Pine & Associates is the statutory auditor of BB Ltd., a listed company and started its operations 6 years ago. The fieldwork during the audit…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2024
Pine & Associates is the statutory auditor of BB Ltd., a listed company and started its operations 6 years ago. The fieldwork during the audit of the financial statements of the company for the year ended 31st March, 2023 was completed on 1st May, 2023. The auditor's report was dated 15th May, 2023. During the documentation review of the engagement, it was observed that the engagement quality control review was completed on 18th May, 2023. The engagement partner had completed his reviews in entirety by 12th May, 2023. Comment

Suggested Answer and Working Notes:

As per SA 220, “Quality Control for an Audit of Financial Statement”, the engagement partner shall take responsibility for reviews being performed in accordance with the firm's review policies and procedures. For audits of financial statements of listed entities, the engagement partner shall: Determine that an engagement quality control reviewer has been appointed;Discuss significant matters arising during the audit engagement, including those identified during the engagement quality control review, with the engagement quality control reviewer; andNot date the auditor's report until the completion of the engagement quality control review. Further, SA 700,” Forming an Opinion and Reporting on Financial Statements", requires the auditor's report to be dated not earlier than the date on which the auditor has obtained sufficient appropriate evidence on which to base the auditor's opinion on the financial statements. In cases of an audit of financial statements of listed entities where the engagement meets the criteria for an engagement quality control review, such a review assists the auditor in determining whether sufficient appropriate evidence has been obtained. Conducting the engagement quality control review in a timely manner at appropriate stages during the engagement allows significant matters to be promptly resolved to the engagement quality control reviewer's satisfaction on or before the date of the auditor's report. In this case, the audit of BB Ltd. for the year ending on 31st March 2023 was conducted by Pine & Associates and was completed on 1st May, 2023. Subsequently, the engagement partner reviewed the audit by 12th May, 2023. The audit report issued by Pine and Associates was dated 15th May, 2023. However, the engagement quality control review was finalized on 18th May, 2023, which is later than the date of the audit report. In view of above, the date of auditors' report before the completion of the engagement quality control review, is not correct.

Topics: Standard on Auditing (SA)

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