Huertazuela, Ara B.

Manalo, Francies Nicole

Maraño, Donita Mae P.
C068 Auditing & Assurance Principles

COMPLETING THE AUDIT

After performing major audit procedures primarily to gather evidence regarding the fairness of
preparation and presentation of the financial statements being audited, the auditor performs
wrap-up procedures, reviews conclusions reached, and formulates the overall audit conclusion
to complete the audit.

Audit procedures generally performed by the auditor to complete the audit include the
following:
A. Identifying liability items not given appropriate accounting treatment
 Search for unrecorded liabilities
 Perform other procedures, including inquiry of entity’s legal counsel, to
identify loss contingencies.

B. Addressing required disclosures

Part of procedures performed during the “completing the audit” phase that are
designed to address required disclosures for the fair presentation of financial
statements include the following:
 Perform review for related parties
 Review of entity’s ability to continue as a “going concern” entity
 Perform review for subsequent events that may affect the financial
statements
 Review of adequacy of disclosures using a disclosure checklist that lists all
specific disclosures required by PFRS/IFRS and the SEC, if appropriate
 C. Overall review of the audit engagement and formation of the audit opinion
In forming an opinion, procedures to be performed include:
 Perform final review stage analytical procedures
 Review of working papers performed by manager, partner and possibly a
second partner review
 Evaluate audit findings
 Communicate with the audit committee
 Forming an audit opinion

D. Other wrap-up procedures

 Obtain management representation letter
 Audit documentation
 Communication with those charged with governance

SEARCH FOR UNRECORDED LIABILITIES

Auditor places greater concern with the completeness assertions when it comes to liabilities
since companies tend to understate these items. To address this, auditor normally performs the
following:

Reviewing subsequent cash disbursements

This test is intended to search for unrecorded liabilities by looking into the payments made by
the company subsequent to the end of the period. Subsequent payments may provide evidence
that a liability is existing at period-end but was not duly recognized by the company. To execute
this, the auditor normally obtains the disbursement listing of the company covering the period
after the payable balance date and then selects samples for evaluation. Payment supports are
then requested from the selections made such as check payments or proof of electronic fund
transfers. The vendor’s invoice, purchase order and receiving report are likewise obtained to
evaluate if such payment relates to a liability that was properly included or excluded from the
payable balance.
 Test of Unprocessed Invoices or Open Purchase Orders (PO)
At year-end the company may have invoices that are yet to be processed by the Accounts
Payable department. The company may also maintain a listing of all purchase orders it has
made for the audit period that are not yet received. Reviewing these listings may uncover
liabilities existing at period-end but are not yet duly recognized. To execute this, the auditor
obtains a list of unprocessed invoices or open PO listing at period-end and selects samples. For
each selection, the vendor’s invoice, purchase order and receiving report are obtained, as
applicable, to evaluate whether the selection was properly included or excluded from the
payable balance.

ANALYTICAL PROCEDURES FOR OVERALL REVIEW

During the concluding phase of the audit, the auditor is required to design and perform
analytical procedures that assist the auditor when forming an overall conclusion as to whether
the financial statements are consistent with the auditor’s understanding of the entity.

The results of the concluding analytical procedures are intended to:

● Corroborate conclusions formed during the audit of financial statements
● Identify any risks of material misstatements that were previously unrecognized
Note: In this scenario, the auditor shall revise the assessment of risks of material
misstatements and assess its impact on further audit procedures.
● Identify risks of material misstatements due to fraud that were previously
unrecognized.
Note: The identification of trends and relationships that are indicative of fraud is a
matter of professional judgement. The auditor places emphasis on year-
end revenue and income due to their relevance. An example would be
large credits to revenue accounts at or near the period-end of the Company.
If the results of analytical procedures identify trends or relationships that are (1) inconsistent
with other relevant information or (2) differ from expected values by a significant amount, the
auditor shall investigate such differences by:
1. Inquiring of management and obtaining appropriate audit evidence relevant to
management’s responses; and
2. Performing other audit procedures as necessary in the circumstances

RELATED PARTY TRANSACTIONS

Related Parties
Parties are considered to be related if one party has the ability to control the other party
or exercise significant influence over the other party in making financial and operating
decisions.

