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Learning Objectives:
By studying this chapter, students should be able to:
1. Define corporate governance and identify the parties involved in corporate
governance.
2. Describe corporate governance responsibilities and failures of corporate
governance leading to enactment of the Corporate Law Economic Reform
Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9 Act).
3. Identify key components of the CLERP 9 Act of 2004 relevant to corporate
management and the auditing profession.
4. Describe management‟s role in preparing and communicating financial and
internal control information.
5. Articulate the responsibilities of audit committees.
6. Describe required communications between the audit firm and the audit
committee.
7. Analyse the relationship between corporate governance and audit risk.
8. Identify the various types of framework pronouncements that affect the auditing
profession and the standards issued within each of the framework categories.
9. Describe the similarities and differences between auditing and assurance
standards of the AUSAB and the IAASB.
10. List the fundamental principles of Australian Auditing Standards (ASAs)
developed by the AUASB and International Standards on Auditing (ISAs)
developed by the IAASB.
11. Articulate a standards-based approach to the audit opinion formulation process.
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Teaching Suggestions
The public accounting profession has been widely criticised during the past decade for
failing to protect investor interests. While much of the audit profession performed
admirably during this time period, the failures were spectacular: HIH Insurance and One-
Tel in Australia and in the US Enron and WorldCom. The Australian Government reacted
to these failures by enacting extensive legislation affecting the audit profession. The new
legislation – the Corporate Law Economic Reform Program (Audit Reform and
Corporate Disclosure) Act 2004 (CLERP 9 Act) – fundamentally changed the auditor–
client relationship and moved the process of setting audit standards from a private–public
co-regulatory arrangement to the public sector. But the failures that occurred during the
past decade were not solely attributable to failures in the audit profession. They also
represented fundamental failures at the very heart of an organisation – failures of the
corporate governance structure. The failures in ethical standards and corporate
governance continue with significant issues about the governance of the Australian
Securities Exchange (ASX), the managed investment scheme industry, disclosure of
margin lending and other issues.
The landscape for the auditing profession has changed: new reporting responsibilities,
changes in expectations, and a new statutory body responsible for setting audit standards
and legal backing for audits conducted pursuant to the Corporations Act 2001. This
chapter describes the motivation for those changes; describes the differences in
responsibilities between auditing listed and unlisted companies, describes generally
accepted auditing standards, and presents a brief overview of the audit process as a
foundation for understanding recent developments in professional ethics and risk analysis
covered in Chapters 3 and 5.
Begin by summarising the events that led up to the CLERP 9 Act 2004. The HIH
Insurance and One.Tel examples and more recently ABC Learning, Babcock and Brown,
and Centro Properties Group cases certainly provides a rich example of the kind of failure
in corporate governance and financial reporting that led to action, but any of the widely
publicised corporate accounting scandals could be used. Explain that the failures of the
past decade were primarily failures across all parts of the corporate governance structure.
They were not just audit failures, or just management failures. Thus, to understand the
changes affecting the audit profession, we have to understand how the audit profession
fits into the overall corporate governance structure. A broad schematic of the overall
governance process can assist in this. As we look at the governance process through the
1990s and early 2000s, there were failures in virtually every part of the governance
process. Boards of Directors hired managers, but provided large amounts of share options
that ceded enormous power to managers, thus providing incentives to continuously report
improved earnings. Managers, in turn, assumed greater responsibilities for involvement
in the hiring of external auditors, despite it technically being a shareholder vote, and used
their power relationship to too often encourage auditors to find accounting treatments
those managers viewed as „value enhancing‟ (read increase or better manage earnings).
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The storm hit when HIH failed and Enron failed in the US in 2001 both being declared
the largest bankruptcies in the respective histories at the time and both audited by
Andersen, which subsequently itself failed. In both of these companies, the operational
failures were covered up with clever accounting manipulations that were not detected by
the public accounting firms. The press, governments, and the general public continued to
ask why such failures could have occurred when the public accounting profession was
given the sole license to protect the public from financial fraud and misleading financial
statements.
Identify and analyse the key components of the CLERP 9 Act 2004 and explain the
public implications of that Act. Explain management‟s role as the key communicator of
financial and control information to stakeholders. Discuss the components of CLERP 9
that were intended to highlight management‟s role in the financial reporting process.
Identify the key responsibilities the audit committee has as an important auditor
independence mechanism.
