Bulletin 2010_2 Cover.qxd
27/01/2011
10:55
Page 1
IN
Compendium of Illustrative
Auditor's Reports on United
Kingdom Private Sector
Financial Statements for
periods ended on or after
15 December 2010
(Revised)
FRC Publications
145 London Road
Kingston upon Thames
Surrey
KT2 6SR
Telephone: 020 8247 1264
Fax: 020 8247 1124
E-mail: [email protected]
or ordered online at: www.frcpublications.com
L
U
Further copies, £25.00, post-free, can be obtained from:
B
UP/APBD-BI10246
2010/2 (Revised)
L
February
E
T
2011
Further copies, £8.00, post-free, can be obtained from:
This Bulletin is a revision of Bulletin 2010/2 to update the illustrative
examples to reflect the requirements of the version of ISA (UK and Ireland)
700 that was issued in February 2011 and which is effective for periods
ending on or after 23 March 2011.
THE AUDITING PRACTICES BOARD
The Auditing Practices Board (APB), which is part of the Financial Reporting Council
(FRC), prepares for use within the United Kingdom and the Republic of Ireland:
Standards and guidance for auditing;
Standards and guidance for reviews of interim financial information performed by the
auditor of the entity;
Standards and guidance for the work of reporting accountants in connection with
investment circulars; and
Standards and guidance for auditor’s and reporting accountant’s integrity,
objectivity and independence
with the objective of enhancing public confidence in the audit process and the quality
and relevance of audit services in the public interest.
The APB comprises individuals who are not eligible for appointment as company
auditors, as well as those who are so eligible. Those who are eligible for appointment as
company auditors may not exceed 40% of the APB by number.
Neither the APB nor the FRC accepts any liability to any party for any loss, damage or
costs howsoever arising, whether directly or indirectly, whether in contract, tort or
otherwise from any action or decision taken (or not taken) as a result of any person
relying on or otherwise using this Bulletin or arising from any omission from it.
The purpose of Bulletins issued by the APB is to provide auditors and, where relevant,
reporting accountants, with timely guidance on new and emerging issues. They are
persuasive rather than prescriptive. However, they are indicative of good practice, even
though they may be developed without the full process of consultation and exposure
used for auditing standards.
# The Financial Reporting Council Limited 2011
Bulletin 2010/2 (Revised) February 2011
THE AUDITING PRACTICES BOARD
COMPENDIUM OF ILLUSTRATIVE AUDITOR’S REPORTS
ON UNITED KINGDOM PRIVATE SECTOR FINANCIAL
STATEMENTS FOR PERIODS ENDED ON OR AFTER
15 DECEMBER 2010
Contents
Page
Introduction
Description of the ‘‘Scope of the Audit’’
Classifications of Companies
Publicly traded and non-publicly traded
Companies subject to the small companies regime
Quoted companies
Listed companies
Companies admitted to trading on AIM
Treatment of the classifications in the illustrative examples
Alternative presentation options of the financial statements of a group
Omitting the parent company profit and loss account
Opinion in respect of an additional financial reporting framework
Emphasis of Matter Paragraphs
Other Matter Paragraphs
Regulated entities
Modifying the auditor’s opinion on the financial statements
Modifying the auditor’s opinion on the Directors’ Report
Illustrative Directors’ Responsibilities Statement
5
5
6
6
7
7
8
9
9
9
10
10
11
11
11
12
12
12
CLEAN AUDITOR’S OPINIONS
COMPANIES (excluding charitable companies)
Appendix 1 Company does not prepare group financial statements
1.
Non-publicly traded company preparing financial statements under the
FRSSE
2.
Non-publicly traded company preparing financial statements under UK
GAAP
3.
Publicly traded standard listed company preparing financial
statements under UK GAAP
4.
Publicly traded premium listed company preparing financial
statements under IFRSs as adopted by the European Union
THE AUDITING
PRACTICES BOARD
13
14
17
19
22
1
Bulletin 2010/2 (Revised) February 2011
Appendix 2 Group and parent company financial statements reported
on in a single auditor’s report
5.
Non-publicly traded group preparing financial statements under UK
GAAP
6.
Non-publicly traded group preparing financial statements under IFRSs
as adopted by the European Union (may apply to a group admitted to
trading on AIM)
7.
