An extract from the draft audit report, produced by an audit junior, is given below: Basis of opinion We conducted our

audit in accordance with Auditing Standards. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It is also includes an assessment of all the estimates and judgments made by the directors in the preparation of the financial statements, and of weather the accounting policies are appropriate to the companys circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain as much information and explanation as possible given the time available for the audit. We confirm that the financial statements are free from material misstatement, weather caused by fraud or other irregularity or error.

The directors are however are wholly responsible for the accuracy of the financial statements and no liability for errors can be accepted by the auditor. In forming our opinion we also evaluated the overall adequacy of the presentation of information of the companys annual report.

Required: Identify and explain the errors in the above extract. (You are required to redraft the report)

2. You are an audit manager in Black & White, a firm of Chartered Accountants. One of your clients, Good Luck, is a textbook publisher. Good Luck is planning to expand through the acquisition of a number of small publishers of other media such as video tapes and CDs. The finance director of Good Luck has been reviewing the financial statements of potential targets. He has come across an auditors report dated 19 January 2009, on financial statements for the year ended 30 September 2008, which does not have the standard working of an unmodified report. The finance director has now approached you for an explanation of its meaning. The scope and opinion paragraphs are as follows: Scope We conducted our audit in accordance with International Standards on Auditing as adopted in Bangladesh. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. However, the evidence available to us identified certain transactions which had not been included in the previous years records and as a result had been omitted from the financial statements for the year ended 30 September 2007. Adjustments have been made and are disclosed in Note 22. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion the financial statements give a true and fair view of the financial position of the Company as of 30 September 2008 and of the loss on its operations and its cash flows for the year ended in accordance with Bangladesh Accounting Standards (BAS). The companys liabilities exceed its assets at 30 September 2008 creating an adverse situation which management believes is reversible over the coming twelve months. Management further believes that the company is capable of continuing to trade for twelve months from the date of this report, 19 January 2009. Required: Identify and explain the shortcomings of this report.