Auditor Report Matter

7/30/2019 Auditor Report Matter

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Client : Prepared by : Date :

Year : Reviewed by : Date :

Guidance:

Guidance:Small entities usually have few owners, often there is a sole proprietor. Many owner-managers adopt a 'hands on'approach to internal control issues by personally exercising supervisory controls. The owner may employ amanager to run the business but in most cases is directly involved in running the business on a day-to-day basis. As the proprietor, the owner- manager has a personal interest in safeguarding the assets of thebusiness, measuring its performance and controlling its activities, but may be unable to divert limited managementtime to such matters as formal internal control procedures. However, the lack of formality does not of itself indicate circumstances giving rise to a high risk of fraud or error, the auditors of a small entity make their assessmentof risk in the light of its particular circumstances.

The term owner-manager means the proprietors of entities who are involved in running of the entity on a dayto day basis. Where proprietors are not involved on a day to day basis, the term owner-manager is used to refer toboth the proprietors, and to any managers hired to run the entity.

The meaning of small entity in this context gives considerations not only to the size of an entity but also to itstypical qualitative characteristics. Quantitative indicators of the size of an entity may include balance sheet totals,revenue and the number of employees, but such indicators are not definit ive. Therefore, it is not possible to givean adequate definition of a small entity solely in quantitative terms.

(a) Is the concentration of ownership and management in a small number of individuals

1. Answer the following questions to determine whether the entity is a small entity asstated in the Guidance Note on Special Consideration in the Audit of Small Entities:

APPLICABILITY CHECKLIST


2/1404

Guidance:Size and economic considerations in small entities mean that sophisticated internal controls are often neither necessary nor desirable, the fact that there are few employees limits the extent to which segregation of duties ispracticable. Further, dominant position of the owner-manager may lead to management override of controls which

may have a significant adverse effect on the control environment in any entity, leading to an increased risk of management fraud or material misstatement in the financial statements.

Most small entities employ few , if any, personnel who are solely engaged in record keeping. Consequently, recordkeeping may be simple, customised or personalised, which results in a greater risk that the financial statementsmay be inaccurate or incomplete.

(d) Are there limited internal controls in the entity together with the potential for management override of controls?


3/1404

Date : ....

Date : ...

Sr No DECLARATION WP REF SIGN OFF DATE

1 I have completed the necessary worktaking materiality (engagementspecific) into consider that theworking papers adequately supportour opinion, subject to the mattersnoted.

2 I have carried out a detailedreview of the working papers andconsider that they agree with thereports and adequately support our opinion, subject to the matters noted.

3 Financial statements have beenreviewed with client representative.....(Name)

4 Approval minutes have beenreviewed and a duly signed letter of representation received.

5 Subsequent events review upto thedate of approval has beencompleted.

AUDIT DECLARATION

Client : . Prepared by : ...

Year : Reviewed by :


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SCH REF COMMENT CLIENT RESPONSE DISPOSAL

MATTERS FOR PARTNER'S CONSIDERATION


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Client : .. Prepared by : Date : ...

Year : .. Reviewed by :.

Date : ..

AUDIT ISSUE ACCOUNT BALANCE AFFECTEDFINAL DECISION AND DETAILS

OF HOW RESOLVED

SUMMARY MEMORANDUM

Summaries below the key issues arising out of audit and resolution thereof prior to signing the financialstatements.


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Client :

Prepared by :. Date :

Year :

Reviewed by : Date : .

Assets Liabilities Equity Pre-tax IncomeRs. Rs. Rs. Rs.

A+B+C:

Planning Materiality

SUMMARY OF UNADJUSTED ERRORS

GROUPCorrecting Entries

A. Known Misstatements

Sub-totalB. Likely Misstatements

Sub-totalC. Carry Forward Items (prior Years)

Aggregate effect

Rs

Rs. .


10/1404

Prepared by : Date :

Year Reviewed by : Date :

Sr. No. PERFORMEDBY

COMMENTS,REFERENCES

Compare the financial statement for the currentyear to those of previous years, analysevariances and the reasons.

