusion Memo under the relevant auditing standards. It does not purport to give definitive professional advice in
any form. It should, accordingly, not be relied upon as such. Auditors using these Work Programmes and any
programmes or templates, should tailor the approach and the evidence gathered to comply with Generally Accepted
Accounting Practices in Ireland in accordance with the Accounting Standards Board, International Standards on
Auditing (UK & Ireland) and Company Law

Despite taking every care in the preparation of this document OmniPro does not guarantee the accuracy or veracity of
any information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained
therein

OmniPro does not take any legal responsibility for the contents of this manual and the consequences that may arise
due to any errors or omissions. OmniPro shall therefore not be liable for any damage or economic loss occasioned to
any person acting on, or refraining from any action, as a result of or based on the material contained in this publication

All areas of this document need to be specifically tailored to each individual client

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Partner Conclusion Summary
(REF ISA 700, ISA 720)

This needs to be specifically tailored and added to for each assignment based on the facts of the audit
findings etc

I have reviewed and assessed the conclusions drawn from the audit evidence obtained as the basis for the
expression of an opinion on the financial statements within the materiality levels set out at the planning stage

The auditor report is presented in accordance with the recommended formats presented in Auditing Practices Board
Bulletin 2006/1 (RoI)

As highlighted and documented below based on our interpretation of ISA 700 and Bulletin 2006/1 (specifically
Appendix 2) we do not have a situation which requires any disclosures or modification of the standard audit opinion.

 We have obtained sufficient appropriate audit evidence
 The financial statements are prepared in accordance with Irish GAAP
 The financial statements are not affected by significant uncertainties.
 The financial statements give a true and fair view
 Thus in our professional judgement particularly there is no need to make any modifications to the
standard unqualified audit opinion for an entity of this type

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I have completed the Audit Completion –Audit Partners Checklist @ A 4. No issues arose.

Based on these conclusions reached I can express an opinion as follows

o That the financial statements give a true and fair view, in accordance with Generally Accepted Accounting
Practice in Ireland, of the statement of the company's affairs and of its profits for the period

o That the financial statements have been properly prepared in accordance with the Companies Acts 1963 to
2009

o That we have obtained all the information and explanations we consider necessary for the purpose of our
opinion

o That in our opinion the company has kept proper books of accounts and that the company's financial
statements are in agreement with these books of accounts

o That in our opinion the information given in the Directors' Report is consistent with the financial statements

o That the net assets are more than half of the amount of its called up share capital thus in our opinion on that
basis there did not exist a financial situation which under Section 40 (1) of the Companies (Amend) Act, 1983
would require the convening of an extraordinary general meeting of the company.

__________________________

PARTNER & DATE

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Matters for the Attention of Partner
Significant Matters and issues for partner attention to include

Issue File Ref

All issues of significant relevance should be detailed.

Matters Forward

There have been no changes in the client’s activities or procedures this year that require attention on next year. There
were no tests identified during our audit fieldwork that could be omitted from testing in subsequent years

There were no other issues that require any mention

Communications with those charged with Governance (Ref ISA 200, ISA 210, ISA 260, ISA
265, ISA 580, ISQC1)
The practice has open channels of communication with the client.

The key formal communications were as follows:

Letter of Engagement
 A tailored letter of engagement reflecting the requirements of the client and the specific nature of the
engagement in hand has been issued. A signed copy can be found @ WP Ref B 6.

Audit Planning Letter
 Arising out of our engagement team meeting, the client planning meeting and our acceptance and
continuance procedures an audit-planning letter has been issued to the client. A signed copy can be
found @ WP Ref B 7.
 The timescale of the audit has been discussed with the Engagement Partner and those charged with
governance on WP B9.

Letter of Representation
 A tailored letter of representation was issued to the client. A signed copy can be found @ WP Ref A2.

