Guide Understanding Audit Assurance

8/12/2019 Guide Understanding Audit Assurance

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A guide tounderstandingauditing andassurance:Listed companiesFebruary 2013


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CPA Australia Ltd (‘CPA Australia’) is one of the world’s largest accounting bodies representing more than 139,000 members of the nancial, accounting and business professionin 114 countries.

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Contents

Contributors 4Foreword 5

A guide to understanding auditing and assurance: Listed companies 6

Why are audits and reviews required? 6

What does assurance mean? 6

What is an audit of nancial statements? 7

What is a review of nancial statements? 7

Relationships in nancial reporting 7

The auditor’s report 8

Modied auditor’s reports 9

How can you tell if the auditor’s report is clean or not? 10

What is auditor independence? 10

What do auditors and reviewers do? 11

What does materiality mean? 12

What do auditors do in regard to fraud? 12

What do auditors do in regard to going concern? 12

Does a clean auditor’s report mean a clean bill of health for the company? 13

Does the auditor sign off on the whole annual report? 13

Difference between internal and external audit 13

Other assurance 13 Appendix 1 – Glossary 14

Appendix 2 – Example auditor’s report 15

Appendix 3 – Example review report 17



Contributors

CPA Australia acknowledges the work of the External Reporting Centre of Excellence.

External Reporting Centre of Excellence

Jeffrey Luckins CPA Chairman

Indra Abeysekera CPA

Tong-Gunn Chew FCPA

Thomas Egan FCPA

Amir Ghandar CPA Technical Support and Lead Author

David Hardidge FCPA

Piotr Jakubicki CPA

Alan Lee CPA

Denis Pratt FCPA Technical Support

Meg Richards CPA

Carmen Ridley

Veronique Row CPA

Mark Shying CPA Technical Support

Ram Subramanian Technical Support



Auditing and assurance play an essential role in the effectiveoperation of our capital markets and the economy atlarge, providing condence to current and prospectiveshareholders about the information disclosed by companies.

A guide to understanding auditing and assurance: Listedcompanies explains the value and purpose of auditing andassurance in plain language. This should assist shareholderswho are not experts in auditing and assurance to betterunderstand the messages from their company’s auditor, andmake use of this information in their decision making.

The Guide is an initiative of the External Reporting Centreof Excellence of CPA Australia and I congratulate themon their contribution to a CPA Australia publication thathas an important role to play in the promotion of improvednancial literacy.

Alex Malley FCPA

Chief Executive OfcerCPA Australia Ltd

Foreword



Why are audits and reviews required?Shareholders are often quite separate from those managingand governing the companies they own. 1 They need areliable source of nancial information on which to assessthe company, and the performance of management.

The same can be said for other stakeholders of companies,such as creditors, lenders, employees, analysts, prospectiveshareholders, governments and communities. Audits andreviews enhance the credibility of the information containedwithin the nancial statements , so that shareholders andother stakeholders can make assessments and decisions

with condence and on a consistent basis.

What does assurance mean? The term assurance refers to the expression of aconclusion that is intended to increase the condencethat users can place in a given subject matter orinformation. For example, an auditor’s report isa conclusion that increases the condence thatusers can place in a company’s nancial statements.

There are different levels of assurance, which dependon the type of work that the assurance practitioner performs, and these different levels also lead to differenttypes of conclusions.

A guide to understanding auditingand assurance: Listed companies

1 This guide refers to audits and reviews of listed company nancial statements. The concepts of audit and review are also applicable to other types of entity such as groups ofcompanies, trusts and partnerships.

Type of assurance For example Nature of key work performed Example form of conclusion

Reasonable Assurance An audit of nancial statements Detailed testing, evidence gatheringand substantiationto support the conclusion.

“We believe the nancial statements present a trueand fair view”.

Limited Assurance A review of nancial statements Primarily enquiries and analysis, lessdetailed procedures.

“We have not become aware of anymatter to cause us to believe thenancial statements do not presenta true and fair view”.

No Assurance Preparing nancial statements(compilation)

Preparation of the nancialstatements

No conclusion provided



The following diagram illustrates different levels of assurance,in some of the different activities performed by accountants:

What is an audit of nancial statements? An audit of nancial statements is a reasonable assuranceengagement where the auditor provides an opinion aboutwhether the nancial statements present a true and fair view, and are in accordance with accounting standards (and legislation where appropriate) .

