Auditing Essay

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Lecture 3 An overview of the audit 1. Overview of the Audit of Financial Statements 2. The Auditor’s Report 1 1. OVERVIEW OF THE AUDIT OF FINANCIAL STATEMENTS 2 Corporations Act 2001 requirements • Governs the registration, appointment, removal and resignation of the independent auditor – Initially appointed by directors, must be ratified by members at first AGM. – An auditor holds office until his or her death, removal or resignation (s. 327) – Auditor is also required to rotate every 5-7 years • Auditors can also speak at AGMs 3 Duties of an independent auditor • When an auditor accepts an appointment, he or she enters into a contractual relationship with the company • The audit engagement letter, agreed to and signed by the auditor and the client, details some of the duties of an auditor for a company • See ASA 210 Terms of Audit Engagements 4 Duties of an independent auditor • There are express or implied terms in such contracts that the auditor will: – exercise a reasonable degree of care and skill – be independent of the company – report to members his or her opinion, as to whether the financial statements are properly drawn up so as to give a true and fair view of the company’s financial position, in accordance with the Corporations Act and applicable accounting standards – comply with auditing standards and other professional standards 5 Duties of the client • To provide the auditor with access to evidence • To inform the auditor of any matters that may affect the financial report • To pay the fees on time 6 Management and auditor responsibilities • The Corporations Act (s. 294) stipulates that directors must make a declaration which states: – that the financial statements and notes comply with accounting standards – that the financial statements and notes give a true and fair view – that the financial statements

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