Audit Findings Letter
 A tailored audit findings letter reflecting the specific issues identified during the audit was drafted and
forwarded to the client. A signed copy with the client’s responses can be found @ WP Ref A12.
 Audit Opinion Letter (WP A15) has been issued to Management on XXXX 2011 outlining the audit opinion.
 Response from audit client where a qualified audit opinion has been made has been documented on WP
A15.1

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Other verbal communications and meetings, which were recorded include:-
 Audit planning meeting with client (WP Ref B 9)
 Interim Audit meeting with Engagement Partner and those charged with Governance on weaknesses/errors in
internal controls (WP Ref B10)
 Internal Meeting with Engagement Partner & Audit Manager on Audit Findings (WP Ref A11.1)
 Audit conclusion meeting with client (WP Ref A 11)

All other client communications which was relied upon in the course of the audit or which was required to ensure good
communication with those charged with governance was recorded on the individual sections of the audit fieldwork

Section 1 Reporting Requirements

 As identified at the planning stage there are no specific 3rd party reporting requirements for this client to
regulators or third party but the following obligations were considered as part of the audit:-
o Money Laundering Reporting (Money Laundering & Terrorist Financing) Act 2010 (Section 25).
o Reporting to ODCE under the CLEA 2001
o Criminal Justice Theft & Fraud Offences Act 2001 & Criminal Justice (Terrorism Offences) Act 2005
o S1079 Taxes Consolidation Act
 We have no grounds for suspicion of Money Laundering and the need to report in accordance with
the Criminal Justice Act (Money Laundering & Terrorist Financing) Act 2010 (Section 25).
 No have not become aware in the course of our audit of any indictable offences committed by the
company which are reportable to the Director of Corporate Enforcement
 We have considered our reporting requirements under the Criminal Justice Acts 2001 and 2005 and
have not become aware of theft, fraud or other related offences as defined in the Acts.
 We have not become aware of any incidences requiring reporting under S 1079 of the Taxes
Consolidation Act 1997

In accordance with ISA 200 we have
 Complied with relevant ethical requirements (a) Integrity (b) Objectivity (c) Professional competence
and due care (d) Confidentiality and (e) Professional behaviour, including those pertaining to
independence, relating to financial statement audit engagements
 Planned and performed the audit with professional scepticism recognising that circumstances may
exist that cause the financial statements to be materially misstated
 Exercised professional judgment in planning and performing an audit of financial statements
 Obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby
enable us to draw reasonable conclusions on which to base the auditor’s opinion
 Complied with all ISAs (UK and Ireland) relevant to the audit. An ISA (UK and Ireland) is relevant to the audit
when the ISA (UK and Ireland) is in effect and the circumstances addressed by the ISA (UK and Ireland) exist
 Understood the entire text of all relevant ISA (UK and Ireland), including its application and other explanatory
material, to understand its objectives and to apply its requirements properly
 Determined that there are no other audit procedures in addition to those required by the ISA’s necessary.

Section 2 Ethics, Independence & Continuance (REF ISA 220, ES, ISQC1)

 As set out in Section 2 of the APM no ethical issues that were not rectifiable with the implementation of
suitable safeguards were identified at the planning stage. No information has been obtained during the audit
fieldwork that would have caused the firm to decline the audit engagement had that information been received
prior to commencement of the engagement.