Related-party transactions
Transactions with related parties involve transfer of resources or obligations between
related parties, regardless of whether a price is charged.

Responsibilities of Parties
Management
● Identification and disclosure of related parties and transactions with such parties.
● Design and implement adequate accounting and internal control systems to
ensure
that transactions with related parties are appropriately identified in the
accounting records and disclosed in the financial statements.

Those Charged with Governance

 ● Obtain information from management to enable them to understand the nature
and business rationale of the entity’s related party relationships and transactions.
● Monitoring how management is discharging its responsibility for such controls.

Auditor
● Perform audit procedures designed to obtain sufficient appropriate audit
evidence regarding the identification and disclosure by management of:
a. related parties (identity and nature of relationships)
b. effects of related party transactions that are material to the financial
statements.
● Obtain an understanding of the controls that management has established to
identify, properly account for, disclose relationships and transactions with related
parties
● Consider the adequacy of control procedures over the authorization and
recording of related party transactions.
While the existence of related parties and transactions between such parties are considered
ordinary features of business, the auditor needs to be aware of them because:
a. Related party relationships and transactions are required to be disclosed by GAAP;
b. The existence of related parties or related party transactions may affect the financial
statements;
c. The source of audit evidence affects the auditor’s assessment of its reliability; and
d. A related party transaction may be motivated by other than ordinary business
considerations.

During the course of the audit, the auditor needs to be alert for transactions which appear
unusual in the circumstances and may indicate the existence of previously unidentified related
parties.
Example include:
● Transactions which have abnormal terms of trade, such as unusual prices, interest
rates, guarantees, and repayment terms.
 ● Transactions which lack an apparent logical business reason for their occurrence.
● Transactions in which substance differs from form.
● Transactions processed in an unusual manner.
● High volume or significant transactions with certain customers or suppliers as
compared with others.
● Unrecorded transactions such as the receipt or provision of management services at
no charge.

Audit procedures
During the course of the audit, the auditor carries out procedures which may identify the
occurrence of transactions with related parties. Examples include:
● Performing detailed tests of transactions and balances.
● Reviewing minutes of meetings of shareholders and directors.
● Reviewing accounting records for large or unusual transactions or balances, paying
particular attention to transactions recognized at or near the end of the reporting
period.
● Reviewing confirmations of loans receivable and payable and confirmations from
banks. Such a review may indicate guarantor relationship and other related party
transactions.
● Reviewing investment transactions, for example, purchase or sale of an equity
interest in a joint venture or other entity.

Procedures to check completeness of client-provided information regarding related parties

include:
a. Review prior year working papers for names of known related parties;
b. Review the entity’s procedures for identification of related parties;
c. Inquire as to the affiliation of directors and officers with other entities;
d. Review shareholder records to determine the names of principal shareholders or, if
appropriate, obtain a listing of principal shareholders from the share register;
e. Review minutes of the meetings of shareholders and the board of directors and other
relevant statutory records such as the register of directors’ interests;
f. Inquire of other auditors currently involved in the audit, or predecessor auditors, as to their
knowledge of additional related parties; and
g. Review the entity’s income tax returns and other information supplied to regulatory
agencies.

Examining identified related party transactions

The auditor should obtain sufficient appropriate audit evidence as to whether these
transactions have been properly recorded and disclosed and should become satisfied about
their purpose, nature, extent, and effect. The following should be considered:

a. Obtain an understanding of the business purpose of the transaction.

b. Examine invoices, executed copies of agreements, contracts and other documents.
c. Determine whether the transaction has been approved by board of directors or other
officials.
d. Test for reasonableness of the amounts to be disclosed in the financial statements.

Management representations
The auditor should obtain a written representation letter from management concerning the:
a. Completeness of information provided regarding the identification of related parties; and
b. Adequacy of related party disclosure in the financial statements.