Australian listed company full-year nancial statements arerequired by law to be audited. Many other types of entitiesare also required to have their nancial statements audited,for example non-listed companies over a certain sizethreshold, some charities and not-for-prot entities.

While the reasonable assurance obtained in an audit isa high level of assurance, it is not absolute assurance (acertication that the nancial statements are completelycorrect). Obtaining absolute assurance is not possible innancial statement audits for a number of reasons, including:

• It would be impractical for the auditor totest and audit every transaction

• Financial statements involve judgements andestimates which often cannot be determinedexactly, and may be contingent on future events

What is a review of nancial statements? A review of nancial statements is a limited assuranceengagement where the reviewer provides a conclusion tothe users of the nancial statements as to whether theypresent a true and fair view, and are in accordance withaccounting standards.

Australian listed company half-year reports are reviewed bythe same auditor that will audit the nancial statements atthe end of the year.

Relationships in nancial reporting The following diagram illustrates the relationship betweenshareholders and other stakeholders, management 2 and theauditor or reviewer.

In listed companies a sub-committee of the board ofdirectors called the audit committee usually arranges theappointment of the auditor. The audit committee typicallymeets with the auditor throughout the year to discussdetails such as scheduling, risks, nancial reporting issues,the auditors ndings and other matters relevant to the audit

and nancial statements. At the conclusion of the audit, theauditor often provides a more detailed, in-depth condentialreport to the audit committee.

Reasonable assurance – for examplean audit of nancial statements

Limited assurance – for example areview of nancial statements

No assurance – for example, preparing nancialstatements on behalf of management

(technically called a compilation engagement)

Absolute assurance – for example a guarantee

2 Unless otherwise specied, the term “management” throughout this guide refers to those charged with the governance of companies including directors and toplevel executives.

More

Less

A s s u r a n c e o

b t a i n e

d

More

Less

ManagementShareholders /

other stakeholders(including creditors)

Auditor The auditor/revieweris independent frommanagement

The auditor providesa conclusion on thenancial statements

Management preparesthe nancial statements



In Australia, auditors attend a listed company’s AnnualGeneral Meeting and are available to answer questionsfrom interested parties that are entitled to participate in themeeting, such as shareholders. This is a useful opportunityto clarify specic aspects of the audit.

The auditor’s report The auditor’s report contains the auditor’s opinion onthe nancial statements, in addition to a range of otherinformation. Appendix 2 contains an illustrative exampleof an unmodied auditor’s report with explanation, and

Appendix 3 contains an example of an unmodiedreview report with explanation. An unmodied auditor’sreport effectively states the auditor believes the nancialstatements present a true and fair view, and are inaccordance with accounting standards and relevantlegislation. This is sometimes also called an “unqualied”or a “clean” audit opinion. Unmodied auditor’s reportsare the most common type you are likely to come across.

This is in part because management usually addressesmost of the problems or adjustments that auditorsdiscover before the nancial statements are issued.

An unmodied review report effectively states the reviewerdid not become aware of anything that suggested thenancial statements do not present a true and fair viewin accordance with accounting standards.

Emphasis of matter and other paragraphs

In some circumstances, the auditor will include additionalwording in the auditor’s report directing users to informationthat in their view is fundamental to understanding thenancial statements. This may be information includedin the nancial statements, such as a note (called an“emphasis of matter” paragraph), or information that isincluded elsewhere (called an “other matter paragraph”).It is important to note that an emphasis of matter orother matter paragraph is not a qualication, limitationor adverse conclusion (for these types of auditor’s reports,see Modied auditor’s reports below).

Type of paragraph Examples

Emphasis of matter • There is a signicant uncertainty as to the company’s ability to continue as a going concern,which has been appropriately disclosed in the nancial statements.

• The nancial statements are not prepared on the basis of applying all accounting standards.

Other matter There is information included in an annual report that is inconsistent with the audited nancialstatements (for example, the gures in the operating review are inconsistent with thosedisclosed in the nancial statements).



Modied auditor’s reportsModied auditor’s reports are issued when the auditor believes the nancial statements contain a material misstatement ,or when the auditor is unable to obtain enough evidence to form an opinion. The following table sets out the different typesof modied auditor’s reports that may be issued in these situations.

Type of modied audit opinion Description Situations where this typeof report may be issued

Examples

Qualied or “except for” opinion The opinion states the nancialstatements present a true andfair view, and are in accordancewith accounting standards

except for the effect of aspecic matter or matters. The issues are described ina separate paragraph withinthe report.