Students should know the internationalisation of the framework under which Australian
Auditing Standards from the AUASB (and the IAASB) are created. Explain the changes
in auditing standards setting resulting from the CLERP 9 Act to incorporate Auditing
Standards into the Corporations Act 2001 in the same way that Accounting Standards are
written into that Act.
Describe the overall audit process as a foundation for fulfilling audit responsibilities to
the public.
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Suggested Homework Problems
Learning
Objectives
Review
Questions
Multiple-Choice
Questions
Discussion and
Research Questions Cases
LO 1
Pp 44-46
2-1, 2-6 2-1 2-37, 2-38, 2-39,
2-52, 2-57, 2-58
2-59
LO 2
Pp 47-49
2-2, 2-3, 2-4,
2-5, 2-6
2-2, 2-3, 2-4 2-40, 2-41
LO 3
Pp 50-51
2-7, 2-8, 2-9,
2-10, 2-11, 2-12
2-42, 2-47, 2-54, 2-56,
2-57
LO 4
Pp 51-52
2-13 2-5 2-43, 2-56
LO 5
Pp 52-53
2-14, 2-15, 2-16,
2-17, 2-18
2-44, 2-45, 2-46, 2-49,
2-52, 2-58,
2-59
LO 6
Pp 54-54
2-19, 2-20 2-6 2-44, 2-45 2-59
LO 7
Pp 54-55
2-21, 2-22, 2-23 2-48, 2-52
LO 8
Pp 55-56
2-30, 2-31 2-59
LO 9
Pp 56-58
2-26, 2-27, 2-28,
2-29
2-9 2-49
LO10
Pp 58-61
2-24, 2-25, 2-31,
2-32
2-7, 2-49, 2-50, 2-52, 2-53,
2-64
LO11
Pp 61-65
2-33, 2-34, 2-35
2-36
2-8, 2-10 2-51, 2-53, 2-55 2-59
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Chapter Outline
I. CORPORATE GOVERNANCE AND AUDITING
1. Corporate governance is a process by which the owners and creditors of an
organisation exert control and require accountability for the resources
entrusted to the organisation. The owners (shareholders) elect a board of
directors to provide oversight of the organisation‟s activities and
accountability to stakeholders.
2. Primary parties involved in corporate governance are:
a. Shareholders
b. Board of directors
c. Audit committee as a subcommittee of the Board
d. Management (financial and operational)
e. Internal auditors
f. Self-regulatory organisations (i.e. CPAA, ICAA, IPA)
g. Other self-regulatory organisations (i.e. ASX)
h. Regulatory agencies (i.e. ASIC, FRC)
i. External auditors.
3. Owners want accountability of things such as:
a. Financial performance
b. Financial transparency
c. Stewardship
d. Composition of the board of directors and their activities.
II. CORPORATE GOVERNANCE RESPONSIBILITIES AND FAILURES:
1. The financial failures of the past decade were not exclusively the fault of the
public accounting profession. Rather, the failures represented fundamental
breakdowns in the structure of corporate governance. Nor were the failures
limited to Australia and the US. Similar failures occurred in major companies
located in Italy, France, India, Japan, the UK, and other parts of the world.
Greed simply overwhelmed many parts of the system and self-regulatory
mechanisms (professional accounting organisations) failed in holding their
members to the highest level of corporate accountability. In response,
regulations such as the CLERP 9 Act 2004 were enacted, in part to address
fundamental problems in corporate governance. Investment analysts focused
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on „earnings expectations‟ and contributed to the governance problem by
relying on management guidance rather than performing their own
fundamental analysis.
2. In a famous speech that made international headlines SEC Chairman Levitt
cited numerous problems with the profession:
a. „Cookie jar reserves‟ used by firms to manage earnings
b. Improper revenue recognition
c. Creative accounting for mergers and acquisitions that did not reflect
economic reality
d. Increased reliance on share-based compensation that put increased
pressure on meeting earnings targets.
3. An environment was needed in which auditors would make independent
judgements on the economic substance of transactions and require accounting
that was consistent with such judgement.
4. There was also concern that the profession was „cutting corners‟ to make
audits more cost effective and thus allow audit partners to be compensated at
levels comparable to their consulting or non-audit service partners.