Audit Conclusions and Reporting

Circumstances Effect in Auditor’s Report

Unable to obtain sufficient appropriate Qualified or Disclaimer of opinion

audit evidence concerning related parties since it is a limitation of scope
 and transactions
Inadequate disclosure Qualified or Adverse opinion

Transactions are not properly accounted for Qualified or Adverse opinion

SUBSEQUENT EVENTS REVIEW

Subsequent Events
These are events occurring between the date of the financial statements and the date of
the auditor’s report, and facts that become known to the auditor after the date of the auditor’s
report.

Dates relevant to subsequent events

When considering subsequent events, the auditor shall identify the following relevant dates.
1. Date of the financial statements
The date of the end of the latest period covered by the financial statements

2. Date of approval of the financial statements

The date on which all the statements that comprise the financial statements
have been prepared and those with the recognized authority have asserted that
they have taken responsibility for those financial statements.
3. Date the financial statements are issued
The date that the auditor’s report and audited financial statements are made
available to third parties

4. Date of the auditor’s report

The date of the auditor’s report informs the user of the auditor’s report that
the auditor has considered the effect of events and transactions of which the
auditor became aware and that occurred up to that date.
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, including evidence that:
a. All the statements that comprise the financial statements, including the related notes, have
been prepared; and
b. Those with the recognized authority have asserted that they have taken responsibility for
those financial statements.

Types of Subsequent Events

The auditor should consider the effect of subsequent events on the financial statements and on
the auditor’s report. These events could either be:

Type I Events
These are events that provide evidence of conditions that existed at the date of the financial
statements (known as adjusting events). Examples include:
✔ events that indicate that the going concern assumption in relation to the whole or part
of the entity is not appropriate
✔ settlements after reporting date of court cases that confirm the entity had a present
obligation at reporting date
✔ receipt of information after reporting date indicating that an asset was impaired at a
reporting date
✔ bankruptcy of a customer that occurs after reporting date that confirms a loss existed
at reporting date on trade receivables
✔ sales of inventory after reporting date that give evidence about their net realizable
value at reporting date
✔ discovery of fraud or errors that show the financial statements are incorrect

Type II Events
These are events that are indicative of conditions that arose after the date of the financial
statements (known as non-adjusting events). Examples of these events that would generally
result in disclosure include:
✔ 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
✔ announcing a major restructuring after reporting date
✔ major ordinary share transactions
✔ abnormally large changes, after the reporting date, in asset prices or foreign exchange
rates
✔ changes in tax rates or tax law
✔ entering into major commitments such as guarantees
✔ commencing major litigation arising solely out of events that occurred after the
reporting date

Responsibilities of Parties

Management
● Any subsequent event shall be properly accounted for and adequately disclosed in
the financial statements
● Disclose to auditor all subsequent events affecting financial statements under audit

Auditor
● Obtain sufficient appropriate audit evidence that all events up to the date of the
auditor’s report that may require adjustment of, or disclosure in, the financial
statements have been identified.
 ● When the auditor becomes aware of events which materially affect the financial
statements, the auditor should consider whether such events are properly accounted
for and adequately disclosed in the financial statements.
● The auditor shall request management and, where appropriate, those charged with
governance, to provide a written representation that all events occurring subsequent
to the date of the financial statements and for which the applicable financial
reporting framework requires adjustment or disclosure have been adjusted or
disclosed.

Audit procedures
The auditor shall perform the procedures so that they cover the period from the date of the
financial statements to the date of the auditor’s report, or as near as practicable thereto.