A qualied opinion is issuedwhen a specic part of thenancial statements containsa material misstatement or

adequate evidence cannotbe obtained in a specic,material area, and the restof the nancial statements arefound to present a true andfair view, in accordance withaccounting standards.

The auditor has a differentview on the valuation of anasset than that applied bymanagement in the nancial

statements, but the restof the nancial statementswere found to be free ofmaterial misstatements.

Disclaimer of opinion The auditor cannot reach anopinion overall on the nancialstatements and thereforedisclaims any opinion on it.

A disclaimer of opinion isissued when the auditor cannotobtain adequate evidence toform an opinion on the nancialstatements overall.

The company’s nancialreporting information systemis damaged and key datais lost, meaning adequateevidence is not available tosupport the disclosures in the

nancial statements. Adverse opinion The opinion states that the

auditor believes the nancialstatements do not presenta true and fair view, and

are not in accordance withaccounting standards.

An adverse opinion is issuedwhen the auditor believesmisstatements are so pervasivethat the nancial statements donot present a true and fair view,or are not in accordance withaccounting standards.

The auditor believes thatmanagement has applied aninappropriate nancial reportingframework in preparing thenancial statements.



How can you tell if the auditor’s reportis clean or not? To determine if an auditor’s report is clean or modied,you need to look at the “opinion” section. This is usuallyfound towards the end of the auditor’s report, beforethe auditor’s name and signature. An unqualied orclean audit opinion will state that the auditor believes thenancial statements present a true and fair view, and arein accordance with accounting standards and relevantlegislation. A modied auditor’s report will containa qualication to that statement, a disclaimer or an

adverse statement (see also “Modied auditor’s reports”).

What is auditor independence? An independent auditor is free from external inuence orbias and is therefore able to independently form judgementsand conclusions during the audit. Auditors are subjectto professional ethical standards , including extensiverequirements for auditor independence both in mindand in appearance. It is critical that auditors are not onlyactually independent, but also seen as independent.

Many of the laws and regulations applicable to audits,

such as those in the Corporations Act 2001 , set outadditional independence requirements that auditors ofrelevant companies need to meet. For listed companiesin Australia, some of these additional requirements include:

• Rotation of lead auditors every ve years

• Restrictions on auditors holding boardpositions at companies they have audited

The Corporations Act 2001 requires a declaration ofindependence to be provided by the auditor to the boardof directors, which is published in the annual report.



What do auditors and reviewers do? The audit or review of nancial statements is a systematicprocess designed to identify instances of materialmisstatement in the nancial statements. Extensive auditingand assurance standards and legislative requirements setthe framework and minimum requirements for nancialstatement audits and reviews.

The following diagram illustrates at a very high level whatis involved in nancial statement audits and reviews, and theorder in which activities usually take place during the year:

Primarily performedafter period end

Period end, e.g. 30 June

Primarilyperformed priorto period end

A key part of the initial assessmentis whether the auditor/reviewer willbe able to meet independence andother ethical requirements.

Initial assessment and agreement on terms of the engagement

Understanding the companyinvolves an analysis of internaland external factors – in greaterdepth for an audit than a review.The assessed risks of materialmisstatement form a basisfor the audit/review proceduresto be performed.

Understanding the company and assessing risksof material misstatement in the nancial statements

The types of procedures appliedinvolve judgement and will varysignicantly depending on therisks of material misstatement,nature of the entity and whether theengagement is an audit or review.

Performing procedures to address the riskof material misstatement in the nancial statements

For more on auditor/reviewer’sreporting, see “The auditor’s report”,and illustrative examples

in appendices 2 and 3.

Finalisation and auditor’s report signed (Australian listedcompanies: within 2 months of period end date)



What does materiality mean? As mentioned above, auditors and reviewers are concernedwith material misstatements, rather than any misstatementin the nancial statements. Material misstatements arethose that are signicant enough to affect the decisionsmade by the users of the nancial statements. This canbe in terms of the quantitative or qualitative signicanceof misstatements.

Quantitative The quantities or dollar amounts inthe nancial statements. For example,

quantitatively material misstatementscould include:

• Overstating revenue

• Missing/not recorded liabilities

• Understating expenses

Qualitative The nature of items in the nancialstatements. For example, qualitativelymaterial misstatements could include:

• Not disclosing certain relatedparty transactions

• Not disclosing management’sremuneration

These disclosures are important in evaluatinghow the company has been managed,although they may be small quantitativelyin comparison to the scale of the company’soverall operations.