Publicly traded standard listed group – Parent company financial
statement prepared under UK GAAP and Corporate Governance
Statement not included in directors’ report
8.
Publicly traded premium listed group – Parent company financial
statements prepared under IFRSs as adopted by the European Union
25
26
28
31
34
Appendix 3 Group financial statements reported on separately from the
parent company financial statements
9.
Publicly traded premium listed group – Auditor’s report on group
financial statements prepared under IFRSs as adopted by the
European Union
38
Appendix 4 Parent company financial statements reported on
separately from the group financial statements
41
37
10.
Publicly traded group – Auditor’s report on parent company financial
statements prepared under UK GAAP
42
11.
Publicly traded group – Auditor’s report on parent company financial
statements prepared under IFRSs as adopted by the European Union
45
EMPHASIS OF MATTER PARAGRAPHS
Appendix 5
12.
Emphasis of matter – Material uncertainty that may cast significant
doubt about the company’s ability to continue as a going concern
13.
Emphasis of matter – Uncertain outcome of a lawsuit
PARTNERSHIPS
Appendix 6
14.
Limited Liability Partnership preparing financial statements under UK
GAAP
15.
Limited Liability Partnership preparing financial statements under
IFRSs as adopted by the EU
16.
Qualifying Partnership preparing financial statements under UK GAAP
2
THE AUDITING
PRACTICES BOARD
48
49
51
52
53
56
59
Bulletin 2010/2 (Revised) February 2011
REGULATED ENTITIES OTHER THAN CHARITIES
Appendix 7 Insurers
17.
Publicly traded insurer with a standard listing preparing financial
statements under UK GAAP and having equalisation provisions
18.
Lloyd’s syndicate – annual financial statements
19.
Lloyd’s syndicate – underwriting year accounts – closed year of
account
20.
Lloyd’s syndicate – underwriting year accounts – run-off year of
account
21.
Non directive friendly society with no subsidiary companies, preparing
financial statements under UK GAAP
22.
Directive friendly society group preparing financial statements under
UK GAAP
Appendix 8 Banking institutions that are not companies
23.
Building society preparing financial statements under UK GAAP
24.
Building society preparing financial statements under IFRSs as
adopted by the European Union
25.
26.
61
62
65
68
70
72
74
76
77
80
83
85
Credit Union in Great Britain
Credit Union in Northern Ireland
Appendix 9 Other regulated entities
27.
Occupational pension scheme
28.
Housing Association registered in England that is an Industrial and
Provident Society
87
88
90
CHARITIES
Appendix 10 Charitable companies registered in England & Wales
29.
Charitable company audited under the Charities Act 1993
30.
Charitable company audited under the Companies Act 2006
31.
Charitable company group whose consolidated financial statements
are prepared and audited under both the Companies Act 2006 and the
Charities Act 1993
98
Appendix 11 Charitable companies registered either in Scotland or in
both Scotland and England & Wales
101
32.
Charitable company where an election has been made for audit
exemption under the Companies Act 2006
33.
Charitable company audited under the Charities and Trustee
Investment (Scotland) Act 2005 and the Companies Act 2006
Large charitable company group whose consolidated financial
statements are required to be prepared and audited under the
Companies Act 2006
34.
92
93
95
102
105
108
THE AUDITING
PRACTICES BOARD
3
Bulletin 2010/2 (Revised) February 2011
Appendix 12 Non-company charities
35.
Charity registered in England & Wales
36.
Charity registered in Scotland
111
112
114
MODIFIED OPINIONS
Appendix 13 Qualified opinion on financial statements
37.
Disagreement – Inappropriate accounting treatment of debtors
38.
Disagreement – Non-disclosure of a going concern problem
39.
Disagreement – Non-disclosure of information required to be
disclosed
40.
Scope Limitation – Auditor not appointed at the time of the stocktaking
41.
Scope Limitation – Directors did not prepare cash flow forecasts
sufficiently far into the future to be able to assess the going concern
status of the company
Appendix 14 Adverse opinion on financial statements
42.
Adverse opinion: No provision made for losses expected to arise on
long term contracts
43.
Adverse opinion: Significant level of concern about going concern
status that is not disclosed in the financial statements
Appendix 15 Disclaimer of opinion on financial statements
44.