Compare the financial statements with anybudgets, forecasts, or managementexpectations and discuss reasons for variations.

Review trends in any important financialstatement ratios. Consider whether the financial statements

adequately reflect any changes in the entity. Inquire into unexplained or unexpected features

of the financial statements.

Client :

FINANCIAL STATEMENTS REVIEW

Guidance

Analytical Procedures as Part of the Overall Review

The Analytical Procedures ordinarily performed at this stage assist in forming an overall conclusion as towhether the financial statements as a whole are consistent with the auditor's knowledge of the business.

DESCRIPTION

A Perform analytical procedures for the financialstatement review by:


11/1404

1

There is negative net worth or negative workingcapital. Fixed term borrowing approaching maturity

without realistic prospects of renewal or repayment, or excessive reliance on short- termborrowings to finance long-term assets.

Adverse key financial ratios.

Substantial operating losses.

Substantial negative cash flows fromoperations.

Arrears or discontinuance of dividends. Inability to pay creditors on due dates.

Difficulty in complying with the terms of loanagreements.

Change from credit to cash-on-delivery

transactions with suppliers. Inability to obtain financing for essential new

product development or other essentialinvestments.

Entering into a scheme of arrangement withcreditors for reduction of liability.

Loss of key management without replacement

Loss of a major market, franchise, licence,or principal supplier.

Labour difficulties or shortages of importantsupplies.

Financial IndicatorsExamine whether:

3 O h I di

2 Operating Indicators


12/1404

END OF FIELD WORK UPDATE UPDATE

CONCLUSION

Significant subsequent events identified by our procedures are properly reflected in the financialstatements, subject to the following matters noted:

DATE OF REVIEW

SUBSEQUENT EVENTS CHECKLIST

GuidanceThe primary objective of this program is to ascertain the occurrence of subsequent events that mayrequire adjustment to, or disclosure in the financial statements.

The inquiries and discussions required by this program should be with client management havingresponsibility for the accounts or other matters covered by the particular procedures. Appropriatesupporting working papers concerning the important matter discussed should be prepared.

The greater the time difference between the balance sheet date and issuing of the audit report, the morecomprehensive the review will need to be.In practice, the review will normally be completed at twoseparate dates.




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3 Review and analyse the latest

Management accounts and other management reports for the periodsubsequent to the balance sheet date andbooks of original entry including bankstatements for periods for which there areno accounts.

2 Review minutes of the meetings of Partners/management/shareholders/ boardof directors, and any other relevantcommittees held after the balance sheetdate and inquire about matters discussedat meetings for which minutes are not yetrecorded.

1 Discuss with management and review theprocedures used to ensure that materialsubsequent events are identified andproperly reflected in the financialstatements.


DESCRIPTION

(CLIENTMANAGEMENT)

DISCUSSEDWITH

SUPPORTING

DOCUMENTREFERENCE

(AUDITOR)

REVIEWEDBY DATE




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Whether any assets of the company havebeen expropriated in some way or havebeen destroyed.

The current status of items that wereaccounted for on a preliminary or estimated basis.

Whether commitments or litigations, claimsand other contingent liabilit ies existed atthe balance sheet date or on the date of inquiry.

Whether the sale of assets or operatingunits has occurred or is planned.

Whether there is a change in ownershipstructure or composition.

(AUDITOR)REVIEWEDBY

DATE

6 Inquire and discuss with management thefollowing :

DESCRIPTION

(CLIENTMANAGEMENT)

DISCUSSEDWITH

SUPPORTINGDOCUMENTREFERENCE





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7

8

Obtain and review up-to-date informationand correspondence concerninglitigations and claims against or by theentity, and consider the need to contactdirectly the clients' legal counsel.

Obtain letter of representation dated thesame date as audit report fromappropriate officials as to whether anyevents occurred subsequent to the year end which require an adjustment or disclosure to be made in the financialstatements.

9 Make such additional inquiries andperform such procedures as considerednecessary to dispose of other potentialsubsequent events as identified by auditwork.