To identify subsequent events, the auditor may perform the following:

a. Obtaining an understanding of any procedures management has established to ensure that
subsequent events are identified.

b. Inquiring of management and, where appropriate, those charged with governance as to

whether any subsequent events have occurred which might affect the financial statement.
Example of inquiries of management on specific matters are:
✔ Whether new commitments, borrowings or guarantees have been entered into.
✔ Whether sales or acquisitions of assets have occurred or are planned.
✔ Whether there have been increases in capital or issuance of debt instruments,
such as the issue of new shares or debentures, or an agreement to merge or
liquidate has been made or is planned.
✔ Whether any assets have been appropriated by government or destroyed, for
example, by fire or flood.
✔ Whether there have been any developments regarding contingencies.
✔ Whether any unusual accounting adjustments have been made or are
contemplated.
 ✔ Whether any events have occurred or are likely to occur that will bring into
question the appropriateness of accounting policies used in the financial
statements, as would be the case, for example, if such events call into
question the validity of the going concern assumption.
✔ Whether any events have occurred that are relevant to the measurement of
estimates or provisions made in the financial statements.
✔ Whether any events have occurred that are relevant to the recoverability of
assets.

c. Reading minutes, if any, of the meetings, of the entity’s owners, management and those
charged with governance, that have been held after the date of the financial statements
and inquiring about matters discussed at any such meetings for which minutes are not
yet available.

d. Reading the entity’s latest subsequent interim financial statements, if any.

e. Read the entity’s latest available budgets, cash flow forecasts and other related
management reports for periods after the date of the financial statements.

f. Inquire, or extend previous oral or written inquiries, of the entity’s legal counsel
concerning litigation and claims.

g. Consider whether written representations covering particular subsequent events may be

necessary to support other audit evidence and thereby obtain sufficient appropriate
audit evidence.

GOING CONCERN ASSUMPTIONS

Going concern assumption views an entity as continuing in business for the foreseeable
future with neither the intention nor the necessity of liquidation ceasing trading or seeking
protection from creditors pursuant to laws or regulations.
 General purpose financial statements are prepared on a going concern basis. On the
other hand, special purpose financial statements may or may not be prepared in accordance
with a financial reporting framework for which the going concern basis is relevant.
Example: The going concern basis is not relevant for some financial statements prepared
on a tax basis in particular jurisdictions.
When the use of the going concern assumption is appropriate, assets and liabilities are
recorded on the basis that the entity will be able to realize its assets and discharge its liabilities
in the normal course of business.

Responsibilities of Parties
✔ Make specific assessment of the entity's
ability to continue as a going concern for
at least twelve (12) months from the

Management reporting period.

✔ Disclose all material uncertainties about
the entity's ability to continue as going
concern.

✔ Consider appropriateness of
management's use of going concern.
✔ Inquire to management and consider

Auditor whether there are material

uncertainties about the entity's ability to
continue as a going concern that need
to be disclosed in the financial
statements.

Examples of events that may cast significant doubt about the going concern assumption:
a. Financial
● Net liability or net current liability position.
 ● Fixed-term borrowings approaching maturity without realistic prospects of renewal or
repayment; or excessive reliance of short-term borrowings to finance long-term assets.
● Indications of withdrawal of financial support by debtors and other creditors.
● Negative operating cash flows indicated by historical or prospective financial
statements.

● Adverse key financial ratios.

● Substantial operating losses or significant deterioration of assets used to generate cash

flows
● Arrears or discontinuance of dividends.
● Inability to pay creditors on due dates.
● Inability to comply with the terms of loan agreements.
● Change from credit to cash-on-delivery transactions with suppliers.
● Inability to obtain financing for essential new product development or other essential
investments.
b. Operating
● Management intentions to liquidate the entity or to cease operations.
● Loss of key management without replacement.
● Loss of a major market, key customer(s), franchise, license, or principal supplier(s).
● Labor difficulties or shortages of important supplies.
● Emergence of a highly successful competitor.

C. Other
● Non-compliance with capital or other statutory requirements
● Pending legal or regulatory proceedings against the entity that may, if successful, result
in claims that are unlikely to be satisfied.
● Changes in legislation or government policy expected to adversely affect the entity.
● Uninsured or underinsured catastrophes when they occur.

Additional audit procedures when events or conditions are identified

When events or conditions have been identified which may cast significant doubt on the
entity's ability to continue as a going concern, the auditor should:
a) review management's plans for future actions;
b) gather sufficient appropriate audit evidence to confirm or dispel whether or not a
material uncertainty exists; and
c) Seek written representations from management regarding its plans for future action.