Disclaimer of opinion: Auditor unable to attend stocktaking and
confirm trade debtors
45.
Disclaimer of opinion: Multiple uncertainties
Appendix 16 Modified opinion on other requirements of the
Companies Act 2006
46.
Qualified opinion on the consistency of the financial statements with
the directors’ report
Appendix 17 Directors’ Responsibilities Statement
47.
Directors’ Responsibilities Statement for a non-publicly traded
company preparing financial statements under UK GAAP
4
THE AUDITING
PRACTICES BOARD
116
117
119
121
122
124
126
127
129
131
132
135
138
139
141
142
Bulletin 2010/2 (Revised) February 2011
INTRODUCTION
1.
This Bulletin is a compendium of illustrative auditor’s reports applicable to United
Kingdom private sector financial statements for periods ended on or after 23 March
20111. The auditor’s reports support and illustrate the requirements of ISAs (UK and
Ireland) 700 ‘‘The auditor’s report on financial statements’’, 705 ‘‘Modifications to the
opinion in the independent auditor’s report’’ and 706 ‘‘Emphasis of matter paragraphs
and other matter paragraphs in the independent auditor’s report’’2. They also support the
requirements of the law and regulations applicable to the particular type of entity to which
the illustration applies.
DESCRIPTION OF THE ‘‘SCOPE OF THE AUDIT’’
2.
Paragraph 16 of ISA (UK and Ireland) 700 requires:
The auditor’s report shall either:
(a) Cross refer to a ‘‘Statement of the Scope of an Audit’’ that is maintained on the
APB’s website; or
(b) Cross refer to a ‘‘ Statement of the Scope of an Audit’’ that is included elsewhere
within the Annual Report; or
(c) Include the following description of the scope of an audit.
‘‘An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to
the [describe nature of entity] circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates
made by [describe those charged with governance]; and the overall presentation of
the financial statements. In addition, we read all the financial and non-financial
information in the [describe the annual report] to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.’’3
1
2
3
The APB publishes a bulletin of illustrative auditor’s reports applicable to the UK public sector and a
bulletin of illustrative auditor’s reports applicable to the private sector in the Republic of Ireland.
The relevant versions of ISAs (UK and Ireland) 700, 705 and 706 are those published in the APB’s
Compendium of Auditing Standards 2010 and subsequent revisions thereto.
At the time of writing the APB is consulting on a proposal to revise this wording through the inclusion of
an additional paragraph. If, following consultation, the change is made it will be effective for auditor’s
reports for periods ending on or after 23 March 2011.
THE AUDITING
PRACTICES BOARD
5
Bulletin 2010/2 (Revised) February 2011
3.
In the illustrative auditor’s reports in this Bulletin these alternatives are shown by means
of two text boxes. The alternative shown by the first text box is the wording that is used
when the auditor’s report cross refers to a Statement of the Scope of an Audit maintained
on the APB’s website, or included elsewhere within the Annual Report. The alternative
shown by the second text box is the wording that must be used if the description of the
Scope of an Audit is included within the auditor’s report.
4.
With effect for financial statements ended on or after 15 December 2010 the Statement of
the Scope of an Audit maintained on the APB website has been revised such that a single
statement can be used with respect to the auditor’s reports of all private sector entities. It
can be found on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.
CLASSIFICATIONS OF COMPANIES
5.
Company law and the Listing Rules classify companies in a number of different ways and
these various classifications affect the content of the auditor’s report applicable to a
particular company.
Publicly traded and non-publicly traded
6.
The primary classification distinguishes between:
(a) ‘‘publicly traded companies’’ – defined as ‘‘those whose securities are admitted to
trading on a regulated market in any Member State in the European Union’’; and
(b) ‘‘non-publicly traded companies’’ – defined as ‘‘those who do not have any securities
that are admitted to trading on a regulated market in any Member State in the
European Union’’ (EU).
7.
Under Article 4 of the IAS Regulation4, publicly traded companies governed by the law of
a Member State are required to prepare their consolidated accounts on the basis of
accounting standards issued by the International Accounting Standards Board (IASB)
that are adopted by the EU5. In CA 2006 such accounts are referred to as ‘‘IAS accounts’’
whereas in the auditor’s reports in this Bulletin this framework is referred to as ‘‘IFRSs as
adopted by the European Union’’6.