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 Throughout the audit engagement, the engagement partner remained alert, through observation and making
inquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the
Engagement team
 No matters came to the engagement partner’s attention through the firm’s system of quality control or
otherwise that indicated that members of the engagement team have not complied with relevant ethical
requirements. Therefore in the opinion of the engagement partner all members of the engagement team have
complied with the APB Ethical Standards and the Institutes Ethical Guide
 All the threats to independence and objectivity, and safeguards implemented/ have been clearly documented
OR
 At the conclusion stage in my opinion no threats to independence have arisen, this will be reviewed again at
the Conclusion stage of the audit
 The engagement partner will monitor engagement performance through:-
o Direction, Supervision and Performance of the audit engagement in compliance with professional
standards and applicable legal and regulatory requirements.
o Reviews being performed in accordance with the firm’s policies and procedures (ISQC1), and on or
before the date of the auditor’s report a discussion will be held with the engagement team to ensure
that sufficient appropriate audit evidence has been obtained to support the conclusions reached and
for the auditor’s report to be issued, WP Ref A11.1
o Consultation on difficult or contentious matters between engagement team and others at appropriate
level outside the firm A11.1
o Engagement Quality Control Review which will involve discussion of significant matters with the
engagement team, and evaluating the conclusions reached in formulating the auditor’s report and
consideration of whether the proposed auditor’s report is appropriate, on WP A11.1.
o Differences of Opinion between the engagement team and the engagement quality control reviewer
will be resolved through the firms policies and procedures, ISQC1.

Section 3 Laws & Regulations (REF ISA 250(A) & 250(B) If applicable)

 All discussions with management in relation to laws & regulations have been documented in the audit
planning meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A11. The management have
given specific representations in relation to laws and regulations in the letter of representation on WP Ref A2.
 Documentation from regulatory authorities was reviewed to assess compliance. ADD DOCUMENTS
REVIEWED

Laws & Regulation Identify/Inspect Areas of Non Responses to non compliance
Compliance and/ or Reporting Requirements
 Employment Law  Collusion
 Employment Law  Forgery
 Tax Legislation  Deliberate failure to record
transactions
 Co. Act  Management override of
controls

 Health & Safety and or  Investigations by regulatory
Environmental Health organizations and
government departments or
payment of fines or penalties
 Tax Legislation  Sales commissions or
agent’s fees that appear
excessive in relation to those
ordinarily paid by the entity or

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in its industry
 Purchasing at prices
 Tax Legislation significantly above or below
market value
 Tax Legislation  Unusual payments in cash
 Tax Legislation  Unusual transactions with
companies registered in tax
havens
 Employment Law  Unauthorized transactions or
improperly recorded
transactions

 We have specifically documented responses to non compliance and/or reporting requirements in accordance
with ISA 250 and 250(B) and the ODCE.
 We reviewed the legal expenses and correspondence during the year and traced to supporting
documentation and obtained relevant explanations. No issues arose

Section 4 Deficiencies in Internal Controls (REF ISA 260, ISA 265)
Note: A deficiency in internal control exists when
o A control is designed, implemented or operated in such a way that is unable to prevent, or detect and
correct, misstatements in the financial statements on a timely basis or
o A control necessary to prevent, or detect and correct, misstatements in the financial statements on a
timely basis is missing
The following deficiencies in control were noted during our audit work

Weakness / Issue File Ref Suggested Resolution / Action

OPTION 1
In this regard we conclude that the deficiencies in internal control noted above constitute “significant deficiencies” as
defined in ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and
Management. On that basis these merit the attention of those charged with governance and therefore these have
been formally communicated to those charged with governance as part of the audit findings letter (WP Ref A 12).;

OPTION 2

The deficiencies in internal control noted above do not constitute “significant deficiencies” as defined in ISA 265
Communicating Deficiencies in Internal Control to Those Charged with Governance and Management. On that these
have not formed part of the audit findings letter (WP Ref 12) however these were discussed with management at the
Audit Closing Meeting as documented at WP Ref A 11

Section 5 Achieving Audit Objectives (ISA 200, ISA 315, ISA 520, ISA 500, ISA 230, ISQC1)
Knowledge of the client

The client knowledge and background has been documented in the APM in Section 3. This documentary has been
supported by the transaction testing performed and all other evidence obtained throughout the audit. Based on the

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information gathered throughout the audit as supported by the conclusions recorded on the working papers and the
conclusions reached on the individual sections C – O

Analytical Review – Expectations and Variations (Ref ISA 520)

The financial performance and published results are in line with expectations and all material variances are explained
on the final analytical review @ WP Ref A 6

Explanations Received, Corroborative Audit Evidence and Substantive Testing

All explanations received from management throughout the audit have been fully supported by sufficient appropriate
audit evidence obtained. The audit evidence obtained, substantive testing and conclusions reached have been
documented throughout the file from Section C to O.