DESCRIPTION

(CLIENT

MANAGEMENT)DISCUSSED

WITH

SUPPORTINGDOCUMENTREFERENCE

(AUDITOR)REVIEWED

BYDATE

Date :


Client : Prepared by :


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To,(the appropriate representative of senior management)..

You have requested that we audit the balance sheet of (Name of the entity) as at 31st March,2........ and the related profit and loss account and the (cash flow statement) for the year ended on that date. We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements.

ENGAGEMENT LETTER

Guidance

The Engagement Letter has to be prepared in duplicate and signed by the client before theengagement is started. A sample format is given below which is required to be tailored for each circumstance.

The auditor and the client should agree on the terms of the engagement. The agreed termswould need to be recorded in an audit engagement letter or other suitable form of contract. Inthe interest of both client and auditor, the auditor should send an engagement letter,preferably before the commencement of the engagement,to help avoiding anymisunderstandings with respect to the engagement.The engagement letter documents and

confirms the auditor's acceptance of the appointment,the objective and scope of the auditand the extent of the auditor's responsibilities to the client.


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We look forward to full cooperation with your staff and we trust that they will make availableto us whatever records; documentation and other information are requested in connectionwith our audit.

Our fees will be billed as the work progresses.

This letter will be effective for future years unless it is terminated, amended or superseded.

The responsibility of the management also includes the maintenance of adequateaccounting records and internal controls for safeguarding of the assets of the company andfor the preventing and detecting fraud or other irregularities.As part of our audit process, wewill request from management written confirmation concerning representations made to usin connection with the audit.

We also wish to invite your attention to the fact that our audit process is subject to 'peer review' under the Chartered Accountants Act, 1949. The reviewer may examine our working papers during the course of the peer review.

In addition to our report on the financial statements, we expect to provide you with a separateletter concerning any material weaknesses in accounting and internal control systemswhich might come to our notice.

The responsibility for the preparation of financial statements on a going concern basis is thatof the management. The management is also responsible for selection and consistentapplication of appropriate accounting policies, including implementation of applicableaccounting standards along with proper explanation relating to any material departuresfrom those accounting standards. The management is also responsible for making

judgements and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the entity at the end of the financial year and of the profit or loss of the entity for that period.


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Date :

Date :

(a)

(c)



REPRESENTATIONS BY MANAGEMENT

GuidanceThe Management Representation Letter is required to be furnished before the Financial Statementsare signed and is required to be tailored in accordance with the circumstances.

The auditor should obtain evidence hat management acknowledges its responsibility for theappropriate preparation and presentation of financial nformation and that management has approvedthe financial information.

During the course of an audit, management makes many representations to the auditor, either unsolicited or in response to specific enquiries.When such representations relate to matters which arematerial to the financial information, the auditor should:

seek corroborative audit evidence from sources inside or outside the entity;

(b) evaluate whether the representations made by management appear reasonable and consistentwith other audit evidence obtained, including other representations; and

consider whether the individuals making the representation can be expected to be well-informedon the matter.

Representations by management cannot be a substitute for other audit evidence that the auditor couldreasonably expect to be available.For example, a representation by management as to the quantity,

existence and costs of inventories is no substitute for adopting normal audit procedures regardingverification and valuation of inventories.If the auditor is unable to obtain sufficient appropriate auditevidence that he believes would be available regarding a matter which has or may have a materialeffect on the financial information, this will constitute a limitation on the scope of his examination evenif he has obtained a representation from management on the matter.


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2

3

c)

4

5

We confirm, to the best of our knowledge and belief, the following representations:

Accounting Policies1 The accounting policies which are material or critical in determining the results of operations for

the year or financial position are set out in the financial statements and are consistent with thoseadopted in the financial statements for the previous year. The financial statements are preparedon accrual basis.

Assets

The company has a satisfactory title to all assets and there are no liens or encumbrances on thecompany's assets, except for those that are disclosed in Note ... to the financialstatements.

Fixed Assets

The net book values at which fixed assets are stated in the balance sheet are arrived at:

a) after taking into account all capital expenditure on additions thereto, but no expenditure

properly chargeable to revenue;b) after eliminating the cost and accumulated depreciation relating to items sold, discarded,

demolished or destroyed;

after providing adequate depreciation on fixed assets during the period.

