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    3 (6qa (16D#4) )

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    rameelamir
    The document provides questions and suggested answers related to audit, assurance and related services. Question 4 asks about the differences between auditor's reports for listed vs unlisted companies based on international standards on auditing. The key differences identified are: listed company reports must include key audit matters, independence statements, engagement partner name, and a section on other information obtained.

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    3 (6qa (16D#4) )

    Uploaded by

    rameelamir
    9 views2 pages
    The document provides questions and suggested answers related to audit, assurance and related services. Question 4 asks about the differences between auditor's reports for listed vs unlisted companies based on international standards on auditing. The key differences identified are: listed company reports must include key audit matters, independence statements, engagement partner name, and a section on other information obtained.

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    3[6QA(16D#4)]

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    The document provides questions and suggested answers related to audit, assurance and related services. Question 4 asks about the differences between auditor's reports for listed vs unlisted companies based on international standards on auditing. The key differences identified are: listed company reports must include key audit matters, independence statements, engagement partner name, and a section on other information obtained.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views2 pages

    3 (6qa (16D#4) )

    Uploaded by

    rameelamir
    The document provides questions and suggested answers related to audit, assurance and related services. Question 4 asks about the differences between auditor's reports for listed vs unlisted companies based on international standards on auditing. The key differences identified are: listed company reports must include key audit matters, independence statements, engagement partner name, and a section on other information obtained.

    Copyright:

    © All Rights Reserved
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    of 2

    Audit, Assurance and Related Services Page 3 of 4

    Q.4 Identify the differences between the auditor’s report on financial statements of a listed
    company as compared to an unlisted company, based on International Standards on
    Auditing. (04)

    Q.5 Dawood Limited (DL), a listed company, has approached your firm to provide a limited
    assurance on sustainability report of the company and presently you are verifying the
    following statement related to carbon emissions:

    “Carbon emissions were within the limits allowed by the regulator.”

    Required:
    Determine how you would verify the above claim. (06)

    Q.6 Your firm has been hired by Sensitive Products Limited (SPL), for an assurance engagement
    regarding compliance with regulatory requirements. SPL is engaged in the production of
    highly sensitive products and is required to comply with strict regulatory requirements. In
    this regard a report is submitted by SPL to the regulatory authority which contains certain
    information.

    Required:
    Draft a limited assurance report to be issued to the regulatory authority regarding the
    information provided to the authority by SPL. The report should contain a qualification and
    mention atleast three procedures performed by your firm. (14)
    (You may assume necessary details, however any annexures to the report are not required)

    Q.7 You are the audit manager responsible for the audit of Mechanic Engineering Limited,
    (MEL) which provides mechanical parts to different industries. The draft financial
    statements for the year ended 30 September 2016 show profit before taxation of
    Rs. 150 million (2015: Rs. 200 million) and total assets of Rs. 1.2 billion (2015: Rs. 1.1
    billion).

    Presently following matters are under your consideration:

    (a) MEL has recognized a late payment surcharge of Rs. 2.5 billion on amount due from
    Government agencies. Last year, the audit report was qualified with respect to the
    recognition of late payment surcharge. The management has informed you that the
    Government authorities have conveyed their willingness to pay Rs. 2 billion instead
    of Rs. 2.5 billion and has provided you a written representation with respect to the
    said amount. MEL however wants to preclude you from sending a confirmation to
    the relevant agency. (07)

    (b) During the year, MEL has sold one of its buildings to Natasha (Private) Limited
    (NPL) at a loss of Rs. 20 million. The building was purchased at a cost of
    Rs. 80 million seven years ago and was depreciated @ 5% per annum on straight line
    basis. The minutes of the meeting of the Board of Directors at which the sale was
    approved indicate that a director of MEL holds 20% shares in NPL. However, the
    minutes also indicate that he did not vote on the transaction due to conflict of
    interest. (09)

    Required:
    Evaluate the above situations and determine the course of action in respect of each of the
    above independent situations. (Reporting implications are not required)
    Audit, Assurance and Related Services
    Suggested Answer
    Certified Finance and Accounting Professional Examination – Winter 2016

    ƒ Perform substantive testing in all the


    areas with low control reliance.
    ƒ Perform cut-off test to check that the
    vouchers have been completely
    recorded.
    Risk of fraud: Management override ƒ Test the appropriateness,
    of controls authorization and completeness of
    As it is a closely held entity with journal entries recorded in the general
    ledger and other adjustments.
    ƒ Use
    majority shareholding owned by a single
    family and with key positions occupied professional judgment to
    by family members, there is always a determine the nature, timing and
    risk of fraud due to management extent of journal entries testing and
    override of controls. other adjustments and assess the
    completeness of the population subject
    There is an increased risk of fraud as to testing
    evident from the termination of
    employee in September 2016, and
    working of internal audit department
    as it is evident from their reports.
    Risk of misstatement in opening ƒ Review prior year working papers of
    the previous auditor.
    It is the first year audit and there is a ƒ Design audit procedures to provide
    balances:

    possibility that prior year opening evidence relevant to opening balances.


    balances are materially misstated and
    are not correctly brought forward.
    Deferred Tax Asset: ƒ Review the management’s future
    Deferred tax asset can only be projection of taxable profits and
    recognized to the extent that the reasonableness of the assumptions
    company expects that it would generate used.
    sufficient profits to realize the benefit. In
    the given scenario it seems difficult for
    the company to generate sufficient
    taxable profits in the near future to
    realize the deferred tax assets.

    Ans.4 Following are the additional matters that have to be included in the audit reports of listed
    companies:
    ƒ Key audit matters
    ƒ Statement from the auditor that it has provided those charged with governance with
    a statement that the auditor has complied with relevant ethical requirements

    matters that may reasonably be thought to bear on the auditor’s independence, and
    regarding independence and communicate with them all relationships and other

    where applicable, related safeguards;


    ƒ Statement that from the matters communicated with those charged with governance,
    the auditor determines those matters that were of most significance in the audit of
    the financial statements of the current period and are therefore presented as the key
    audit matters.
    ƒ The name of engagement partner.

    separate section named “other information” if at the date of audit report the auditor has
    Further in the audit report of listed companies the auditor is supposed to include a

    obtained or expects to obtain other information whereas in the case of unlisted company
    this paragraph is only given if the auditor has obtained any such information.

    Page 4 of 8

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