8.
Article 4 does not apply to a publicly traded company that is not required to prepare
consolidated accounts.
4
5
6
6
Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the
application of international accounting standards.
This requirement has been effected into UK law by virtue of section 403(1) of CA 2006
For companies that apply the requirements of applicable UK law and United Kingdom Accounting
Standards the financial reporting framework is described as UK Generally Accepted Accounting
Practice (UK GAAP).
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
9.
In the UK (as permitted under Article 5 of the IAS Regulation) the use of IAS accounts has
been extended so that:
Publicly traded companies are permitted to use IAS in their individual accounts (this
is discussed further in paragraphs 21 to 25 of this Bulletin);
Non publicly traded companies are permitted to use IAS in both their individual and
consolidated accounts; and
Building societies7, limited liability partnerships, and certain banking, insurance
undertakings and partnerships (to which Part 15 of CA 2006 applies), are permitted to
use IAS.
10. In the UK, CA 2006 does not permit charities to use IAS8. In addition charities do not fall
within the ambit of Article 4 of the IAS Regulation as non-profit making bodies are
specifically excluded.
11. For the purposes of the auditor’s report a further implication of being a publicly traded
company is that such companies are required to include a Corporate Governance
Statement in their annual report. The requirements relating to the content of the
Corporate Governance Statement are set out in section 7.2 of the Disclosure and
Transparency Rules of the Financial Services Authority (FSA).
12. If the Corporate Governance Statement is not included in the directors’ report the
Companies Act 2006 (CA 2006) imposes specific reporting responsibilities on the auditor
with respect to the Statement. Guidance on the auditor’s responsibilities with respect to
the Corporate Governance Statement is set out more fully in Bulletin 2009/4. Example 7
illustrates how the auditor is required to report in this circumstance.
Companies subject to the small companies regime
13. Under section 381 of CA 2006, the small companies’ regime for accounts applies to a
company for a financial year in relation to which the company qualifies as small and is not
excluded from the regime. An auditor’s report applicable to a company to which the small
companies’ regime applies is illustrated in example 1.
Quoted companies
14. CA 2006 also classifies companies as being either quoted or unquoted. For the purposes
of the auditor’s report the implication of being a quoted company is that the company has
to prepare a directors’ remuneration report and the auditor has to report on certain
7
8
Building societies which prepare consolidated accounts and have securities admitted to trading on a
regulated market are required by Article 4 of the IAS Regulation to prepare IAS accounts.
See sections 395(2) and 403(3) of CA 2006.
THE AUDITING
PRACTICES BOARD
7
Bulletin 2010/2 (Revised) February 2011
aspects of it. The definition of ‘‘quoted company’’ for the purposes of the Directors’
Remuneration Report is set out in sections 385(1) and 385(2) of CA 2006.
15. The definition of a quoted company differs from that of a publicly traded company. A
publicly traded company may not necessarily meet the definition of a quoted company
and a non-publicly traded company may be a quoted company. However, for the
purposes of the illustrative examples in this Bulletin it is assumed that non-publicly traded
companies are not quoted companies and that publicly traded companies are quoted
companies. Guidance on the auditor’s responsibilities with respect to the Directors’
Remuneration Report is set out in Bulletin 2002/2. Examples 3, 4, 7, 8, 10 and 11 illustrate
the reporting requirements in respect of the Directors’ Remuneration Report.
Listed companies
16. A company that is listed on the Official List maintained by the United Kingdom Listing
Authority (UKLA) will either have a Premium or a Standard Listing for each listed security.
For the purposes of the auditor’s report having a Standard Listing does not give rise to
additional requirements over that of a non-traded company with respect to the content of
the auditor’s report. However, Standard Listed companies are required to meet the
requirements for a corporate governance statement as described in paragraph 11 above.
As discussed in paragraph 12 there are implications for the content of the auditor’s report
if the corporate governance statement is not included within the Directors’ Report.
