Question

Pretend that you are the audit manager on an annual financial statement audit engagement for a public company (the client).

• Create a unique scenario in which you encounter a critical audit matter that must be evaluated, communicated, and reported. Explain any relevant circumstances and/or supporting evidence.
• Describe how the matter will be communicated in the auditor’s report including specific language that should be used.

Answer 1

A)critical audit matter refers to the crucial elements like checking n everything of transactions,vouchers etc of an organisation.There can be intentional fraud by the people working inside the organisation such are recording less sales or receipts than actual sales or receipts,recording more expenses than what is actually incurred,also engaging in fraudulent transactions or contracts with third parties by the key personnel of the organisation, or any such activities of not adhering to the the accounting principles or standards set up by the accounting body constitutes to events that should be reported in the auditors report

B)The auditors report is the report given by the auditor after evaluating the authenticity of books and transactions of an organisation.The main contents of the report are title addresse,introductory paragraph,auditors opinion,ephasis on matter paragraph.The events directly affecting the structure of the organisation and if auditor finds any fraudulent activities by the management he will give an adverse opinion on the accounts of the organisation which he will clearly state in his opinion paragraph of his report stating the areas where the company was not following the accounting standards or policies etc.