Understanding Auditor's Report and Management Representation in

School: La Trobe University - Course: ECO 5POE - Subject: Accounting

Name: Mai Khanh Tran Phan 134602 Workshop 8 Q1: Explain why the auditor's report cannot be dated before the directors' declaration Auditor's report cannot be dated before the directors'declarationbecause auditors accept only signed financial statement by management for the purpose of auditing and prepare auditreporton the basis of such financial audit. So, date of auditreportwill always be after date ofdirectors'declaration. The auditor should date the audit report no earlier than the date on which the auditor has obtained sufficient appropriate evidence to support the auditor's opinion Q2: How does an auditor distinguish between an adjusting event and a non- adjusting event? Events occurring between the reporting date and the date on which the financial statement are authorised for issue should be classified as either adjusting or non- adjusting events.  Adjusting events provide further evidence of conditions that existed at the reporting date, and result in adjustment to the financial statements.  Example: -sales of inventory after reporting date that give evidence about their net realisable value at reporting date; -discovery of fraud or errors that show the financial statements are incorrect -receipt of information after reporting date indicating that an asset was impaired at reporting date;

Non-adjusting events are events occurring after the reporting date that do NOT provide evidence of conditions that existed at the end of the reporting period. Examples of non-adjusting events: -major business combinations or disposal of a major subsidiary; -major purchase or disposal of assets, classification of assets as held for sale or expropriation of major assets by government; -destruction of a major production plant by fire after reporting date; -announcing a plan to discontinue operations; Q3: Identify the date and period that should be covered by written management representations According to ASA 580, paragraph 14: The date of the written representations should be as of the date of the auditor's report on the financial statements. The written representations should be for all financial statements and period(s) referred to in the auditor's report. Q4: If management refuses to provide written representations, what three actions must an auditor take? According to ASA 580, paragraph 19: If management refuses to provide a representation that the auditor considers necessary, this constitutes a scope limitation and the auditor should express a qualified opinion or a disclaimer of opinion. In such circumstances the auditor would ordinarily: (a) evaluate any reliance placed on other representations made by management during the course of the audit;

(b) draw to the attention of those charged with governance or management any relevant statutory and/or regulatory provision which gives the auditor access to records and information. (c) consider if the other implications of the refusal may have any additional effect on the auditor's report.