Completion & Review (SA 560, 570, 580)
1. SA 560: Subsequent Events (Type 1 vs. Type 2)
| Event Type | Nature of Event | Accounting & Audit Treatment |
|---|---|---|
| Type 1: Adjusting Events |
Events providing evidence of conditions that existed at the balance sheet date (e.g., bankruptcy of a debtor after year-end confirming insolvency as of 31st March). | Requires adjustment of amounts in financial statements and P&L. |
| Type 2: Non-Adjusting Events |
Events indicative of conditions that arose after the balance sheet date (e.g., major factory fire or plant destruction occurring in April). | Requires disclosure in notes; no adjustment of balance sheet figures unless going concern is affected! |
2. SA 570: Going Concern Audit Reporting Decision Tree
🌳 Master Decision Logic for Going Concern (SA 570)
| Fact Situation | Disclosure in Financials | Auditor Reporting Action |
|---|---|---|
| Material Uncertainty Exists | Adequately Disclosed in Notes to Accounts | Unmodified Opinion + Separate MURGC Section (Material Uncertainty Related to Going Concern). |
| Material Uncertainty Exists | NOT Adequately Disclosed in Notes | Qualified or Adverse Opinion under SA 705 (State in Basis of Opinion that disclosure is omitted). |
| Going Concern Assumption is Inappropriate | Prepared on Going Concern Basis | Adverse Opinion (Pervasively misleading financial statements). |
3. SA 580: Written Representations (WR)
- Nature: Necessary audit evidence, but WR alone does NOT provide sufficient appropriate audit evidence on its own.
- Mandatory Representations: (a) Management has fulfilled responsibility for preparation of financial statements in accordance with applicable FRF, (b) Management has provided auditor with all relevant info and complete access.
- Date of WR: Must be as near as practicable to, but not after, the date of the auditor's report on the financial statements.
- Refusal to Provide WR: If management refuses to provide written representations on core responsibilities → Disclaimer of Opinion under SA 705.
4. SA 450: Evaluation of Misstatements
| Category | Audit Meaning |
|---|---|
| Factual Misstatements | Misstatements about which there is no doubt (e.g., mathematical error, clear misapplication of price). |
| Judgmental Misstatements | Differences arising from judgments of management concerning accounting estimates that auditor considers unreasonable. |
| Projected Misstatements | Auditor's best estimate of misstatements in populations involving projection from audit samples. |