F8 - Please Advise

[mei mei]

Can anyone advise on the followings :

1)How to determine a circumstances is pervasive or not pervasive ?:frown:

2) Differences between audit strategic & audit planning?

Thanks

[syed]

i think your question is about issues n events which arise at the final stage of audit, when auditor is about issue an audit report..

Pervasive issues:
matters, which could unsettle the foundations of a going concern, as well as the audit openion.

these are certain events that are Material and also.directly hit the Going concern assumption,( made by managemet while preparing the financial statements).

auditor, on identification of such events, modifies the audit report previously made.
e.g.
significant uncertainity with regards to future of a client.
no fraud, but very high gearing and poor liquidity ratios.
a very heavy penely in some legal proceedings against the client and with much chances of failure to defend it-self in court.
HENCE THE EVENTS WHEN GOING CONCERN ASSUMPTION IS NO LONGWER VALID< AS mAFE IN FINANCIAL STATEMENTS.

onthe other hand,
NON-PERVASIVE ISSUES:
those issuses, which are material for shure, but the going concern assumption is still valid.
if such issues are later accounted for my management later, they still might require emphesis in auditir's openion.. hence, as emphasis of matter report.

[Dazy]

Hi,

In addition to Syed’s answer, the following points are relevant:

Persuasive or not persuasive

The audit evidence determines whether the circumstances are persuasive or not persuasive. The auditor’s opinion on the financial statements is based on the evidence gathered by the auditor, which is not conclusive but persuasive evidence.

The evidence itself does not provide a conclusion. The auditor has to evaluate all the collected evidence in order to draw a conclusion. Auditor uses his past experience, industry knowledge and best judgment to determine whether a circumstance is persuasive or not.

Audit strategy and audit planning

Work on an audit typically begins with the auditor planning out his audit strategy. The main issue that needs to be decided upon here is the risk of material misstatement that exists. The higher the risk of material misstatement the more involved and rigorous the audit will need to be.

According to IFAC glossary of terms, planning involves establishing the overall audit strategy for the engagement and developing an audit plan, in order to reduce audit risk to an acceptably low level.

An audit plan converts the audit strategy into a more detailed plan and includes the nature, timing and extent of audit procedures to be performed by engagement team members in order to obtain sufficient appropriate audit evidence to reduce audit risks to an acceptably low level.