Question 1 AUDIT AND ASSURAMCE

You are an audit manager in Karim & Co and you are nearing completion of the audit of Brown & Co (Brown). The audit senior has produced extracts below from the draft audit report for Brown.

Auditors responsibility

(1) Our responsibility is to express an opinion on all pages of the financial statements based on our audit. We conducted our audit in accordance with most of the International Standards on Auditing.

(2) Those standards require that we comply with ethical requirements and plan and perform the audit to obtain maximum assurance as to whether the financial statements are free from all misstatements whether caused by fraud or error.

(3) We have a responsibility to prevent and detect fraud and error and to prepare the financial statements in accordance with International Financial Reporting Standards.

(4) An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the availability and experience of audit team members. We considered internal controls relevant to the entity; and express an opinion on the effectiveness of these internal controls.

(5) We did not evaluate the overall presentation of the financial statements, as this is managements responsibility. We considered the reasonableness of any new accounting estimates made by management. We did not review the appropriateness of accounting policies as these are the same as last year. In order to confirm raw material inventory quantities, we relied on the work undertaken by an independent expert.

The extracts are numbered to help you refer to them in your answer. Required:

(a) Briefly describe the main elements of the external audit report.

(b) For the above audit report extracts, briefly discuss FIVE elements of this report which require amendment

. Note: Redrafted audit report extracts are not required