Audit People

Gill Gittings

Is there anybody on here that has experience of audit. I want to run a query by someone who is familiar with audit in particular the audit of fair values. It is not a straight forward audit query so would need to email someone if at all possible.

Many thanks in advance
Gill

peugeot

Items carried at fair value are audited under the provisions of ISA 545 (The Audit of Fair Values).

You don't mention in your post whether you are auditor or client. If you are auditor then your audit programme should contain the audit procedures you need to adopt if the assets/liabilities carried at fair value are material. If your audit programme does not deal with the audit of fair values then you should (a) take the issue up with the supplier of your audit programme and (b) tailor the audit programme accordingly so you get sufficient and appropriate audit evidence to support the carrying amounts of the assets/liabilities carried at fair value. It may be the case that you need an expert who deals with valuations of such assets/liabilities, in which case you should consult the provisions in ISA 620 (Using the Work of an Expert).

If you are client then I am unsure as to the nature of your query as clients should not be concerned with actual audit procedures.

Kind regards
Steve

Gill Gittings

Thanks Steve - i was hoping you would reply!:thumbup1:

We are the auditors of a client who are not the most friendliest bunch and who work in the venture capital market so have lots of investments. Some of the investments appear to be worth a lot less than the balance sheet states and we know the client has not done an inpairment. The time deadline for completion of the audit is next week!

We are going back in the new year to finish offthe audit but CCH audit programme does not seem to direct any tests. Have you any ideas as to the types of testing that would be sufficient?:blushing:

Gill

peugeot

Hi,

The tests that you need to perform on the investments should have been detailed in the planning section of the audit file. Given that a client such as yours could well have significant amounts of investments then this area would be highly material to the financial statements and as such the partner/manager in charge of the audit should have detailed specific audit tests to be performed in this area at the planning stage, regardless of whether the audit programme covers such.

If the planning section of the file has not covered such an area, and this area is a material area, then I am afraid that the file would be rendered inadequate during a hot/cold file review, which you need to avoid at all costs.

In any event, if this is not a first-year audit then the prior year audit file should have sufficient and appropriate audit evidence which would give you an indication as to the types of test that would be required on such investments.

If the investments are impaired and no impairment has been recognised in the financial statements, then you need to consider if the impairment that should be recognised is material to the accounts. If it is then this will affect the audit opinion.

I am not familiar with the CCH audit programme (which I think is Kestrian??) but I would be very surprised if it did not cover investments as investments are very common. In any event, you should consult the provisions of ISA 545 to give you guidance on the audit evidence you should consult for those investments carried at fair value. In respect of accounting standards for certain types of investments, then you should look at:

FRS 25 / IAS 32
FRS 26 / IAS 39
FRS 29 / IFRS 7
FRS 9 / IAS 28/31

To give you a more broader understanding. Only refer to the IAS/IFRS if your client is listed/AIM listed or reports under the international regime by choice.

Good luck.

Steve

peugeot

Just to follow on from the above. As it is a new year and we have had to come back to work today I am having a clear out of old files and books from my office!!

I have come across an old CCH audit programme and there is a section on Investments (section C2(i)). This programme is not up to date as we no longer use CCH and it does not specifically refer to investments carried at fair value, but investments in general. It does, however, state at point 10 "Draft any additional tests as directed by the risk assessment form B3(iv)". This is where the additional (tailored) tests at the planning stage will come in which the manager/partner should have documented.

As I mentioned, this programme is an old programme which is being consigned to the dustbin and they could well have updated it as most standards have changed since 2006!

Kind regards
Steve

Gill Gittings

The problem is the audit manager left before christmas. No mention of the investments in planning so not entirely sure what to do. My manager is coming on Monday.

What would you do here?:001_unsure: Im having sleepless nights!

Gill

peugeot

Hi Gill,

Sounds like you're having a hard time with this.

I hope your manager managed to resolve the issues. Unfortunately it sounds to me like your ex-manager had not undertaken adequate planning on this assignment and therefore the rest of the team were not absolutely clear on what should be being done.

I think you have done the right thing referring this to your superior.

Kind regards
Steve