Specifically, there were concerns that:
a. Analytical procedures were being used inappropriately to replace
direct tests of account balances
b. Audit firms were not thoroughly evaluating internal control and
applying substantive procedures to address weaknesses in control
c. Audit documentation, especially related to the planning of the audit,
was not up to professional standards
d. Auditors were ignoring warning signals of fraud and other problems,
and
e. Auditors were not providing sufficient warning to investors about
companies that might not continue as „going concerns‟.
III. THE CLERP 9 Act 2004
Some of the more significant provisions of the Act include:
1) A general statement of principle requiring the independence of auditors
(S324CA)
2) Require the auditor to make an annual declaration, addressed to the board
of directors, that the auditor has maintained its independence in
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accordance with the Act and the rules of the professional accounting
bodies (S307C)
3) Strengthen restrictions on employment relationships between an auditor
and audit client. This includes a mandatory period of two years following
resignation from an audit firm before a former partner directly involved in
the audit of a client can become a director of the client or take a position
with the client involving responsibility for fundamental management
decisions (S324CI)
4) Impose new restrictions on financial relationships. This covers
investments in audit clients and loans between an audit client, and the
auditor or their immediate family (S324CH)
5) Require mandatory disclosure in the annual report of fees paid for not just
non-audit services (NAS) but, for the first time, the categories of NAS
provided (S300(11Ba))
6) Require a statement in the annual report of whether the board of directors
is satisfied that the provision of NAS is compatible with auditor
independence (S300(11Ba)). This disclosure includes an explanation as to
why the following non-audit services, if contracted, do not compromise
audit independence:
(a) Preparing accounting records and financial statements of the audit
client
(b) Valuation services
(c) Internal audit services
(d) IT systems services
(e) Temporary staff assignments
(f) Litigation support services
(g) Legal services
(h) Recruitment of senior management for the audit client
(i) Corporate finance and similar activities.
7) Make audit lead engagement and review partner rotation compulsory after five
years (S324AD); with provision for ASIC (S342A) to grant relief where
necessitated by circumstances
8) Require accountants seeking registration as company auditors to meet agreed
competency standards, to undertake to abide by an accepted code of
professional ethics and to complete a specialist auditing course prior to
registration (S1280A)
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9) Requirement that the CEO and CFO certify the financial statements and the
disclosures in those statements
10) Partners in charge of audit engagements, as well as all other partners or
managers with a significant role in the audit, must be rotated off the
engagement every five years
11) Requiring the establishment of an effective „whistle blowing program‟ that
reports to the appropriate level of the organisation and the audit committee
12) There must be a „cooling off‟ period before a partner or manager can take a
high-level position in an audit client without jeopardising the independence of
the public accounting firm
13) Limiting the non-audit services that audit firms can provide to their audit
clients
14) Audit committees be given enhanced responsibilities
15) Auditing Standards to be legally enforced.
The Financial Reporting Council (FRC)
1. The FRC to take oversight responsibility for the setting of Auditing
Standards
2. A new statutory Auditing standard setting body established
(AUASB)
3. The FRC to establish the strategic direction for the AUASB
4. The FRC delegated responsibility for inspections of audit firms and
audit quality to ASIC.
IV. CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTING
A. Management has always had the primary responsibility for the accuracy and
completeness of an organisation‟s financial statements and notes. It is
management‟s responsibility to:
1. Choose which accounting principles best portray the economic
substance of company transactions
2. Implement a system of internal control that assures completeness
and accuracy in financial reporting, and
3. Ensure that the financial statements contain full and complete
disclosure.
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B. The CLERP 9 Act also requires management (both the CEO and the CFO) to
certify the accuracy of the financial statements and provides for criminal
penalties for materially misstated financial statements.
Teaching Note: Mention that management has in turn attempted to push this
responsibility further down the organisation by requiring divisional managers and
controllers to certify to the correctness of their financial information that is used in
developing consolidated statements.
V. ENHANCED ROLE OF AUDIT COMMITTEES
A. Audit committees, where they exist, take on added importance under the
CLERP 9 Act. Under the ASX Corporate Governance Guidelines, the audit
committee must be composed of „outside directors‟. The audit committee has
important oversight roles.
B. The audit committee should:
1. Be apprised of all significant accounting choices made by
management
2. Be apprised of all significant changes in accounting systems and
controls built into those systems
3. Be involved in the nomination of the external auditor and review the
audit plan and audit results with the auditors
4. Have the authority to hire and fire the head of the internal audit
function, and set the budget for the internal audit activity and should
review the audit plan and discuss all significant audit results
5. Receive all the regulatory audit reports and periodically meet with
the regulatory auditors to discuss their findings and their concerns.