Capital Commitments

At the balance sheet date, there were no outstanding commitments for capital expenditureexcepting those disclosed in Note ... to the financial statements.

Investments

The current investments as appearing in the balance sheet consist of only such investments asb h i dil li bl d i d d b h ld f h f h


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10

11

12

13

o t e ent ty.

InventoriesInventories at the year-end consisted of the following:Raw Materials (including components) Rs ................... ..............Work-in-Process Rs .................. ...............Finished Goods (including by-products) Rs ................ .................Maintenance supplies and Stores and Spare Parts Rs .................. ...............Loose Tools Rs ................ .................Others (specify each major head separately) Rs .............................. ...Total Rs .................. ...............

All quantities were determined by actual physical count or weight or measurement that was takenunder our supervision and in accordance with written instructions, on . (date/dates of physical verification), except as follows*

____________________________________________________________________

____________________________________________________________________

All goods included in the inventory are the property of the entity, none of the goods areheld as consignee for others or as bailee, and, except as set out below, none of thegoods are subject to any charge.

____________________________________________________________________

____________________________________________________________________

All inventories owned by the entity, wherever located, have been recorded,including goods senton consignment.


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..

17

18

been properly dealt with in the books of account and subsequent transactions recorded in theaccounts fairly reflect the changes in the inventories upto ............. (balance sheet date).

Loose Tools Others (specify each major head separately)

(In describing the basis/bases of valuation, the method of ascertaining the cost (e.g. FIFO, Average Cost or LIFO) should also be stated. Similarly, the extent to which overheads havebeen included in the cost should also be stated.)

The following provisions have been made in respect of excess, slow-moving, damaged, or obsolete inventories and these, in our view, are adequate.

No item of inventories has a net realisable value in the ordinary course of business which is lessthan the amount at which it is included in inventories.

The basis/bases of valuation is/are the same as that/those used in the previous year, exceptas set out below:

Class of inventory Basis of Valuation Effect of change in Basis of Valuation

This year Last year .................. ..... ................. ...... .................. .... ................ ......................... ..... ................. ...... .................. ..... . .................. ....


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a)

b)c)

d)

27

Liabilities

We have recorded all known liabilities in the financial statements.

We have disclosed in notes to the financial statements all guarantees that we have given to thirdparties and all other contingent liabilities.

Contingent liabilities disclosed in the notes to the financial statements do not include anycontingencies which are likely to result in a loss and which, therefore, require adjustment of assets or liabilities.

Provisions for Claims and LossesProvision has been made in the accounts for all known losses and claims of materialamounts.

There have been no events subsequent to the balance sheet date which require adjustment of,or disclosure in, the financial statements or notes thereto.

Profit And Loss AccountExcept as disclosed in the financial statements, the results for the year were not materiallyaffected by:

Transactions of a nature not usually undertaken by the company;

Circumstances of an exceptional or non-recurring nature;Charges or credits relating to prior years;

Changes in accounting policies.

GeneralThe following have been properly recorded and, when appropriate, adequately disclosed in thefinancial statements:


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31 We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities reflected in the financial statements.

Yours faithfully,

...

... ...

(Representative of entity's management)


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Guidance

Subject. Sch Ref ..

Recommendations

MANAGEMENT LETTER POINTS

All significant internal control deficiencies we find during the course of our audit work, together with our recommendations should be documented and, following review and approvalcommunicated to the client's management for their consideration.In addition, where during thecourse of our audit work we have identified constructive client service issues, they should besimilarly documented, reviewed and reported

______________________________________________________________________________ ______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________ ______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________


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Client : . Prepared by : Date : ..

Year : Reviewed by : .. Date : ..

Partner/Management Responses

MANAGEMENT LETTER POINTS

Include points in formal management letter Yes/No

_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________

Discussed with ... Title .. Date ..

Conclusion


29/1404

Auditors Report

Auditors Report to the Members of (Name of the Company)

Further to our comments in the Annexure referred to above, we report that:i.

ii.

iii.