17. Chapter 9 of the Listing Rules applies to a company that has a premium listing of equity
shares. For the purposes of the auditor’s report there are implications for the auditor’s
report of having a Premium Listing. They arise from the requirements in Listing Rule
9.8.10R for a premium listed company to ensure that its auditor reviews:
The directors’ going concern statement (required by LR 9.8.6R(3));
Parts of the directors’ statement relating to the company’s compliance with the UK
Corporate Governance Code (required by Listing Rule 9.8.6R(6))9; and
Parts of the report to shareholders by the Board on directors’ remuneration required
by Listing Rule 9.8.8R10.
18. The Listing Rules are silent as to whether the auditor should report on the auditor’s
review. However, the APB is of the view that paragraph 22 of ISA (UK and Ireland) 700
9
This statement is different from the requirement for a corporate governance statement in the Disclosure
and Transparency Rules described in paragraph 11. The interrelationship of the various requirements
relating to the dislcosure of corporate governance arrangements is explained in Schedule B of The UK
Corporate Governance Code (June 2010).
10 For those companies that are both ‘‘listed’’ and ‘‘quoted’’ the requirements of the Listing Rules with
respect to directors’ remuneration disclosures are additional to the content requirements of the
directors’ remuneration report required by CA 2006.
8
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
applies to the auditor’s review. Therefore, the auditor should decribe its responsibilites
within the auditor’s report and incorporate a suitable conclusion in respect of its review.
Examples 4, 8 and 9 illustrate this.
Companies admitted to trading on AIM
19. The definitions of publicly traded company and quoted company both exclude AIM
companies. However, under the AIM Rules a company that is admitted to trading on the
AIM market is required to prepare its financial statements in accordance with IFRSs as
adopted by the European Union. Example 6 is applicable to companies admitted to
trading on AIM.
Treatment of the classifications in the illustrative examples
20. If not otherwise apparent from the title of a particular illustration in the appendices, the
rubric to an example makes clear which of the above classifications apply to the
illustration.
ALTERNATIVE PRESENTATION OPTIONS OF THE FINANCIAL
STATEMENTS OF A GROUP
21. As explained in paragraph 9 above, group and parent company financial statements may
be prepared in accordance with different financial reporting frameworks (for example
IFRSs as adopted by the EU used for the group financial statements and UK GAAP used
for the parent company financial statements).
22. Where the financial statements of the group and the parent company are presented in
accordance with different financial reporting frameworks the financial statements might
be presented separately within the Annual Report and in such circumstances separate
auditor’s reports might be provided11.
23. The examples in Appendix 2 of this Bulletin illustrate auditor’s reports where the report on
the group financial statements and the report on the parent company financial
statements are presented as a single auditor’s report.
24. The examples in Appendices 3 and 4 illustrate auditor’s reports where the group and the
parent company financial statements are presented separately. In such cases the auditor
might provide separate auditor’s reports on the group financial statements (See
Appendix 3) and on the parent company financial statements (See Appendix 4).
11 CA 2006 does not require the directors to sign the group balance sheet and thereby evidence their
approval of it. Where separate financial statements are presented the auditor obtains evidence of the
directors’ approval of the group financial statements before signing the auditor’s report on those group
financial statements.
THE AUDITING
PRACTICES BOARD
9
Bulletin 2010/2 (Revised) February 2011
25. Where separate auditor’s reports are provided on the group and parent company
financial statements the illustrative examples assume that:
(a) the auditor’s responsibilities with respect to the Corporate Governance Statement are
described in the auditor’s report on the group financial statements; and
(b) the Directors’ Remuneration Report is reported on in the auditor’s report on the
parent company financial statements.
However, other approaches may be adopted.
OMITTING THE PARENT COMPANY PROFIT AND LOSS ACCOUNT
26. Section 408 CA 2006 allows a company that prepares group accounts to omit the parent
company’s profit and loss account from the company’s annual accounts provided that:
(a) the notes to the parent company’s balance sheet show the company’s profit or loss
for the financial year determined in accordance with CA 2006; and
(b) it is disclosed in the company’s annual accounts that the exemption applies.
27. Where advantage has been taken of the section 408 exemption and the parent company
financial statements have been prepared in accordance with ‘‘IFRSs as adopted by the
European Union’’ the financial reporting framework is described in the auditor’s report as:
‘‘have been properly prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Companies Act
2006’’12.