What do auditors do in regard to fraud? Auditors consider the possibility that fraudulent activities

can result in material misstatement in the nancialstatements, and take this into account in planning andperforming their work. Fraud is dened in auditing andassurance standards as an:

“intentional act by one or more individuals among management, those charged with governance, employees,or third parties, involving the use of deception to obtain

an unjust or illegal advantage”.

An audit is not an investigation intended to uncover allinstances of fraud. However it is reasonable to expectthat an audit would detect instances of fraud that resultin material misstatement.

What do auditors do in regard togoing concern? The going concern assumption is that a companywill continue in business for the foreseeable future. Thisassumption is adopted unless evidence indicates otherwise.

The going concern assumption has a signicant impacton how a company’s nancial statements are presented(see “If going concern doesn’t apply“).

In preparing the nancial statements, management makesan assumption as to whether it believes the company will beable to continue as a going concern. The auditor performswork to assess this assumption as part of the audit.

The work of the auditor includes:

• Obtaining evidence that can be used toassess the appropriateness of management’sassumptions in regard to going concern.

• Forming a conclusion on whether that evidenceindicates any material uncertainties in the abilityof the company to continue as a going concern.

The auditor’s focus in this assessment is whether thecompany can continue as a going concern for a 12-monthperiod from the date of signing the auditor’s report.

The going concern assumption involves judgementsabout events taking place in the future, which are inherentlyuncertain. Where there is signicant uncertainty in thecompany’s ability to continue as a going concern andthis has been disclosed by management in the nancialstatements, the auditor includes wording in the auditor’sreport to direct users to the applicable note in the nancialstatements. This is called an emphasis of matter paragraph(explained further on page 7). If the auditor ultimately doesnot agree with management’s assumptions in regard togoing concern, the result would be a modied opinion(see “The auditor’s report”).

If going concern doesn’t apply

Companies that are not a going concern report ona different basis from those that are – for example,assets and liabilities would be recognised at theirimmediate sale value/liquidation value, rather thantheir value in future use.



Difference between internal andexternal auditInternal audit is an appraisal activity established within anentity and functions under the direction of the company’smanagement and board. It is a management tool andforms part of the company’s internal control structure.In general, the main focus of an internal audit is toevaluate the adequacy and effectiveness of the company’sinternal control.

Conversely, an external audit is undertaken by an auditorwho is independent from the entity and has been appointed

to express an opinion on the nancial statements or otherspecied accountability matter. External auditors act andreport in accordance with their mandates, which maybe dictated by legislation, regulation or established ina contract.

Other assurance Assurance is also applicable in a wide and expandingrange of other areas aside from nancial statements.Some examples include:

• Compliance with regulations

• Sustainability reports

• Greenhouse gas emission statements

• Prospectuses

A wide group of stakeholders increasingly need credibleinformation in regard to the performance and impact ofcompanies in these areas.

Does a clean auditor’s report mean a cleanbill of health for the company? Auditor’s reports are intended to increase the degreeof condence users have in the information in nancialstatements – not about the state of the company itselfor whether it is a safe investment. An unmodied auditor’sreport means investors or other stakeholders can makean assessment of the company based on its nancialstatements, with a higher degree of condence thatthe information is materially correct and unbiased.

Auditor’s do perform a role in assessing the appropriateness

of the going concern assumptions used by managementin preparing the nancial statements, but this cannot betaken as a conclusion on the solvency or nancial health ofthe company (see “What do auditors do in regard to goingconcern?”)

Does the auditor sign off on the wholeannual report?

The auditor’s report is about the nancial statements,which are usually included in the annual report. In the caseof listed companies in Australia, the auditor also provides

an opinion on the remuneration report, which disclosesthe remuneration of key management personnel.Other information within the annual report may nothave been subjected to assurance (for examplemanagement discussion and analysis, or an operatingreview). However, the auditor does consider whether thisaccompanying information is consistent with the auditednancial statements. So for example, the auditor wouldreport if the prot results included in the operating reviewwere inconsistent with those in the nancial statements.



Appendix 1 – Glossary

Accounting standards: Mandatory standards appliedin preparing nancial statements. In Australia, thesestandards are issued by the Australian AccountingStandards Board, and internationally by the International

Accounting Standards Board.

