AUDITING AND ASSURANCE SERVICES

IN MALAYSIA

TOPIC 12 : AUDIT REPORT

REFERENCE: CHAPTER 12 &13

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LEARNING OUTCOMES Types of audit report Components of an unmodified audit report Departures from an unmodified audit report

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Audit Report the final stage in the entire audit processA written communication of audit findings to

the shareholders Types of audit report

1. Standard unqualified / Unmodified audit report

2. Unqualified / Unmodified audit report with Emphasis of Matter Paragraph

3. Qualified – Qualified opinion4. Qualified Report - Disclaimer opinion5. Qualified Report - Adverse opinion

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1. STANDARD UNQUALIFIED / UNMODIFIED AUDIT REPORT

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CONDITIONTO ISSUE

STANDARDUNQUALIFIED AUDIT REPORT

All statements are included in the FSNo circumstances requiring

the addition of explanatoryparagraph or modification

of wording

ISAs have been followedIn all respects on the

engagement

Sufficient evidencehas been accumulated

FS are presented in accordance with approved

accounting standards.Adequate disclosure have

been included

CONT… SUAR consist:

1. Report Titles2. Audit Report Address3. Introductory Paragraph4. Scope Paragraph5. Opinion Paragraph6. Name of CA firm & signature of auditor7. Auditor’s address8. Audit report date

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1. REPORT TITLE All audit report are required to be title The title must include the word

independent For e.g.

Independent auditor’s report Report of independent auditor Report of the Auditor to the Members of

Sintok Hardware Sdn Bhd

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2. AUDIT REPORT ADDRESS Normally report is addressed to the

company, stakeholders, the Board of Directors

For e.g. Report of the Auditor to the Members of

Sintok Hardware Sdn Bhd

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3. INTRODUCTORY PARAGRAPH Consist of

1. Simple statement that the CA firm has done an audit E.g. we have audited the financial

statements of Sintok Hardware Sdn Bhd set out on page __ to __

2. Lists of FS that were audited E.g. …comprising of the balance

sheet of the company and notes to the account as at 31st December 2005 and of the profit and loss account and the cash flow statement…

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3. INTRODUCTORY PARAGRAPH3. Statement of the responsibility of

management & auditor’s responsibility E.g. The preparation of the financial

statements is the responsibility of the company’s directors. Our responsibility is to express an opinion on the financial statements based on our audit.

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4. SCOPE PARAGRAPH A factual statement about what the

auditor did in the audit Consist of:

1. Statement that the auditor followed Malaysian Approved Standards of Auditing We conducted our audit in

accordance with approved standards on auditing

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4. SCOPE PARAGRAPH2. Statement that the audit is designed,

planned and performed to obtain reasonable assurance about whether the statements are free of material misstatements …to provide us with sufficient

evidence to give reasonable assurance that the financial statements are free of material misstatement

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4. SCOPE PARAGRAPH3. Highlight the audit evidence accumulated

and statement that the auditor believes that the evidence accumulated was appropriate to express the opinion presented E.g. Our audit includes examining, on a

test basis, evidence relevant to the amounts and disclosures in the financial statements. Our audit includes assessment of accounting principles used and significant estimates made by the directors as well as evaluation of the adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our audit.AUD390 AUDITING DIA

5. OPINION PARAGRAPH States the auditor’s conclusions based on

the results of the audit It is a statement of opinion rather a

statement of absolute fact or a guarantee, due: Conclusions are based on professional

judgment There may be some information risk

associated with the financial statements, even though the statements have been audited

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5. OPINION PARAGRAPH E.g. In our opinion….

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6. NAME OF CA FIRM & SIGNATURE OF AUDITOR

Identifies the CA firm and the auditor who performed the audit

E.g.Bakar & AnthonyFirm No: XXXXChartered AccountantsAlor Setar

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7. AUDITOR’S ADDRESS The location of the audit firm

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8. AUDIT REPORT DATE Refer to the completion date of the audit

assignment Indicates the last day of the auditor’s

responsibility for the review of significant events that occurred after the date of the financial statements

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Reasons for the issuance of this report:1. Emphasis of matter (pp. 4)2. Substantial doubt about going concern

(pp. 16)

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2. UNQUALIFIED / UNMODIFIED AUDIT REPORT WITH EMPHASIS OF MATTER

PARAGRAPH

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QUALIFIED AUDI

T REPO

RT

Qualified Opinion

Adverse Opinion

Disclaimer

Opinion

Conditions results in issuing modified opinion report:

1. The scope of the audit has been restricted (Scope Limitation)

2. Disagreement

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1. SCOPE LIMITATION Arises when the auditor has not

accumulated sufficient evidence to conclude whether FS are stated in accordance with CA Act 1965

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SCOPE LIMITATION

RESTRICTION IMPOSED BY THE

CLIENTE.g. Management refuse to permit the auditor to perform stock count or to confirm account receivable with debtors

RESTRICTION CAUSED BY

CIRCUMSTANCES BEYOND EITHER THE

CLIENT’S OR AUDITOR CONTROL

E.g. To perform stock count of inventories after client’s year end

2. DISAGREEMENT Arises where the auditor is able to

express an opinion but his opinion differs from the view expressed by the management in the FS

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Examples….Non-conformity with the provisions of the CA Act 1965 & other legislationNon-compliance with approved accounting standardsDisagreements with facts or amounts included in the financial statementsInadequate disclosure of facts or amounts included in the FS

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CONDITIONS FINDING – MATERIAL &

NOT PERVASIVE

FINDING – MATERIAL & PERVASIVE

LIMITATION ON SCOPE OF AUDIT

QUALIFIED OPINION DISCLAIMER OF OPINION

DISAGREEMENT WITH MANAGEMENT

QUALIFIED OPINION ADVERSE OPINION

TYPES OF QUALIFIED AUDIT REPORT TO PRODUCE

Material: the omission, non disclosure, misstatement of an item would influence the decision of users of FSPervasive: one matter which is so significant as to undermine the FS as a whole

OVERVIEW OF AUDIT REPORTING

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Effect of Materiality Type of Audit Report

IMMATERIAL

MATERIAL

MATERIAL &PERVASIVE

Unqualified/ Unmodified Unqualified withEmphasis of

Matter Reports

DisagreementLimitation on Scope

Qualified

Limitation on Scope

Disclaimer

Qualified

Disagreement

Adverse