Additional Audit Procedures

During the planning stage of the audit we determined that no additional audit procedures would be required in addition
to those required by the ISA’s in pursuance of the objectives stated in the ISAs. Following our audit testing no further
additional procedures were identified

Final Opinion

In our professional judgement based on the evidence gathered and documented throughout the file in our
professional opinion the financial statements give a true and fair view.

Budget

The planned budget and actual budget comparison has been recorded on WP Ref B 5. Any matters forward to
improve efficiency have been recorded above in the Matters Forward Section

Query & Review Points

All query and partner review comments have been dealt with @ WP Ref 3.1.

Section 6 Fraud (REF ISA 240)

 Throughout our audit testing samples were selected to facilitate the reasonable expectation of detecting fraud
as well as designing a sample that accurately reflects the attributes of the entire population.

 Based on an initial assessment of Fraud using the Fraud questionnaire @ WP Ref A13.1 the following areas
were identified as potential fraud risk areas

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Section Specific Risk Results & Conclusions based on WP Ref
work carried out

Sales Revenue Recognition
Stock Inventory Quantities
Creditors Provisions-Accounting Estimates
Cash/Bank Misappropriation of Cash amounts
Payroll Misappropriation of Cash amounts

 Detailed conclusions can be found @ WP Ref A13.2
 The discussions with and verbal representations obtained from the directors in relation to fraud were recorded
in the audit conclusion meeting memo on WP Ref A 11. Formal written representations in relation to fraud
were obtained from the directors in the letter of representation on WP Ref A 2.
 No reportable fraud offences were detected during the course the audit

Section 7 & 8 Materiality & Sample Sizes (REF ISA 320, ISA 315, ISA 330, ISA 530)
OPTION 1 No Change in Materiality or Sample Sizes Required

The materiality levels and sample size selections as set out at the outset of the audit during audit planning at WP Ref
A4.1 and WP Ref A4.2 and Sections 7 & 8 of the Audit Planning Memo were continually reviewed and assessed
throughout the audit fieldwork to ensure that the initial levels set were appropriate. No information was obtained or
reviewed that would have caused Compliant Auditor to determine a different amount initially

Sample testing carried out on all sections accurately reflected the attributes of the entire population being tested.

Overall sample sizes were appropriate and the results obtained are sufficient to form an opinion.

OPTION 2 Change in Materiality or Sample Sizes Required

The materiality levels and sample size selections as set out at the outset of the audit during audit planning at WP Ref
A4.1 and WP Ref A4.2 and Sections 7 & 8 of the Audit Planning Memo were continually reviewed and assessed
throughout the audit fieldwork to ensure that the initial levels set were appropriate. In light of information received
regarding ????? we have revised the overall materiality level for the Balance and Profit & Loss to ???? and ????
respectively. Performance materiality levels have also been revised in particular materiality for Debtors has been
revised to €???? While the sample size has been revised to ????.. Audit testing was carried out based on these
revised materiality levels and sample sizes

Section 9 Response to Significant Specific Risks Identified at Planning Stage of the audit
(REF ISA 330)

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Area Risk of Material Misstatement Risk Assertion Results and Conclusions WP Ref.
Level Impacted based on Audit Work Ref
Performed
Stocks Existence of Stock 3 E Attended Stock take. F
No Issues arose
Incorrect treatment of 2 V NRV Testing on slow F
obsolete/slow moving stock moving stocks
identified during stock
take. No particular
concerns raised

Cash Misappropriation of Cash 2 C, V Reviewed cash book H
during period and
reviewed of cash
levels at year- end.
No material items
noted