Assurance: The expression of a conclusion that is intendedto increase the condence of users in subject matter orinformation (see also “What does assurance mean?”)

Assurance practitioner : A professional assuranceservices provider.

Auditor’s report: The nal report that sets out the auditor’sopinion (see also “The auditor’s report”, and an exampleof an auditor’s report in Appendix 2).

Auditing and assurance standards: Mandatorystandards applied by assurance practitioners in audits,reviews and other assurance engagements. In Australiathese standards are issued by the Australian Auditing and

Assurance Standards Board, and internationally by theInternational Auditing and Assurance Standards Board.

Financial statements: Four primary nancial statementsfor the current and comparative nancial period (statement

of comprehensive income, statement of nancial position,statement of changes in equity, and cash ow statement),plus the notes to the nancial statements. See also,“ A guide to understanding annual reports: Listedcompanies” available on CPA Australia’s website.

Going concern: An enterprise that is expected tocontinue in business for the foreseeable future (see also“What do auditors do in regard to going concern?”)

Limited assurance: A level of assurance that ismeaningful, but lower than reasonable assurance(see also “What does assurance mean?”)

Material misstatement: An inaccuracy or omission fromthe nancial statements that is signicant enough to affectthe decisions made by users of the nancial statements.

Professional ethical standards: The ethical standardsapplicable to the accounting profession, including thoseapplicable to assurance practitioners. In Australia, thesestandards are issued by the Accounting Professionaland Ethical Standards Board, and internationally by theInternational Ethics Standards Board for Accountants.

Reasonable assurance: A high but not absolute level ofassurance (see also “What does assurance mean?”)

Review report: The nal report that sets out the reviewconclusion (see also “The auditor’s report”, and an exampleof a review report in Appendix 3).

True and fair: Presenting an accurate and unbiased pictureof a company’s nancial performance and position in thenancial statements.

http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/guide-understanding-annual-report.pdf






Appendix 2 –Example auditor’s report

Independent auditor’s report

The report is addressed to the membersor shareholders of the company To the Members of ABC Company Ltd.

This section sets out the basic details of theengagement – the applicable reporting period,name of the company, and what was audited

Report on the Financial Report

We have audited the accompanying nancial report of ABC CompanyLtd., which comprises the statements of nancial position as at30 June 20X3, the statements of comprehensive income, thestatements of changes in equity and the statements of cash owsfor the year then ended, notes comprising a summary of signicantaccounting policies and other explanatory information, and thedirectors’ declaration of the company and the consolidated entitycomprising the company and the entities it controlled at the year’send or from time to time during the nancial year.

The directors are responsible for preparing thenancial statements, and for the internal controlsin the company

Directors’ Responsibility for the Financial ReportThe directors of the company are responsible for the preparationof the nancial report that gives a true and fair view in accordancewith Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessaryto enable the preparation of the nancial report that gives a true andfair view and is free from material misstatement, whether due to fraudor error. In Note X, the directors also state, in accordance with

Accounting Standard AASB 101 Presentation of Financial Statements ,that the nancial statements comply with International FinancialReporting Standards.



Appendix 2 –Example auditor’s report

The auditors are responsible for auditing thenancial statements – this section also providesa brief description of what auditors do (see also“What do auditors and reviews do?”)

Auditor’s Responsibility

Our responsibility is to express an opinion on the nancial reportbased on our audit. We conducted our audit in accordance with

Australian Auditing Standards. Those standards require that wecomply with relevant ethical requirements relating to audit engagementsand plan and perform the audit to obtain reasonable assuranceabout whether the nancial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the nancial report. The proceduresselected depend on the auditor’s judgment, including the assessmentof the risks of material misstatement of the nancial report, whetherdue to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the company’s preparation of the

nancial report that gives a true and fair view in order to design auditprocedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the company’sinternal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accountingestimates made by the directors, as well as evaluating the overallpresentation of the nancial report.

We believe that the audit evidence we have obtained is sufcientand appropriate to provide a basis for our audit opinion.

The auditor sets out their overall nding in theopinion. This is an example of an unmodiedor “clean” audit opinion. See also “The auditor’sreport” for information on modied opinions.