28. Example 5 illustrates an auditor’s report where the section 408 exemption has been taken
in respect of the parent company’s own profit and loss account. The other example
reports in Appendices 2 and 4 illustrate (by way of shaded text) the wording that is
required to be inserted in the auditor’s report when the company does not take
advantage of the section 408 exemption (i.e. a parent company profit and loss account is
included). They illustrate by way of struck out text, wording that should be deleted when
the shaded text is included (i.e. the struck out text is included in the auditor’s report when
the company excludes the profit and loss account from the parent company financial
statements). Charitable company groups can also take advantage of the section 408
exemption. In examples 31 and 34 the alternatives are illustrated by the use of square
brackets.
12 See paragraph 9.24 of ‘‘Guidance for UK Companies on Accounting and Reporting: Requirements
under the Companies Act 2006 and the application of the IAS regulation’’ Department for Business
Enterprise & Regulatory Reform. June 2008. (www.bis.gov.uk/files/file46791.pdf)
10
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
OPINION IN RESPECT OF AN ADDITIONAL FINANCIAL REPORTING
FRAMEWORK
29. The financial statements of some companies may comply with two financial reporting
frameworks (for example IFRSs as adopted by the European Union and IFRSs as issued
by the IASB) and those charged with governance may engage the auditor to express an
opinion in respect of both frameworks.
30. ISA (UK and Ireland) 700 (Revised) requires that the second opinion should be clearly
separated from the first opinion on the financial statements by use of an appropriate
heading. This is illustrated in examples 4, 6, 7, 9 8 and 2413.
EMPHASIS OF MATTER PARAGRAPHS
31. An emphasis of matter paragraph refers to a matter that is appropriately presented or
disclosed in the financial statements that, in the auditor’s judgment, is of such importance
that it is fundamental to a user’s understanding of the financial statements. When the
auditor includes an emphasis of matter paragraph ISA (UK and Ireland) 706 requires the
auditor to indicate in its report that the auditor’s opinion is not modified in respect of the
matter emphasized.
32. Example of emphasis of matter paragraphs are set out in Appendix 5. These examples
have been drafted in the context of auditor’s reports on the financial statements of a
company. However, the examples can be tailored for use in the auditor’s reports of all
entities.
OTHER MATTER PARAGRAPHS
33. An other matter paragraph refers to a matter other than those presented or disclosed in
the financial statement that, in the auditor’s judgment, is relevant to a user’s
understanding of the audit, the auditor’s responsibilities or the auditor’s report.
34. Examples 9, 10 and 11 illustrate how an other matter paragraph is included in the
auditor’s report.
REGULATED ENTITIES
35. Further APB guidance with respect to the auditor’s reports on the financial statements of
regulated entities is set out in the following Practice Notes:
13 The wording used in these examples is illustrative to reflect the requirement of the Securities and
Exchange Commission of the USA whose Final Rule ‘‘Acceptance From Foreign Private Issuers of
Financial Statements Prepared in Accordance With International Financial Reporting Standards
Without Reconciliation to US GAAP (4 January 2008) states ‘‘...the independent auditor must opine in
its report on whether those financial statements comply with IFRS as issued by the IASB. ...the
auditor’s report can include this language in addition to any opinion relating to compliance with
standards required by the home country’’.
THE AUDITING
PRACTICES BOARD
11
Bulletin 2010/2 (Revised) February 2011
PN No.
Title
Appendices in this
Bulletin
11
The Audit of Charities in the United Kingdom
10, 11 and 12
14
The Audit of Registered Social Landlords in the
United Kingdom
9 (example 28)
15
The Audit of Occupational Pension Schemes in the
United Kingdom
9 (example 27)
19
The Audit of Banks and Building Societies in the
United Kingdom
8 (examples 23 and 24)
20
The Audit of Insurers in the United Kingdom
7 (examples 17 to 20)
24
The Audit of Friendly Societies in the United Kingdom
7 (examples 21 and 22)
27
The Audit of Credit Unions in the United Kingdom
8 (examples 25 and 26)
36. These Practice Notes also contain illustrative examples of auditor’s reports that arise from
the requirements of regulations and which, therefore, are not required to follow the
reporting requirements of ISAs (UK and Ireland).
MODIFYING THE AUDITOR’S OPINION ON THE FINANCIAL
STATEMENTS
37. An auditor’s opinion on financial statements is considered to be modified in the following
situations.