Sales All sales of the company not 3 C, Reconciled Sales to M
completely recorded in accounts A Point of Sale Reports
of company E Performed Analytical review
year on year and compared
to benchmark with no issues
noted

Section 10 Audit Accounting Estimates

OPTION 1
The followings situation(s) where accounting estimates, other than fair value accounting estimates, include:
 Allowance for doubtful accounts
 Inventory Obsolescence
 Warranty Obligations
 Depreciation method or asset useful life
 Provision against the carrying amount of an investment where there is uncertainty regarding its recoverability
 Outcome of long term contracts
 Costs arising from litigation settlements and judgments

Option 2
There are no areas that require the use of accounting estimates

Section 11 Other Matter

Related Parties (REF ISA 550 & FRS 8)

 All related parties have been adequately disclosed in the Financial Statements
 There were no illegal loans to directors or related companies under S31 of CA 1990 in the previous year. All
aggregate loans to directors throughout the year did not exceed 10%
 Statutory minutes, legal correspondence, bank confirmations and guarantees and general correspondence
were reviewed with all related party transactions documented on WP Ref T 2.

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 Our discussions with management at the planning stage have been recorded in the audit planning meeting
WP Ref B 9.
 All discussions with management in relation to related parties have been documented in the audit planning
meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A 11. The management have given
specific representations in relation to related parties in the letter of representation on WP Ref A 2.
 There was no evidence of window dressing or unrecorded related party transactions

Going Concern (REF ISA 570)

THIS SECTION NEEDS TO BE TAILORED SPECIFIC TO EACH CLIENT. COMMENTS BELOW ARE FOR
ILLUSTRATIVE EXAMPLE PURPOSES ONLY

The going concern questionnaire @ WP Ref A 9.2 was completed and no issues arose. Detailed documentation of
findings can be found @ WP Ref A 9.3. Copies of Cash flows, Bank facilities, Updated Management Accounts have
been included on file @ A 9.4 & A 9.5.

Or
The going concern questionnaire @ A9.2 was completed and the following issues arose which have been dealt with
and explained below. Detailed documentation of findings can be found @ WP Ref A 9.3.

Issue 1

Circumstances / Facts

Ongoing Litigation and/or new claims since balance sheet date

Substantial Losses of €???

Net Liability or Net Current Liability Position €????

Bank confirmation letters
EG Increased length of time in repaying loans

No Support from group subsidiaries

Management Explanation

Supporting Audit evidence obtained

Conclusion
In our professional judgement based on the information obtained, this issue does/does not require disclosure in the
accounts.

GENERAL
All discussions with management in relation to potential going concern issues have been documented in the audit
planning meeting on WP Ref B 9 and the audit conclusion meeting on WP Ref A 11. The management have given
specific representations in relation to going concern in the letter of representation on WP Ref A 2.

A copy of the budgets/cash flow forecasts for the coming year is on WP Ref A9.4. These forecasts project continued
steady growth and profitability.

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As highlighted and documented below based on our interpretation of ISA 700/ ISA 570 and APB Bulletin 2006/01
(specifically Appendix 3) we do not have a situation which requires any disclosures or modification of the standard
audit opinion.

Based on our interpretation of ISA 570 and APB Bulletin 2010/2 Bulletin 2006/1 specifically Appendix 3 we do not
have a situation which requires any disclosures or modification of the standard audit opinion.

 We have obtained sufficient appropriate audit evidence
 The financial statements are prepared on a going concern basis
 There is not a significant level of concern about the entity’s ability to continue as a going concern
 The financial statements give a true and fair view
 The directors in assessing going concern have considered a period of at least 12 months after the balance
sheet date
 Thus in our professional judgement particularly in relation to going concern there is no need to make any
adjustments or disclosures in the financial statements.
 Or If necessary - We have obtained and detailed below all the information necessary to make the relevant
disclosures in relation to going concern.