Opinion

In our opinion:

(a) the nancial report of ABC Company Ltd. is in accordance

with the Corporations Act 2001, including:(i) giving a true and fair view of the company’s and consolidated

entity’s nancial positions as at 30 June 20X3 and of theirperformance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and theCorporations Regulations 2001; and

(b) the nancial report also complies with InternationalFinancial Reporting Standards as disclosed in Note X.

Audit frm AUDIT FIRM

Audit Partner AUDIT PARTNER

Sydney, 30 September 20X3

The auditor conrms they have met the requiredindependence standards

Independence

In conducting our audit, we have complied with the independencerequirements of the Corporations Act 2001 . We conrm that theindependence declaration required by the Corporations Act 2001 ,which has been given to the directors of ABC Company Ltd., wouldbe in the same terms if given to the directors as at the time of thisauditor’s report.



Appendix 3 –Example review report

Independent auditor’s review reportThis is a review – why does it say “auditor”?The auditor that will audit the nancial statements at the end of the year usually conducts the half-year review – so the report refers to the reviewperformed by the independent auditor.

The report is addressed to the membersor shareholders of the company

This section sets out the basic details of theengagement – the reporting period, name ofthe company, what was reviewed

The directors are responsible for preparingthe nancial statements and for the internalcontrols in the company

The auditor is responsible for reviewingthe nancial statements – this section alsoprovides a brief description of what auditorsdo (see also “What do auditors andreviews do?”)

To the members of ABC Company Ltd.

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year nancial report of ABCCompany Ltd., which comprises the condensed statement of nancial positionas at 31 December 20X2, the condensed statement of comprehensive income,condensed statement of changes in equity and condensed statement of cashows for the half-year ended on that date, notes comprising a summary ofsignicant accounting policies and other explanatory information, and thedirectors’ declaration.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of thehalf-year nancial report that gives a true and fair view in accordance with

Australian Accounting Standards and the Corporations Act 2001 and forsuch internal control as the directors determine is necessary to enablethe preparation of the half-year nancial report that is free from materialmisstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year nancial reportbased on our review. We conducted our review in accordance with AuditingStandard on Review Engagements ASRE 2410 Review of a Financial ReportPerformed by the Independent Auditor of the Entity , in order to state whether,on the basis of the procedures described, we have become aware of anymatter that makes us believe that the half-year nancial report is not in

accordance with the Corporations Act 2001 including giving a true andfair view of the company’s nancial position as at 31 December 20X2and its performance for the half-year ended on that date, and complyingwith Accounting Standard AASB 134 Interim Financial Reporting and theCorporations Regulations 2001. As the auditor of ABC Company Ltd., ASRE2410 requires that we comply with the ethical requirements relevant to the auditof the annual nancial report.

A review of a half-year nancial report consists of making enquiries,primarily of persons responsible for nancial and accounting matters, andapplying analytical and other review procedures. A review has substantiallyless scope than an audit conducted in accordance with Australian AuditingStandards and consequently does not enable us to obtain assurance that wewould become aware of all signicant matters that might be identied in anaudit. Accordingly, we do not express an audit opinion.

The directors of the company are responsible for the preparation of thehalf-year nancial report that gives a true and fair view in accordance with

Australian Accounting Standards and the Corporations Act 2001 and forsuch internal control as the directors determine is necessary to enablethe preparation of the half-year nancial report that is free from materialmisstatement, whether due to fraud or error.



Independent auditor’s review report

Appendix 3 –Example review report

The auditor conrms they have met the requiredindependence standards

The auditor sets out their overall nding in theconclusion. This is an unmodied or “clean”conclusion. See also “The auditor’s report”.

Independence

In conducting our review, we have complied with the independencerequirements of the Corporations Act 2001. We conrm that theindependence declaration required by the Corporations Act 2001,which has been given to the directors of ABC Company Ltd.,would be in the same terms if given to the directors as at the timeof this auditor’s report.

Conclusion

Based on our review, which is not an audit, we have not becomeaware of any matter that makes us believe that the half-yearnancial report of ABC Company Ltd. is not in accordance withthe Corporations Act 2001 including:

(a) giving a true and fair view of the company’s nancial position asat 31 December 20X3 and of its performance for the half-year endedon that date; and

(b) complying with Accounting Standard AASB 134 Interim FinancialReporting and Corporations Regulations 2001.

Audit frm AUDIT FIRM

Audit Partner AUDIT PARTNER

Sydney, 30 September 20X3



Documents

Guide Understanding Audit Assurance