【正确答案】Audit report elements and why included The following elements should be included within an auditor’s report along with why: Title – The auditor’s report shall have a title which clearly indicates that it is the report of an independent auditor, this distinguishes this report from any other. Addressee – The auditor’s report shall be addressed as required by the circumstances of the engagement, this is determined by law or regulation but is usually to the shareholders. This clarifies who may rely on the opinion and who may not, such as third parties. Introductory paragraph – The introductory paragraph in the auditor’s report shall identify the entity whose financial statements have been audited, state that the financial statements have been audited, identify the title of each statement which comprises the financial statements, refer to the summary of significant accounting policies and other explanatory information and specify the date or period covered by each financial statement. This paragraph aims to clarify what time period the audit covers and which pages of the financial statement have been audited, as not every page is audited. Management’s responsibility for the financial statements – This section of the auditor’s report describes the responsibilities of those in the organisation who are responsible for the preparation of the financial statements. This paragraph along with that of the auditor’s responsibilities looks to make clear what the role of management is, as well as what the role of the auditor is. It seeks to reduce the expectation gap. Auditor’s responsibility – The auditor’s report shall state that the responsibility of the auditor is to express an opinion on the financial statements based on the audit and that the audit was conducted in accordance with International Standards on Auditing and ethical requirements and that the auditor plans and performs the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Along with the management’s responsibility paragraph,it seeks to make clear the role of the auditor and also what management’s role is. Also this paragraph seeks to explain what an audit involves and that only material misstatements are considered, as opposed to all errors. Opinion paragraph – When expressing an unmodified opinion, the auditor’s opinion shall either state that the financial statements ‘present fairly’ or ‘give a true and fair view’ in accordance with the applicable financial reporting framework. This paragraph details whether the financial statements are true and fair or not. Other reporting responsibilities – If the auditor addresses other reporting responsibilities in the auditor’s report, these shall be addressed in a separate section in the auditor’s report titled ‘Report on Other Legal and Regulatory Requirements’. This is important where there is local legislation which requires reporting on; this needs to be clearly identified in the report as this is in addition to the requirement of the ISAs. Signature of the auditor – The auditor’s report must be signed, this can be either the personal name of the auditor or, the signature is on behalf of the firm, depending on the jurisdiction in which the auditor is operating. This clarifies which firm or auditor has performed the audit engagement. Date of the auditor’s report – The auditor’s report shall be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial statements. The date of the audit report is important in the case of subsequent events which impact the financial statements; the auditor’s role is different depending on whether the audit report was signed or not when the subsequent event came to light. Auditor’s address – The auditor’s report shall name the location where the auditor practises. This is useful in case shareholders need to contact the auditors.

【正确答案】Subsequent event A key customer of Bullfinch.com has just notified the company that they are experiencing cash flow difficulties and are unlikely to make any payments for the foreseeable future. This information was received after the year end but provides further evidence of the recoverability of the receivable balance at the year end. If the customer is experiencing cash flow difficulties just a few months after the year end, then it is highly unlikely that the year-end receivable was recoverable as at 31 October and hence is an adjusting event. The receivables balance is overstated and consideration should be given to adjusting this balance, if material, through the use of an allowance for receivables or by being written off. The total amount outstanding at the year end was $283,000 and is material as it represents 7·4% (0·283/3·8m) of profit before tax and 2·5% (0·283/11·2m) of revenue. Hence, the directors should amend the 2014 financial statements by writing down or writing off the receivable balance. The following audit procedures should be applied to form a conclusion as to the level of the adjustment: – The correspondence with the customer should be reviewed to assess whether there is any likelihood of payment. – Discuss with management as to why they feel an adjustment is not required in the 2014 financial statements. – Review the post year-end period to see if any payments have been received from the customer.