We have audited the attached Balance Sheet of.(name of the Company), as at 31st Mar also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statthe responsibility of the Companys management. Our sponsibility is to express an opinion on thestatements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Thoserequire that we plan and perform the audit to obtain reasonable assurance about whether the financial

are free of material misstatement. An audit includes examining, on a test basis, evidence supporting thand disclosures in the financial statements. An audit also includes assessing the accounting principlesignificant estimates made by management, as well as evaluating the overall financial statement pr We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditors Report) Order, 2003. issued by the Central Government in ter section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on tspecified in paragraphs 4 and 5 of the said Order.

We have obtained all the information and explanations, which to the best of our knowledgewere necessary for the purposes of our audit;

In our opinion, proper books of account as required by law have been kept by the companappears from our examination of those books (and proper returns adequate for the purpaudit have been received from the branches not visited by us. The Branch Auditors Rep

been forwarded to us and have been appropriately dealt with);

The Balance Sheet and Profit and Loss Account dealt with by this report are in agreemebooks of account (and with the audited returns from the branches);


30/1404

For M/s Name of the FirmChartered AccountantsFirm Registration Number

Signature

(Name of the Member Singing the Audit Report)(Designation)Membership Number

Place :

Date


31/1404

h, 2... andments aree financial

Standardsstatements

e amountsused and

esentation.

ms of sub-he matters

and belief

y so far asses of our

ort(s) have

nt with the


32/1404

Review Report to

For M/s Name of the FirmChartered AccountantsFirm Registration Number

Signature(Name of the Member Singing the Audit Report)(Designation)

Format for Limited Review Report for Companies other than Banks

We have reviewed the accompanying statement of unaudited financial results of (Name of the Company) for the period ended .. except for thedisclosures regarding Public Shareholding and Promoter and Promoter Group Shareholding whichhave been traced from disclosures made by the management and have not been audited by us. Thisstatement is the responsibility of the Companys Management and has been approved by the Board of Directors/ Committee of Board of Directors. Our responsibility is to issue a report on these financialstatements based on our review.

We conducted our review in accordance with the Standard on Review Engagement (SRE) 2400,engagements to Review Financial Statements issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as towhether the financial statements are free of material misstatement. A review is limited primarily toinquiries of company personnel and analytical procedures applied to financial data and thus providesless assurance than an audit. We have not performed an audit and accordingly, we do not express anaudit opinion.

Based on our review conducted as above, nothing has come to our attention that causes us to believethat the accompanying statement of unaudited financial results prepared in accordance with applicableaccounting standards1 and other recognised accounting practices and policies has not disclosed theinformation required to be disclosed in terms of Clause 41 of the Listing Agreement including themanner in which it is to be disclosed, or that it contains any material misstatement.


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Client : .. Prepared by : Date :

Year : .. Reviewed by : Date :

Rate Total Hours Total

2

Apprentices

1

1

2

Partner in charge

Audit Manager

Hours Rate

Senior Partner

TIME BUDGETDESCRIPTION BUDGET ACTUALS

.. ..

.. ..


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Client : .. Prepared by : . Da

Year : ... Reviewed by : . Da

SR.NO. PERFORM PRE-ENGAGEMENT ACTIVITIESSCHEDULE

REFERENCEPERFORMED

BY

1 Review engagement risk by considering thefactors which are client specific.

2 Prepare preliminary audit engagement budgetand schedule appropriate audit staff.

3 Review terms of engagement and prepare feeestimates.

4 Review the points brought forward from theprior year, correspondence file, report file andtax file, and ensure that points of concern are

appropriately addressed.5 Hold a pre-audit meeting with the engagement

manager and partner to discuss engagementrisk consideration,audit approach to be takenand design and preparation of the audit plan.

PERFORM PRELIMINARY PLANNING6 Organise a planning meeting with the client's

staff to update our understanding of the clientsbusiness and their accounting process.

