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    Week 9 Auditing

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    Yusef Shaqeel
    The document discusses key audit matters and issues related to accounting treatment of subsequent events. It explains that key audit matters are those judged most significant to the audit and require the auditor to describe how the matter was addressed. It then analyzes four issues that arose after the financial year end and determines whether they require adjustment to the financial statements or simply disclosure based on whether evidence existed at the financial statement date.

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    Week 9 Auditing

    Uploaded by

    Yusef Shaqeel
    24 views2 pages
    The document discusses key audit matters and issues related to accounting treatment of subsequent events. It explains that key audit matters are those judged most significant to the audit and require the auditor to describe how the matter was addressed. It then analyzes four issues that arose after the financial year end and determines whether they require adjustment to the financial statements or simply disclosure based on whether evidence existed at the financial statement date.

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    The document discusses key audit matters and issues related to accounting treatment of subsequent events. It explains that key audit matters are those judged most significant to the audit and require the auditor to describe how the matter was addressed. It then analyzes four issues that arose after the financial year end and determines whether they require adjustment to the financial statements or simply disclosure based on whether evidence existed at the financial statement date.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views2 pages

    Week 9 Auditing

    Uploaded by

    Yusef Shaqeel
    The document discusses key audit matters and issues related to accounting treatment of subsequent events. It explains that key audit matters are those judged most significant to the audit and require the auditor to describe how the matter was addressed. It then analyzes four issues that arose after the financial year end and determines whether they require adjustment to the financial statements or simply disclosure based on whether evidence existed at the financial statement date.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Week – 9

    Answer:
    Part – A:
    Key Audit Matters:

    Matters or events that are according to the professional judgement of the auditor are of most
    significance and important in execution of the audit of the current year financial statements are
    known as Key Audit Matters. These matters are extracted from the matter that are being
    communicated to the those charged with governance.
    A further description is required to be added by the auditor on each of the key audit matters in
    his audit report by stating that:

     Why the given matter has been considered as highly important and of more significance
    in the audit.

     How the auditor has addressed the matter during the performance of the audit.

     Needs to provide related disclosure references.

    The Key Audit Matters paragraph or section is usually placed right after the basis for opinion
    paragraph of the audit report and before the Management Responsibility Paragraph.

    Part – B:
    Issues Event/Accounting Explanation
    Treatment
    a) On August 15th, the It’s a type 2 event, needs a Since, the issuance of share
    board is planning to disclosure in the financial and evidence for it arises after
    issue its shares in the statements of the company. the year end or date of the
    private placement. financial statements because
    the private offerings would
    occur after the year end at
    June 30th, therefore, this event
    needs a disclosure in the
    financial statements and
    would not affect the financial
    statements before year end.
    b) Issuing shares to Type 2 event, needs to give Since, the contract is not yet
    finance the purchase disclosure in the financial signed and it will be signed
    of 60% stake in statements. on 15th August; therefore, the
    another company. issuance of share would have
    no implications on the year-
    end financial statement that
    are being closed at June 30.
    Hence, needs a disclosure in
    the financial statements of the
    company instead of adjusting.
    c) A legal case has been This is a Type 1 event and Since, there is sufficient
    lodged against the needs to be adjusted. evidence that is existed at the
    company for damages. date of the financial
    statements because the event
    that gives rise to the law suit
    occurred before the ear end
    June 30.
    d) Doubtful trade This is a Type 1 event and Here the auditor has to check
    receivable has now needs to be adjusted. whether it is a bogus receipt.
    been paid. Since it is in cash, there might
    be chances of manipulation of
    debtor’s balances by entering
    bogus receipts in their
    account. Moreover, one of the
    large debtors and other debt
    amounts that could have a
    material impact on the
    financial statements;
    therefore, this event needs to
    be adjusted and disclosed.

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