Martyn Jones November 2009
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Transcript of Martyn Jones November 2009
Agreeing to the terms of audit engagement and management
representationsISAs (UK and Ireland) 210 and 580
Martyn JonesNovember 2009
Agreeing to the terms of audit engagement
An area of change which involves clients
Is an area where ICAEW will be issuing
some supporting guidance
Procedures include determining whether
the financial reporting framework to be applied
is acceptable
Procedures to obtain agreement of
directors that they acknowledge and understand their responsibilities
Why did these revisions occur
To establish whether the preconditions for an audit are present
To try to eliminateinstances of
accepting proposed engagements where
financial reporting framework
is unacceptable
In the UK and Ireland we would not normally expect the framework to be an issue
Management responsibility
Preparation of the financial statements in accordance with the applicable financial reporting framework including,
where relevant, their fair presentation
For such internal control as management determines as necessary to enable the preparation of financial statements that
are free of material misstatement due to fraud and error
And…..
Management responsibility
Additional information that the auditor may
request for the purpose of the audit
Access to all information of which
management is aware that is relevant
Unrestricted access to persons within the entity from whom the auditor
determines it is necessary to obtain
audit evidence
Also to provide the auditor with:
Key points
ISA example engagement letter not tailored for UK
and Ireland
Appropriate terminology for UK or Irish Company
will be directors
Auditors shall not accept the proposed audit engagement if the financial reporting framework is unacceptable or agreement to the preconditions has not been obtained
Other key points
Appendix 2 deals with the
determination of acceptability of general
purpose frameworks
Recurring audits – need to assess
circumstances that require the terms to be
revised
A conglomeration of accounting convention
designed to suit individual preferences
is not an acceptable financial reporting
framework for general purpose financial
statements
Smaller entities
For example where a third party has assisted in the
preparation of the financial statements
There is a need to avoid
misunderstanding
Written representations about management responsibility
Fulfilled its responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework
including, where relevant, their fair presentation as set out in the terms of the audit engagement
Written representations about management responsibility (cont’d)
It has provided the auditor with all relevant information and access as agreed in the terms
of engagement
All transactions have been recorded and are reflected in the financial
statements
APB guidance is important as it clarifies that representations can be given to “best of knowledge and belief”
Further UK and Irish guidance
• A signed copy of the financial statements may be sufficient evidence of the directors’ acknowledgement of their collective responsibility for the preparation of the financial statements where it incorporates a statement to that effect
• A signed copy of the financial statements is, however, not by itself sufficient appropriate evidence to confirm other representations
Signing responsibilities should be fairly straightforward for UK and Irish auditors
Other key points
If written representations not provided discuss with directors, re-evaluate their integrity, evaluate
effect on reliability and take appropriate actions including effect
on opinions having regard to requirement to disclaim