Events After the Balance Sheet Date (REF ISA 560 & FRS 21)

The following audit evidence was reviewed and inspected up to the date before the signing of the audit report, to
ensure that and subsequent events have been identified and that the financial statements accurately reflect any
adjustments which should be made to the year end figures. Details of the actual audit evidence examined has been
recorded for each individual item on WP Ref A 10.2. Copies of Cash flows, Bank facilities, Updated Management
Accounts have been included on file @ A 9.4 & A 9.5.

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o Management accounts
o Cash book, invoices and bank statements
o Cash flows
o Correspondence
o Minutes of meetings
o Major contracts

ADD/DELETE TO LIST ABOVE

The initial field work and final audit work were performed within 1 week of each other so no secondary subsequent
events work was deemed necessary Are there any points forward from previous years which should be considered

The discussions with and verbal representations obtained from the directors in relation to subsequent events were
recorded in the audit conclusion meeting memo on WP Ref A 11. Formal written representations in relation to events
after the Balance Sheet date were obtained from the directors in the letter of representation on WP Ref A 2.

Work of an Expert (ISA 620)

As set out in the Planning Memo Expert A was used during our audit due to their expertise in the area of????. The
WP @ Q 1 & 2 was completed. We have reviewed the expert’s findings and conclusions, their significant assumptions
and methods and in our professional judgment sufficient appropriate audit evidence has been obtained and no other
audit procedures need to be performed in pursuance of the audit objectives in the area of ????.

Use of Service Organisations (ISA 402)
 We have obtained an understanding of how a user entity uses the services of a service organisation in the
user entity’s operations, documented on S1 an S2.

Groups & Consolidations (ISA 600)
OPTION 1
NO GROUP

OPTION 2
I (name auditor) have been appointed as Group Auditor as at DD/MM/YR.
 We have obtained a letter of engagement as documented at WP B6.
 We have obtained an understanding of the group as outlined in our group engagement team meeting
documented @ WP B8.
 We have consolidation adjustments and reclassifications as documented at WP T 3.
 We have considered the work of component auditors @ WP B8, to include :- (a) Independence, (b) Ethical
guidelines, (c) timescales.
 Financial Statements and Trial Balances for each company have been filed at WP T4.
 Intra group accounts have been reconciled at WP T5 with written confirmation on WP T6.

Section 12 Independent Partner / Hot File Review/External Consultation (REF ISQC 1)
 Based on an initial assessment of the engagement at the planning stage an independent partner review is not
necessary. Having completed the audit file no further issues arose that would have changed the initial
assessment, hence no hot file review is deemed to be necessary on this file in accordance with our internal
Engagement Quality control procedures.

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 No external consultation was required for this assignment. Had such consultation requirements arose the firm
would have followed its External Consultation internal policies which would include full documentation of the
consultation etc
 This file will be reviewed (cold file review) on a cyclical basis as part of the firm’s annual compliance review
and ongoing internal quality control procedures.

Section 13 Summary of Errors (REF ISA 450)
THIS SECTION NEEDS TO BE TAILORED SPECIFICALLY TO EACH CLIENT. COMMENTS BELOW ARE FOR
ILLUSTRATIVE EXAMPLE PURPOSES ONLY

 As Compliant Accountant & Co are involved in the accounts preparation as well as the audit most detected
errors are corrected as part of the accounts preparation procedures. Some minor errors remained unadjusted
see WP Ref A7.1.
 All misstatements noted during our audit with a value below €500 have been excluded from this listing as they
are clearly trivial. These misstatements noted at WP Ref A7.1 have not been corrected in the financial
statements as these amounts are clearly immaterial both individually and in aggregate. These have been
notified to the directors as part of the audit findings letter on WP Ref A12.
 Representations were also received in relation to unadjusted errors as part of the Letter of Representation @
WP Ref A 2. All material errors noted during the audit were adjusted as agreed with the Directors.