Audit Conclusions and Reporting

Circumstances Effect in Auditor's Report

Management unwilling to make or extend its
assessment of its ability to continue as a going
concern for at least 12 months from the
reporting date
Use of going concern assumption is
appropriate but a material uncertainty exists
Qualified or Disclaimer of opinion since it is a
limitation of scope
● If adequately disclosed, Unqualified and
add an emphasis of a matter paragraph
● If not, Qualified or Adverse opinion

Use of going concern assumption is Adverse opinion

inappropriate
Multiple material uncertainties exist Disclaimer of opinion

Significant Delay in the Signature or Approval of Financial Statements

When there is significant delay in the signature or approval of the financial statements by
management after the balance sheet date, the auditor considers the reasons for the delay.
When the delay could be related to events or conditions relating to the going concern
assessment, the auditor considers
a) the need to perform additional audit procedures
b) the effect on the auditor's conclusion regarding the existence of a material uncertainty

WRITTEN REPRESENTATIONS/CLIENT’S REPRESENTATION LETTER

 PSA 580 Written Representations requires the auditor to obtain written representations
from the entity's
✔ management with appropriate responsibilities for the financial statements and
knowledge of the matters concerned; and
✔ Those charged with governance when appropriate.

Definition

Written representation
- Refers to a written statement by management provided to the auditor to confirm
certain matters or to support other audit evidence. Written representations in this
context do not include financial statements, the assertions therein, or supporting
books and records.
● Other terms used to describe written representations include written representation letter,
management representation letter, client representation letter, and representation letter.

Written representations in the context of audit

The auditor has the following objectives when obtaining written representations:
A. To obtain written representations from management that management believes that
it has fulfilled the fundamental responsibilities that constitute the premise on which
an audit is conducted;

Management's acknowledgement of its responsibilities

The auditor shall request management to provide a written representation that

1. It has fulfilled its responsibility for the preparation and presentation of the financial
statements as set out in the terms of the audit engagement and, in particular, whether
the financial statements are prepared and presented in accordance with the applicable
financial reporting framework.
 2. It has provided the auditor with all relevant information agreed in the terms of the audit
engagement, and that all transactions have been recorded and are reflected in the
financial statements.

Audit evidence obtained during the audit that management is fulfilling the
responsibilities that it agreed to in the terms of the audit engagement is not sufficient
without obtaining confirmation from management that it believes that it has fulfilled
those responsibilities.
Simply stated, such letter is used as evidence that management acknowledges its responsibility
for the fair presentation of the financial statements in accordance with applicable financial
reporting framework, has approved the financial statements, and has provided all the
information relevant to the audit engagement.
Furthermore, in addition to written representations, the auditor can obtain such
acknowledgment of management's responsibility thru the following:
✔ from relevant minutes of meetings of the board of directors or similar body; or
✔ By obtaining signed copy of the financial statements.

B. To support other audit evidence relevant to the financial statements o specific

assertions in the financial statements by means of written representations if
determined necessary by the auditor or required by other PSAS; and

Written representations as audit evidence

Although written representations provide necessary audit evidence, they do not provide
sufficient appropriate audit evidence on their own about any of the matters with which they
deal.
Written representations provide support to audit evidence obtained by the auditor and may
contribute in enhancing the quality of the representations.
Example:
 A request for written, rather than oral, representations many cases may prompt
management to consider such matters more rigorously, thereby enhancing the quality of the
representations.
Furthermore, the fact that management has provided reliable written representations does not
affect the nature or extent of other audit evidence that the auditor obtains about the
fulfillment of management's responsibilities, or about specific assertions. This means that,
written representations may complement, but not replace, evidence that may be obtained from
performance of audit procedures.
C. To respond appropriately to written representations provided by management or if
management does not provide the written representations requested by the auditor.

Written representations are an important source of audit evidence. If management modifies or

does not provide the requested written representations, it may alert the auditor to the
possibility that one or more significant issues may exist.