7 Consider environmental and industry factorswhich might identify specific potential risk anddocument our concern.

8 Update understanding of the accounting process

GENERAL AUDIT PROGRAMME


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13 Update our understanding of the client'sbusiness, accounting process, controlenvironment and materiality.Where changes are

significant or where factors indicate potentialrisks, document the details and our specificconcerns as a matter for Partner's attention.Draftresponses to address the risk and seekpartner/manager approval.FINAL AUDIT VISIT

14 Update our understanding of the client'sbusiness, accounting process, control

environment and materiality.Where changes aresignificant or where factors indicate potentialrisks,document the details and our specificconcerns as a matter for partner's attention.Draft focused responses to address the risk andseek partner/manager approval.

15 Ensure all review points have been cleared andrelevant work papers amended.

16 Ensure all adjustments to the financialstatements are reflected in the lead scheduleand that they agree to the statutory accounts.

17 Ensure all material misstatements arediscussed and reported to management andrecorded appropriately (To be done ashighlighted in Summary of unadjusted errors).

18 Complete our subsequent events review up tothe date of the completion of the audit fieldwork and ensure this is updated to a date asnear as it is practicable to the date of signingthe statutory accounts.

19 Ensure matters to be considered by partnersare properly documented and cleared before the


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25 Complete the appropriate compliance checklistfor accounting and other legal requirements towhich the entity is subject and ensure all material

matters have been complied with.

26 Ensure adequate documentation is on file tosupport disclosure items in the financialstatements.

27 Ensure the accounts disclose related partiesand related party transactions that are material tothe financial statements.MANAGEMENT LETTERS

28 Prepare matters for inclusion in managementletters relating to any internal controlweaknesses and client service objective.

29 Review prior year management letter points andensure these have been followed up by client or need to be readdressed.

30 Ensure managements response to those pointswe have raised for inclusion in the managementletter are documented in the files.

31 Review any reports issued by the internal auditdepartment noting their findings andrecommendations.Plan and execute your responses to their findings and the impact on thefinancial statements. Determine if any correctiveactions have been taken based upon the reports.

32 Complete and issue formal management Letter to the appropriate company officials.ADMINISTRATION MATTERS

33 Ensure the time records are updated daily andreconciled to the time sheet fortnightly. Report to


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e :

e :

DATE


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Client : : Date :

Year : : Date :

1

How the entity is financed

Key personnel

Selection and application of accounting policies

Taxation status and issues of the entity and owner, if applicable

Describe the internal factors affecting the business, including

Business objectives and operations (including key income earning assets)

Ownership and management structure, including the relationship between the owner andthe entity, if applicable

Reviewed by

Prepared by

UNDERSTANDING THE CLIENT'S BUSINESS


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Prepared by : Date :

Reviewed by : Date :

1

CONCLUSION

2 Other useful information related to accounting policies:

The audit of a very small business is based on a substantive approach with no reliance oninternal control. Consequently, it is not necessary to identify or test key controls and thissection should consist only of a concise summary of the areas outlined below in order toassist in performing substantive tests.

CONTROLTESTED

PROCEDURE NO. OFSAMPLES

Year :

UNDERSTANDING THE ACCOUNTING POLICIES

Client :


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Consider whether the accounting policies used are appropriate and consistent with thatof the prior year.Consider the risk of going concern assumption and its impact on the financial

statements.


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Client : Date :

Year : Date :

CY (RS.) PY (RS.) IN %SUBJECT TOTHRESHOLD

The variances, if any needs to be analysed and reasons properly documented in line with th(engagement specific). Based on materiality, a threshold may be fixed say, in terms of percamount and only items above this threshold are analysed.

ACCOUNT BALANCE DIFFERENCE

GuidanceThe auditor applies analytical procedures at the planning stage of the audit. The nature and eprocedures at the planning stage of the audit of a small entity may be limited by the timelinestransactions by the small entity and the lack of reliable financial information at that point of ti

may not have interim or monthly financial information that can be used in analytical procedur stage. The auditor may, as an alternative conduct a brief review of the general ledger or suchrecords as may be readily available. In many cases, there may be no documented information ththis purpose, and the auditor may obtain the required information through discussion with the own

* Review draft financial statements for unusual or unexpected amounts or for the absence of suchrelationship and comparison of amounts with the prior year financials to analyse the variances.

