Guide to Using International Standards on Auditing in - IFAC

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230 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Exhibit 17.4-1 Component Title Addressee Introduc<strong>to</strong>ry Paragraph Management’s (Or Other Appropriate Term) Responsibility for the Financial Statements Comments Independent Audi<strong>to</strong>r’s Report <strong>Using</strong> the word “independent” distinguishes the independent audi<strong>to</strong>r’s report from reports issued by others. Those for Whom the Report Is Prepared (typically shareholders or those charged with governance) This may also be dictated by the circumstances of the engagement or local regulations. • Identifies the entity whose financial statements have been audited. • States that the financial statements have been audited. • Identifies the title of each of the financial statements that comprise the complete set of financial statements. • Refers <strong>to</strong> the summary of significant accounting policies and other explana<strong>to</strong>ry notes. • Specifies the date and period covered by the financial statements. Where supplementary information is presented, explains whether it is covered by the audit opinion or clearly differentiates it as not being covered. Explains that management is responsible for the preparation of the financial statements in accordance with the applicable financial reporting framework. The report states that management is responsible for: • The preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework; and • Such internal control as management determines is necessary <strong>to</strong> enable the preparation of financial statements that are free from material misstatement, whether due <strong>to</strong> fraud or error. Management responsibility includes: • Accepting responsibility for internal control necessary <strong>to</strong> enable the financial statements <strong>to</strong> be free from material misstatement, whether due <strong>to</strong> fraud or error; • Selecting and applying appropriate accounting policies; • Ensuring the information contained in the financial statements is relevant, reliable, comparable, and understandable; • Ensuring adequate disclosure <strong>to</strong> ensure material transactions are unders<strong>to</strong>od by users of the financial statements; and • Making accounting estimates that are reasonable in the circumstances.
231 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Component Audi<strong>to</strong>r’s Responsibility Audi<strong>to</strong>r’s Opinion Other Reporting Responsibilities Comments States that the responsibility of the audi<strong>to</strong>r is <strong>to</strong> express an opinion on the financial statements based on the audit. This includes: • Stating that the audit was conducted in accordance with <strong>International</strong> <strong>Standards</strong> on Auditing. The audi<strong>to</strong>r’s report should also explain that those standards require that the audi<strong>to</strong>r comply with ethical requirements, and that the audi<strong>to</strong>r plan and perform the audit <strong>to</strong> obtain reasonable assurance about whether the financial statements are free from material misstatement. • Describing an audit by stating: − An audit involves performing procedures <strong>to</strong> obtain audit evidence about the amounts and disclosures in the financial statements, − The procedures selected depend on the audi<strong>to</strong>r’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due <strong>to</strong> fraud or error. In making those risk assessments, the audi<strong>to</strong>r considers internal control relevant <strong>to</strong> the entity’s preparation of the financial statements in order <strong>to</strong> design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control, and − An audit also includes evaluating the appropriateness of the accounting policies used, the reasonableness of accounting estimates made by management, as well as the overall presentation of the financial statements. • Stating that the audi<strong>to</strong>r believes that the audit evidence the audi<strong>to</strong>r has obtained is sufficient and appropriate <strong>to</strong> provide a basis for the audi<strong>to</strong>r’s opinion. • Where financial statements are prepared in accordance with a fair presentation framework, the description of the audit shall refer <strong>to</strong> “the entity’s preparation and fair presentation of the financial statements” or “the entity’s preparation of financial statements that give a true and fair view,” as appropriate in the circumstances. Fair Presentation Frameworks States whether the financial statements present fairly, in all material respects, (or give a true and fair view of) in accordance with the applicable financial reporting framework, or such similar wording as required by law or regulation. Compliance Frameworks States whether the financial statements are prepared in all material respects in accordance with the applicable financial reporting framework. When <strong>International</strong> Financial Reporting <strong>Standards</strong> are not used as the financial reporting framework, the wording of the opinion should identify the jurisdiction or country of origin of the financial reporting framework (e.g., … in accordance with accounting principles generally accepted in country X …). Certain standards, laws, or generally accepted practice in a jurisdiction may require or permit the audi<strong>to</strong>r <strong>to</strong> report on other responsibilities. Such matters would be addressed in a separate paragraph following the audi<strong>to</strong>r’s opinion.
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Guide to Using International Standards on Auditing in - IFAC

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