Doubt as to the reliability of written representations

If the auditor concludes that the written representations are not reliable, the auditor shall take
appropriate actions, including determining the possible effects on the opinion in the auditor's
report.
If the auditor has concerns about the competence, integrity, ethical values or diligence of
management, or about its commitment to or enforcement of these, the auditor shall determine
the effect that such concerns may have on the reliability of representations (oral or written) and
audit evidence in general.

Requested Written Representations Not Provided

If management does not provide one or more of the requested written representations, the
auditor shall:
a) Discuss the matter with management;
b) Reevaluate the integrity of management and evaluate the effect that may have on the
reliability of representations (oral or written) and audit evidence in general and
 c) Take appropriate actions, including determining the possible effect o the opinion in the
auditor's report.

Effects in auditor's report

When the auditor concludes that (1) there is sufficient doubt about integrity of management
and the written representations it had provided or (2) the management does not provide the
written representations, the auditor shall disclaim an opinion on the financial statements.

Basic elements of written representation letter

1. Date of and period(s) covered by written representations

The date of the written representations shall be as near as practicable to, but not after, the
date of the auditor's report on the financial statement. Simply stated, the letter may be dated
on or before the date of the auditor's report. In practice, the date of the letter coincides with
the date of the auditor's report.
Moreover, the written representations shall be for all financial statement and period or
periods referred to in the auditor's report

2. Addressee

The written representations shall be in the form of a representation letter addressed to the
auditor.

3. Signature (Management from whom Written Representations Requested

The auditor requests written representation from the management who are responsible for
the preparation and presentation of the financial statements
The specific individuals who will prepare and sign the letter may vary depending on the
governance structure of the entity, and relevant law regulation
Ordinarily, the letter will be signed by the entity's chief executive officer in chief financial
officer, or other equivalent persons in entities that do not en such titles (e.g., President for CEO
and Treasurer for CFO). In some came other parties, such as those charged with governance
may also responsible for the preparation and presentation of the financial statements
In the event where the signatories of the letter were not present during periods referred to
in the auditor's report, they may assert that they are not in a position to provide some or all of
the written representations because they were not in place during the period. However this
condition does reduce their responsibilities for the financial statements as a whole. Accordingly,
the requirement for the auditor to request from them written representations that cover the
whole of the relevant period(s) still applies.

Written representations vs. Management letter

Written representations
By appropriate management
Prepared and assigned
(CEO and CFO)
Auditor
Addressee
Yes. Required to be obtained
Required preparation
by auditor
Concurrent with auditor's
Date
report date
Confirmation of
representations made by
management to the auditor
Content and reduces the possibility of
misunderstanding between
client and the auditor
Management letter
By the auditor
Client's management
No. Optional and no standard
format or approach
As timely as practicable
May include
recommendations that are
intended to help the client
operate its business
effectively

Importance ● Reminder of management ● Encourage a better

of its primary relationship between the
responsibility for the auditor and the
financial statements management
● Can serve as audit ● Suggest additional tax and
 evidence when such management services that
representation may be the the auditor can provide.
only evidence which can
reasonably be expected to
be available

EVALUATION OF FINDINGS, FORMATION OF OPINION, DRAFT OF AUDIT REPORT

Evaluating audit findings and preparing a list of potential adjusting entries.

The auditor shall form an opinion on whether the financial statements are prepared, in
all material respects, in accordance with the applicable financial reporting framework.

In order to form that opinion, the auditor shall conclude as to whether the auditor has
obtained reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error. That conclusion shall take into
account:

(a) whether sufficient appropriate audit evidence has been obtained;

(b) whether uncorrected misstatements are material, individually or in aggregate; and

(c) whether the financial statements are prepared, in all material aspect, in accordance
with the requirements of the applicable financial framework

Formation of Opinion

After evaluating the evidence obtained, the auditor should decide whether to accept the
financial statements as fairly stated or to request management to revise the statements.
Material misstatements discovered during the audit must be corrected by recommending
appropriate adjusting entries.
 If management accepts all the adjusting entries proposed by the auditor, an unmodified
report is issued on the financial statements. On the other hand, if management refuses to
correct the financial statements for these material misstatements the auditor should issue a
qualified or an adverse opinion.