Section 14 Disclosures & Accounting Policies (REF FRS’s & Company Law)
All disclosures have been made in the Financial statements in accordance with our Disclosures checklist at WP Ref A
8.1 & A 8.2 and pro-forma set of Financial statements. All accounting policies have been reviewed and these are in
accordance with accounting standards and applicable law.

Section 15 File Completion
All working papers have been completed and reviewed appropriately as recorded by the file completion checklist on
WP Ref A 5.
Finalised Financial Statements have OR have not been submitted to the client within three days of approval of the
financial statements and signing of the auditor’s report, WP Ref A5.
The Financial Statements have been signed off by (Personal Name of Auditor) on XXX 2011 on file Ref A1.1.

Section 16 Re-Appointment (Ref ISA 220)
Nothing has come to my attention during the audit which would prevent the firm, subject to review next year,
accepting reappointment or remaining in office.

________________________

PARTNER & DATE

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Compliant Client A 9.3
30 June 2011
Initials Date
Prepared by: Staff 1-Jan-09
Index Reviewed by: Partner 31-Jan-09

Going Concern
To assess the ability of the company to continue on a going concern basis
Objective for the next 12 months thus the adequacy of preparing the Financial
Statements on this basis

NOTE: Important to ensure that as much back up documentation as possible is gathered
and contained on file relating to Going Concern. The Work Done below is only a
suggestion and should be fully tailored for each client

Work Done

As at the current period end the company is in a current asset and a net asset position with
net assets totalling ?????

All banking facilities for next year have been agreed and finalised with the bank. Copies of
these agreementscan be found at WP Ref A 9.4
There has been no major restructure in debt in the period and from a review of all
borrowings in the company there would appear to be none approaching maturity without
realistic prospects of renewal or repayment. The company is not reliant on short term
borrowings and the bank balance is in a positive position

From our knowledge of the client and discussions with the directors during Closing Meeting
(Ref WP A 11) there is no evidence of the company defaulting or breaching any
agreements or covenants

We discussed cashflows and liquidity with the Finance Director and reviewed liquidity
current and quick ratios @ A 6. The company would appear not to have any major liquidity
issues. Discussions with the Finance Director were held during both the Planning Meeting
and Close Out Meeting with the client see REF A 11 & B 9

We reviewed the company's management accounts and cashflows up the the date of
signing the Financial statements. For this three month period turnover was????, profit was
???? And the bank position as at that date is ????.Therefore there is no particular concern
regarding the companies ability to continue post year end (see WP Ref A9.5)

There have been no substantial sale of fixed assets during or after the period

Working Capital terms and conditions from both a customer and a supplier's perspective
have not changed during the period

Operationally the company has not and is not expecting to change its business/level of
business within the next 12 months

© OmniPro


Compliant Client A 9.3
30 June 2011
Initials Date
Prepared by: Staff 1-Jan-09
Index Reviewed by: Partner 31-Jan-09

Going Concern
As confirmed by way of Solicitors Letter the company is not subject to any major litigation
which could render going concern issues

We have reviewed the forecast Cashflows and Budgets for the client and we are satisfied
that there are no going concern issues. We have completed the checklist @ A9/2 and have
not noted any issues in this regard. We also spoke to the management regarding going
concern (see WP Ref A 9.5)

No evidence was obtained during our work to suggest the company was overally reliant on
any particular suppliers or customers who themselves could be facing difficulties

We have obtained a written confirmation of support from the subsidiaries
within the group, namely XXX Ltd and XXX Ltd

Managements Assessment of Going Concern (See WP Ref A 9.6)

Conclusion

In our professional judgement work carried out in this section has been satisfactorily
completed and recorded with all appropriate evidence received. Based on our testing
carried out we can conclude that using the going concern basis for the preparation of the
Financial Statements is appropriate

© OmniPro

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