The role of audit in enhancing confidence in financial reporting The Role of An Auditor

ACCA Roundtable Session 1 May 2011

Agenda

The Purpose of an Audit Role & Responsibilities of an Auditor Reasonable Assurance Materiality and What it Means in an Audit Recap

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Agenda

The Purpose of an Audit Role & Responsibilities of an Auditor Reasonable Assurance Materiality and What it Means in an Audit Recap

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The Purpose of an Audit

Governance Framework
Business operations
First Defence

REPORTING ENTITY
Board of Directors Audit & Other SubSub -committees Executive Management Internal Audit

Operational processes, control activities, business level monitoring

Corporate oversight
Second Defence

Business planning, policies & procedures, functional oversight

Audit
Third Defence

Internal & External Audit

Monitor compliance; p provide p independent challenge & assurance

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The Purpose of an Audit

The purpose of Th f an audit dit is i to t enhance h the degree of confidence of intended users in the financial statements. statements This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, p , in accordance in all material respects, with the an applicable financial reporting framework.
[clarified ISA 200.3]

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The Purpose of an Audit

Users of Financial Statements
o Shareholders and management o Potential P t ti l investors i t & analysts l t o Banks and other lenders o Tax authorities & other govt/regulatory bodies o Employees/trade unions o Suppliers o Competitors p o General public

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Agenda

The Purpose of an Audit Role & Responsibilities of an Auditor Reasonable Assurance Materiality and What it Means in an Audit Recap

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Role & Responsibilities

Key elements of an auditors auditor s role
o Maintaining confidence in businesses o Contributing C t ib ti to t quality lit of f financial fi i l reporting ti o Valuable assurance to banks and other lenders o Working in the public interest

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Role & Responsibilities

Does the Auditor: The Auditor is required to give i an opinion i i as to:

Confirm that the financial statements are true and correct? Correct all errors in the draft financial statements? Ch k all Check ll the th controls t l in i an organization to ensure they are working effectively? Act as a detective for all instances of fraud?

the fair presentation, in all material respects, of the financial statements; their preparation in accordance with an applicable reporting framework.

The Auditor is NOT

responsible for identifying all instances of fraud! But B t work ork sho should ld incl include de planning to detect material misstatements, whether due to fraud or error
8

NO!

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Role & Responsibilities

ISA Requirements: The Auditor should: o Remain independent o Maintain an attitude of

Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error Communicate as required by ISAs in accordance with the auditors findings
[clarified ISA 200.11] 200 11]

o o

professional skepticism Apply professional judgment Conduct audits in accordance with the clarified ISAs

2011 KPMG Trinidad and Tobago, a partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.