Annual Audit Manual

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9031 Financial statements preparation and audit procedures
Dec-2023

In This Section

Responsibilities with respect to financial statements

Audit procedures on final set of financial statements

Documentation

Overview

For explanation of performing overall conclusion analytics, testing reconciliations and evaluating the adequacy of disclosures refer to OAG Audit 9020, OAG Audit 7580 and OAG Audit 9032, respectively.

Responsibilities with respect to financial statements

CAS Requirement

Prior to dating the auditor's report, the engagement partner shall review the financial statements and the auditor's report, including, if applicable, the description of the key audit matters and related audit documentation, to determine that the report to be issued will be appropriate in the circumstances (CAS 220.33).

The auditor’s substantive procedures shall include the following audit procedures related to the financial statement closing process (CAS 330.20):

(a) Agreeing or reconciling information in the financial statements with the underlying accounting records, including agreeing or reconciling information in disclosures, whether such information is obtained from within or outside of the general and subsidiary ledgers; and

(b) Examining material journal entries and other adjustments made during the course of preparing the financial statements.

The auditor’s documentation shall demonstrate that information in the financial statements agrees or reconciles with the underlying accounting records, including agreeing or reconciling disclosures, whether such information is obtained from within or outside of the general and subsidiary ledgers (CAS 330.30).

CAS Guidance

The nature, and also the extent, of the auditor’s substantive procedures related to the financial statement closing process depends on the nature and complexity of the entity’s financial reporting process and the related risks of material misstatements (CAS 330.A54).

OAG Guidance

The financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on whether the financial statements are prepared, in all material respects, in compliance with the applicable financial reporting framework (see OAG Audit 8011).

It is the responsibility of the engagement leader to review the final financial statements to determine that the auditor's report to be issued is appropriate in the circumstances. In doing so, the engagement leader determines whether:

  • the financial statements have been prepared, in all material respects, in compliance with the applicable financial reporting framework;

  • disclosure and presentation are appropriate; and

  • the financial statements comply with statutory and other regulatory requirements, where appropriate.

It is the responsibility of the team manager or a designated team member to determine that the audit file contains evidence that the financial statements:

  • agree to the entity’s records,
  • have been agreed to supporting information in the audit file,
  • have been mathematically checked, and
  • have been reviewed for spelling or typographical errors.

For further guidance on journal entry testing, see OAG Audit 5509.

Audit procedures on final set of financial statements

OAG Guidance

There are a number of specific procedures we perform on the final set of financial statements including:

  • Reconcile management accounts previously used in audit procedures to the year-end financial statements.

  • Perform overall conclusion analytics to assess the overall reasonableness of the financial statements (see OAG Audit 9020).

  • Review material adjusting journal entries processed by the entity to finalize the financial statements (see OAG Audit 7580).

  • Agree comparative information to the prior year’s financial statements, and, where the comparative numbers have been changed due to changes in legislation or accounting standards, verify that appropriate disclosures have been made.

  • Check and cross-reference the financial statements and verify the mathematical accuracy of the statements.

  • Agree the final draft or previous draft set (with appropriate ‘roll-forward’ procedures where applicable) to the adjusted trial balance or supporting schedules as appropriate.

  • Evaluate the adequacy of the disclosures by completing a financial statement disclosure checklist (see OAG Audit 9032).

  • Retain in the audit file:

    • The final mathematically checked and cross-referenced copy (or previously referenced draft if changes between it and the final copy are not substantial) of the financial statements; highlight changes on the final copy.

    • Copies of significant supporting schedules (e.g., earnings per share).

    • A “clean” signed copy of our audit report on the financial statements.

    • Preliminary and superseded drafts of the financial statements are not retained.

For group audit procedures see OAG Audit 2360.

Documentation

OAG Guidance

Evidence of review, including the engagement leader’s review, of the financial statements and auditor’s report is retained in the audit documentation either electronically in the related procedure or in the hard copy external files. For documentation requirements regarding the evaluation of the disclosure and presentation of the financial statements, see OAG Audit 9032.