POST-AUDIT RESPONSIBILITIES: Events after the Financial Statements are Issued

Ordinarily, the auditor does not have any responsibility to perform additional
procedures after the financial statements are issued. However, when the auditor becomes
aware that the report issued in connection with the financial statements may be inappropriate,
the auditor must take steps to prevent future reliance on such report.

Post audit responsibilities include the consideration of the following:

1. Subsequent events

2. The discovery of existing facts.

The auditor has no obligation to perform any audit procedures regarding the financial
statements after the date of the auditor’s report. During this period, it is the responsibility of
the management to inform the auditor of events that may affect the financial statements.

When, after the date of the auditor’s report but before the financial statements are
issued, the auditor becomes aware of a fact which may materially affect the financial
statements, the auditor should:

After the date of auditor’s report but After the date of auditor’s report and
before issuance issuance
Discuss matter with the management, and where appropriate, those charged with
governance.
 Consider whether the financial statements need amendment.
Inquire how management intends to address the matter in the financial statements
When management amends the financial statements
Carry out the necessary audit procedures Carry out the necessary audit procedures
in the circumstances in the circumstances
Provide the management with a new Review the steps taken by management
report on the amended financial that anyone in receipt of the previously
statements issued reports is informed of the
situation.

Issue a new report on the revised

financial statements which includes an
emphasis of a matter paragraph which
discusses the reasons for revisions
The new auditor’s report should include
an emphasis of a matter paragraph
referring to a note to financial
statements that more extensively
discusses the reasons for the revision of
the previously issued financial
statements and to the earlier report
issued by the auditor

If the management makes the appropriate revisions and disclosures to the users of the
financial statements, the auditor should issue a new auditor's report that includes an emphasis
of a matter paragraph to highlight the reason for the revision of the previously issued financial
statements. The new auditor’s report shall not be dated earlier than the date of approval of the
amended financial statements. The new date is normally the date when the specific subsequent
event occurred.
 An additional date may be included in the auditor’s report to inform users that the
auditor’s procedures subsequent to that date were restricted to the subsequent amendment of
the financial statements. This concept is known as dual dating.

In the event that management refuses to revise the financial statement or to inform the
users about the newly discovered information, the auditor should notify those persons
ultimately responsible for the direction of the entity about the management’s refusal and about
his intent to prevent users from relying on the auditor’s report.

3. The discovery of omitted procedures.

Auditors are not required to review the working papers once the audit report is issued.
However, CPA firm's internal inspection program shall disclose the omission of auditing
procedures considered necessary at the time of the audit. In this situation, the auditor should
follow these guidelines:

1) Assess the importance of the omitted procedure.

An omitted procedure is considered important if such omission impairs the auditor's

ability to support the previously issued opinion on the financial statements. Evaluating the
impact of an omitted procedure would depend on the type of substantive evidence it would
have produced; and whether there were other procedures performed that provide the same
type of evidence as the procedure omitted.

The results of other audit procedures, performed during the audit, may compensate for
or make the omitted procedure less important. In determining whether-there were other
procedures applied that could compensate for the omitted procedure, the auditor may:

- Review the working papers;

- Discuss the circumstances with the engagement personnel; and

- Reevaluate the scope of the audit.

 2) Undertake to apply the omitted procedures or the corresponding alternative
procedures.

If the auditor determines that the omission of the procedures is important because it
impairs the auditor's ability to support the previously issued opinion, and the auditor believes
that there are persons currently relying, or likely to rely on the report; the auditor should
promptly apply the omitted procedures or the corresponding alternative procedures.

The result of applying the omitted procedure may indicate, whether or not, material
misstatements exist. If, after applying the omitted procedures, the auditor determines that the
financial statements are materially misstated and that the auditor's opinion was inappropriate,
the auditor should discuss the matter with the management and, if necessary, should take steps
to prevent future reliance on the report.