C. The audit committee is not intended to replace the important processes
performed by the auditors. But, the audit committee must make informed
choices about the quality of work it receives from the auditors.
VI. REQUIRED AUDIT FIRM COMMUNICATION TO THE AUDIT
COMMITTEE
Auditors are expected to exercise informed judgement beyond simply determining
whether the statements reflect Accounting Standards. Auditors should be alert to
whether the company may have stretched the limits of Accounting Standards and
GAAP in portraying current financial results. The auditor must have a discussion
with the audit committee about not only the acceptance of an accounting principle
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chosen, but whether or not the auditor believes the accounting treatment best
portrays the economic substance of the transaction. Auditors must be prepared to
bring controversial accounting principles to the audit committee for discussion.
The new requirements are a supplement to, not a replacement of, existing
communication requirements (ASA 260 and ASA 265).
VII. IMPORTANCE OF GOOD GOVERNANCE TO THE AUDIT
A. Companies with good corporate governance
1. Are less likely to engage in financial engineering
2. Have a code of conduct that is reinforced by actions of top
management
3. Have independent board members who take their jobs seriously and
have sufficient time and resources to perform their work
4. Take the requirements of good internal control over financial
reporting seriously
5. Make a commitment to financial competencies needed.
VIII. AUDIT STANDARD SETTING: A NEW AND OLD MIXTURE
A. Auditing standards that apply to the auditor‟s task of developing and
communicating an opinion on the financial report.
B. Assurance standards that apply to the auditor‟s task of developing and
communicating an opinion on financial information outside of the normal
financial statements.
C. An attestation standard is a term used to describe assurance services that
involve gathering evidence regarding specific assertions and communicating
an opinion on the truth and fairness or fairness of the presentation to a third
party.
D. Review standards apply where the board or a user has requested a lower level
of assurance than that provided by an audit. In performing these services, the
auditor does not gather enough evidence to support a statement as to whether
the financial statements are fairly presented, but rather provides negative
assurance. Compilation standards provide no assurance.
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IX. SIMILARITIES AND DIFFERENCES BETWEEN VARIOUS AUDITING
AND ASSURANCE STANDARDS
All of the standards start from fundamental principles on how an audit engagement
should be planned and conducted and then how the results should be communicated.
An overview of the fundamental principles involved with audit standards is shown in
Exhibit 2.5 and for quality control standards is shown in Exhibit 2.6.
X. GENERALLY ACCEPTED AUDITING STANDARDS AND IAASB
PRINCIPLES
A. The IAASB developed fundamental principles for auditing standards that
serve as a foundation for all subsequent standards. Because the standards are
conceptual in nature, an understanding of them provides a foundation on
which all the other standards can be interpreted.
B. Quality Control Standards.
1. These guide the profession in selecting and training its professionals
to meet the public trust. These standards are represented by the broad
concepts underlying technical training and proficiency,
independence from the client, and the exercise of due professional
care. They form the conceptual foundation for the conduct of audits,
and all other standards follow from the basic premises in these
standards.
2. Independence is often referred to as the cornerstone of auditing –
without independence, the value of the auditor‟s attestation function
would be decreased. Auditors must not only be independent in their
mental attitude in conducting the audit (independence in fact) but
also must be perceived by users as independent of the client
(independent in appearance).
Teaching Note: Stress that an auditor can add value to the client through
advice, but in doing so must remain objective or risk becoming irrelevant to
shareholders.
3. Due Professional Care.
The public expects that an audit will be conducted with the skill and
care of a professional. Following Auditing Standards is one
benchmark for due professional care. However, following Auditing
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Standards is not always sufficient. If a „reasonably prudent person‟
would have done more, such as investigating for a potential fraud, it
is often asserted that the professional should have done at least as
much. Public accounting firms use supervision and review of audit
work to ensure that audits are conducted with due professional care.
C. Audit Conduct Standards
1. Planning and Supervision.
The auditor must understand the client‟s business risks, its
processing risk (including computer dependency), and must be able
to analyse current financial results and anticipate areas where
misstatements are likely in the financial statements and notes. The
most visible product of the planning process is the audit program,
which lists the audit objectives and the procedures to be followed in
gathering evidence to test the accuracy of account balances.