Reviewed by :

Prepared by :

ANALYTICAL PROCEDURES IN PLANNING THE AUDIT


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OBSERVATION ACCOUNT BALANCEAFFECTED

AUDIT PROCEDURE CONCL

* Examine impact of the above in our scope of audit procedures.


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IF NO,REASONS

e materiality fixedntage or a fixed

tent of analyticalof processing of

me. Small entities

s at the planningother accountingat can be used for r- manager.

amounts and


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SION


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Client : Date:

Year : Date:

DETAILS OF RISK ACCOUNTBALANCE(S)AFFECTED

ASSERTIONAFFECTED

AUDITPROCEDURES

NO. OF SAMPLES

Reviewed by :

ASSESSMENT OF RISK

For each significant accounting balance, consider whether there are circumstances which will increase therisk of misstatements. Also analyze whether there are conditions or events which increase risk of fraud or error. List below the risk factors identified for specific account balances:

Prepared by :


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Date :

Date :

PLANNING MATERIALITYPrevious

Last Year

Critical component Estimated

. Rs.. Rs..

...% of thereof (Top Limit) Rs.. Rs..

...% of thereof (Low Limit) Rs.. Rs..

Planning Materiality Rs. .

Guidance:

i Profit or loss before tax (adjusted, if appropriate, for the effect of any abnormal levels of items of expenditure such as the owner-manager's remuneration)

Rs Rs..

Planning Materiality is significant in determining the scope of our audit and should be at a level sufficientfor us to conclude that a material misstatement does not exist in the financial statements.To obtain a quantitative materiality guide, we need to identify an appropriate base amount which webelieve is a critical component of the financial statements.The critical component should be (i) relevantto the financial statements as a whole and (ii) stable and normal in the ordinary business of the entity.One of the following may be taken as critical component:

Rs Rs..

Rs Rs..

Current Year Last Year



Actual


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PREPARED BY

PERMANENT FILE UPDATE

ADDITION/ AMENDMENT/DELETION

REFERENCE REVIEWED BY


51/1404



a) Does the owner-manager have a specificidentifiable motive (for example,dependence of the owner-manager onthe success of the entity) to distort thefinancial statements, combined with theopportunity to do so?

FRAUD RISK QUESTIONNAIRE

GuidanceConsideration of Fraud and Error:Where planning and performing audit procedures and evaluating and reporting the results thereof, theauditor should consider the risk of material misstatement in the financial statements resulting fromfraud and error.

The presence of a dominant owner-manager is an important factor in the overall control environment,as the need for management authorization can compensate for otherwise weak control proceduresand reduce the risk of employee fraud and error. However, this can be a potential weakness sincethere is the opportunity for management override of controls. The owner-manager's attitude to controlissues in general and to the personal exercise of supervisory controls can have a significant influence

on the auditor's approach. The auditor's assessment of the effect on such matters is conditioned byknowledge of that particular entity and the integrity of its owner-manager.

Sr DESCRIPTION YES\NO\NA

DETAILS OFRISK

IDENTIFICATIONREF


52/1404

f) Are there unusual transactions aroundthe year-end that have a material effecton profit?

g) Are there unusual related partytransactions?

h) Are the payments of fees or commissionsto agents and consultants appear to beexcessive?

i) Are there any disputes with taxauthorities?

j) Are parts of the detailed accountingrecords unavailable or have been lost for implausible reasons?

k) Is there a significant level of cashtransactions without adequatedocumentation?

l) Are there many transactions withoutadequate documentation?

m) Are there numerous unexplained aspectsof audit evidence (such as differencesbetween the accounting records and thirdparty confirmations, or unexpectedresults of analytical procedures)?

n) Is there inappropriate use of accountingestimates?

o) Have the owner-manager or keypersonnel not taken annual leave for a

long period of time?p) Is there lack of sufficient working capital?

q) Are weaknesses reported earlier stillcontinue?


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7/30/2019 Au

Documents

Auditor Report Matter