9032 Use of financial statement disclosure checklists

Jun-2020

CAS Guidance

OAG Guidance

A disclosure requirement may not be applicable and need to be documented in the checklist or related workpapers / procedures when

(1) the condition to which the disclosure requirement relates is not present, or

(2) the disclosure is deemed immaterial (both quantitatively and qualitatively) to the financial statements taken as a whole.

When the checklist highlights omitted, incomplete or incorrect disclosures that do not meet the above criteria, teams need to discuss with entity’s management. If entity’s management does not amend the financial statements, the engagement team need to apply professional judgment to conclude on whether the matter is included on the summary of uncorrected misstatements and/or audit report modified.

At the final stage of the audit, the entity’s management will present to us preliminary or final versions of its financial statements, including segment reporting and disclosures to comply with the applicable financial reporting framework. It is the responsibility of the entity’s management to verify that the financial statements, including any additional disclosures, comprise the required information. It is our responsibility to audit the information and to consider whether it is free from material misstatements or misrepresentations.

The disclosures required vary widely between the different financial reporting frameworks and may be extensive.

Checklists for IFRS and PSAS reporting frameworks are located on the Financial Audit INTRAnet site. These checklists serve as practice aids assisting us in addressing the financial statement assertions of classification and understandability (collectively referred to as presentation and disclosure). Use of the appropriate financial disclosure checklist confirms that financial statement disclosure requirements are not overlooked and that disclosures made are appropriately presented.

Additionally, be aware that requirements may change subsequent to release of the checklist. Audit teams should refer to the INTRAnet for releases of supplemental checklist updates that will help teams identify changes in accounting pronouncements.

Checklists are general in nature and do not purport to be complete in all respects. Accordingly, these checklists are neither a substitute for professional judgment regarding the essential question of fair presentation, nor are they proxies for referring to authoritative literature. Document information needed to clarify and support any judgmental decisions. In case of unclear, higher risk or complex circumstances consider consulting Audit Services and document the results of this consultation.

Additional Guidance

In situations where a client issues a number of similar financial statements for entities with very similar scope of operations it permissible to complete a single checklist covering the entire group. Documentation should include how the team has used the single checklist to validate the accuracy and completeness of disclosures for each set of statements.

Financial statements prepared under a disclosed basis of accounting should apply the checklist which most closely relates to the reporting framework being applied. Documentation should include consideration of incremental disclosures required by the disclosed basis of accounting, if any.

Financial statements that are prepared in accordance with the provisions of a contract or a regulation that do not closely resemble a recognized reporting framework are not required to complete disclosure checklist. Documentation should include the rationale for this conclusion.

OAG Guidance

Carry out the compliance review for financial statement disclosure as soon as practicable. Ideally, this means when the first reasonably complete set of draft financial statements is available. Seek to avoid last minute surprises resulting from a need to amend or add disclosures in the financial statements because:

• It may be difficult, or at a minimum less efficient, for the entity to produce, and for us to audit, additional information.

• Experience shows that mistakes are more likely to be made at a late stage in the financial statement preparation and review process.

• The entity will incur printers’ costs to amend proofs and page layouts and may question the need for change.

Generally, it is most efficient and effective to provide a copy of the checklist to the entity and discuss it at the beginning of the audit engagement, verifying that the entity becomes aware of the nature and extent of disclosure requirements and in order to prevent potential misunderstandings during the preparation of the financial statements. Discuss with entity’s management new and changed reporting requirement to incorporate their impacts on the financial statements early in the drafting process. Where possible, attempt to have entity personnel complete the checklist, with follow-up review by us.

Before submitting the financial statements to Audit Services for review, the team will prepare the appropriate financial statement disclosure checklist and have it reviewed by the engagement leader.