2. Understanding the Entity and its Internal Controls.
The auditor needs to assess the entity and its environment to help
assess the risk of material misstatement (including fraud). Analysis
of an organisation‟s risks and internal controls can yield insight into
the types of misstatements (errors or fraud) that might occur without
being detected, or alternatively, it might yield insight into the
strength of the controls to minimise financial misstatements. An
analysis of the accounting system is necessary to determine (a) risks
that are not addressed by controls; (b) the potential impact of those
risks on the company‟s financial position, (c), the type(s) of
misstatements that could occur and (d) the likelihood that financial
misstatements could take place. The auditor‟s analysis of how a
misstatement could occur is important in developing audit
procedures to determine its existence.
3. Obtaining Audit Evidence.
Sufficient (enough) competent (reliable and relevant) evidence must
be obtained to evaluate the assertions embodied in the financial
statements, including the related notes. More persuasive and
extensive testing is required for accounts that are likely to contain
material misstatements.
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D. Reporting Standards
1. Presentation in Accordance with Accounting Standards.
i. The auditor is required to state explicitly whether the financial
statements are true and fair for audits under the Corporations
Act 2001 (fairly presented) in accordance with Accounting
Standards.
ii. Consistent
iii. Disclosures are adequate
iv. If nothing is mentioned in the auditor‟s report, the reader can
assume that the disclosures in the financial report meet the
requirements of authoritative pronouncements.
v. Opinion.
vi. If there are reasons why an opinion cannot be issued, inform
the reader of all of the substantive reasons why an opinion
cannot be issued.
XI. FUNDAMENTAL PRINCIPLES OF IAASB AUDITING STANDARDS
A. The IAASB has taken a broad approach to standard setting that recognises the
demand for both assurance and audit services. The IAASB pronouncements
require the auditor to determine whether the framework a client uses for
financial reporting is appropriate. An overview of the principles for the
conduct of an audit is shown in Exhibit 2.5. The standards differ from the 10
GAAS in the following ways:
1. There is a reference to ethical standards, not just auditor
independence
2. Professional scepticism is important and could be interpreted as
either more or less than auditor independence
3. Reasonable assurance recognises inherent difficulties in conducting
an audit, such as the auditor cannot test every transaction, or
management may have covered up frauds that are virtually
impossible to detect
4. Audit risk should be minimised to an acceptable level
5. Materiality is a major concept that affects the design of the audit
6. The auditor must determine the acceptability of the accounting
framework used by the audit client.
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B. Standards for Other Audit Engagements
1. Reasonable assurance engagements
„Engagements in which a practitioner expresses a conclusion
designed to enhance the degree of confidence of the intended users
other than the responsible party about the outcome of the evaluation
or measurement of a subject matter against criteria.‟
2. Limited assurance engagements
This is one in which the objective is to provide more limited
assurance by doing less work that may be appropriately understood
by all three parties. Limited assurance engagements normally result
in „negative assurance‟ and check to see if anything comes to
attention indicating a problem.
C. The IAASB identifies the following elements of an assurance engagement:
1. A three-party relationship involving a practitioner, a responsible
party, and intended users
2. An appropriate subject matter
3. Suitable criteria
4. Sufficient appropriate evidence
5. A written assurance report in the form appropriate to a reasonable
assurance engagement or a limited assurance engagement.
XII. ATTESTATION STANDARDS
A. Auditing is a specific and important part of a broader set of services referred
to as attestation services. All attestation services, including the financial report
audit, involve gathering evidence regarding specific assertions and
communicating the attester‟s (auditor‟s) opinion on the fairness of the
presentation to a third party. Financial report audits are unique in that they are
broadly disseminated and have very specific standards developed solely for
that service.
B. Future of Audit Standard Setting.
1. The International Auditing Standards Committee is taking on added
importance as the economy becomes increasingly global and
companies wish to register on multiple stock exchanges. Finally, the
Internal Auditing Standards Board has attained recognition as the
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premier standard-setter for the professional practice of internal
auditing on a worldwide basis.
XIII. OVERVIEW OF AUDIT PROCESS: A STANDARDS-BASED APPROACH
A. Phase II: Understanding the Client
1. Planning meeting
Audit planning starts with a meeting with the audit committee,
where one exists, and the management of the company being
audited. The meeting ensures that the key governance parties,
particularly the audit committee, are aware of the audit approach and
the responsibilities of each party. While the overall audit approach is
shared with management, the details of the plan, including the
determination of materiality, is not shared with management
although it may be shared with the audit committee.
2. Developing an Understanding of Materiality.
The audit must be planned to provide reasonable assurance that
material misstatements will be detected. The concept of materiality
is pervasive and guides the nature and extent of auditing. Materiality
guidelines usually involve applying percentages to some base, such
as total assets, total revenue, or pretax income. There has been
criticism of the accounting profession in the past few years for not
sufficiently examining qualitative factors in making materiality
decisions. In particular, the profession has been criticised for:
i. Netting (offsetting) material misstatements and not making
adjustments because the net effect may not be material to net
income
ii. Not applying the materiality concept to „swings‟ in accounting
estimates
iii. Consistently „passing‟ on or waiving individual adjustments
that may not be considered material.
Teaching Note: Explain that some transactions, by their very nature, are likely to be
more important to some users, so it is important that the auditor and audit
committee take into account all the significant stakeholders that may be making
decisions based on the financial reports. Although many audit firms have provided
guidelines to audit staff for materiality decisions, it is important to note that any
guideline is just a starting point that is adjusted for other relevant information.
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3. Developing a Preliminary Audit Program
i. Detailed planning leads to the development of a detailed audit
program designed to discover material misstatements, if they
exist, in the financial report.
ii. Planning is the foundation for the audit program and includes
the following:
 Develop an understanding of the client‟s business and the
industry within which it operates.
ï‚· Develop an understanding of risks the company faces and
determining how those risks might affect the presentation
of a company‟s financial results.
ï‚· Develop an understanding of management remuneration
plans and how those plans may motivate management
actions.
ï‚· Develop a preliminary understanding of the quality of the
client‟s internal controls over financial reporting.
ï‚· Build a detailed audit program on audit risk, internal
control quality, accounting assertions, and materiality.
 Develop an understanding of the client‟s accounting
policies and procedures.
ï‚· Anticipate financial report items likely to require
adjustment.
ï‚· Identify factors that may require extension or modification
of audit tests, such as potential related-party transactions or
the possibility of material misstatements.
ï‚· Determine the type of reports to be issued, such as
consolidated statements or single-company statements,
special reports, or reports to be filed with the regulatory
agencies such as APRA.
B. Phases III and IV: Obtaining Evidence
1. Testing Assertions
The third and fourth phases of the audit and review opinion
formulation process involve obtaining evidence about controls,
determining their impact on the financial report audit, and obtaining
substantive evidence about specific account assertions. The auditor
is required to gather „sufficient, appropriate audit evidence‟ in order
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to reach a conclusion on the truth and fairness (fairness) of the
organisation‟s financial presentations.
2. Example: Testing Additions to Property, Plant, Equipment
i. Take the assertion: The equipment shown on the financial
statements is properly valued at cost (not to exceed its
recoverable value) with applicable allowances for depreciation.
This assertion can be broken down into four components:
ï‚· The valuation of assets that were acquired in previous
years
ï‚· The valuation of new assets added this year
ï‚· The proper recording of depreciation
ï‚· Potential impairment of the existing assets due to
changed economic conditions or management plans
regarding the manufacture of some of its products.
ii. Auditing Additions to PPE
Generally, the previous year‟s valuations would have been
audited, so the focus is on the current year‟s additions. The
following audit procedure would address the assertion:
ï‚· Take a statistical sample of all additions to property
plant and equipment and verify the cost through
reference to vendor invoices to determine that cost is
accurately recorded and that title has passed to the
company.
iii. Additional Audit Procedure for Company Considered to be
„High Risk
For the items selected, verify that the asset has been put in
production by physically verifying its existence and operation.‟
Teaching Note: Describe the major elements in the above audit procedures, which
include statistically selecting a sample of items to test, reviewing documentary
evidence of cost and title, and physically verifying existence of the asset.
C. Phase V: Wrapping up the Audit and Making Reporting Decisions
1. Summarise Audit Evidence and Reach Audit Conclusion.
The remaining task is to summarise the audit evidence related to the
assertions tested and reach a conclusion about the truth and fairness
(fairness) of the client‟s financial presentation. If the evidence does
not support a fair presentation, the auditor will