(a) Qualified opinion arising from either a disagreement or a scope limitation (Illustrative
examples set out in Appendix 13);
(b) Adverse opinion (Illustrative examples set out in Appendix 14); and
(c) Disclaimer of opinion (Illustrative examples set out in Appendix 15).
MODIFYING THE AUDITOR’S OPINION ON THE DIRECTORS’ REPORT
38. Section 496 of CA 2006 requires the auditor to state in its report on the company’s annual
accounts whether in its opinion the information given in the directors’ report for the
financial year for which the accounts are prepared is consistent with those accounts. The
example report in Appendix 16 illustrates a modified opinion on the consistency of the
directors’ report with the annual accounts.
ILLUSTRATIVE DIRECTORS’ RESPONSIBILITIES STATEMENT
39. Example 47 in Appendix 17 is an illustrative example of a Directors’ Responsibilities
Statement for a non-publicly traded company preparing its parent company financial
statements under UK GAAP. Illustrative examples of Directors’ Responsibilities
Statements for publicly traded companies are not provided as the directors’
responsibilities will vary dependent on the rules of the market on which a company’s
securities are admitted to trading.
12
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 1
COMPANY DOES NOT PREPARE GROUP FINANCIAL STATEMENTS
1.
Non-publicly traded company preparing financial statements under the FRSSE
2.
Non-publicly traded company preparing financial statements under UK GAAP
3.
Publicly traded standard listed company preparing financial statements under UK
GAAP
4.
Publicly traded premium listed company preparing financial statements under
IFRSs as adopted by the European Union
THE AUDITING
PRACTICES BOARD
13
Bulletin 2010/2 (Revised) February 2011
Example 1 – Non-publicly traded company preparing financial
statements under the FRSSE
Company qualifies as a small company.
Company does not prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Profit and Loss Account, the
Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and
Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related notes14. The
financial reporting framework that has been applied in their preparation is applicable law and
the Financial Reporting Standard for Smaller Entities [(Effective April 2008)]15 (United
Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors[, including ‘‘APB Ethical Standard –
Provisions Available for Small Entities (Revised)’’, in the circumstances set out in note [x] to
the financial statements]16.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
14 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
15 Specify the version of The Financial Reporting Standard for Smaller Entities.
16 Delete the words in square brackets if the relief and exemptions provided by ES PASE are not utilised.
Paragraph 22 of ES PASE requires disclosure in the auditor’s report where the audit firm has taken
advantage of an exemption provided by ES PASE. The Appendix to ES PASE provides illustrative
disclosures of relevant circumstances where the audit firm has taken advantage of an exemption
provided by ES PASE.
14
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ........ and of its profit
[loss] for the year then ended17;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice applicable to Smaller Entities; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.17
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
17 Guidance for auditors when a company takes advantage of the option in section 444(1) of CA 2006 not
to file the profit and loss account or the directors’ report is set out in paragraph 12 of APB Bulletin 2008/
4 ‘‘The Special Auditor’s Report on Abbreviated Accounts in the United Kingdom’’.
THE AUDITING
PRACTICES BOARD
15
Bulletin 2010/2 (Revised) February 2011
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to [prepare the financial statements in accordance with
the small companies regime] [and] [take advantage of the small companies’
exemption in preparing the directors’ report].
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
16
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 2 – Non-publicly traded company preparing financial
statements under UK GAAP
Company is not a quoted company.
Company either does not qualify as a small company or qualifies as a small company
but chooses not to prepare its financial statements in accordance with the FRSSE.
Company does not prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED/PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Profit and Loss Account, the
Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and
Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related notes18. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
18 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
17
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ........ and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
18
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 3 – Publicly traded standard listed company preparing
financial statements under UK GAAP
Company is a quoted company and has a standard listing.
Company does not prepare group financial statements.
Corporate governance statement incorporated into the directors’ report, either directly
or by incorporation by reference as explained in APB Bulletin 2009/4(see example 7
for an illustration of an auditor’s report where the corporate governance statement is
not incorporated into the directors’ report).
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Profit and Loss Account, the
Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and
Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related notes19. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
19 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
19
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200620; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
20 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
20
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
21
Bulletin 2010/2 (Revised) February 2011
Example 4 – Publicly traded premium listed company preparing
financial statements under IFRSs as adopted by the European
Union
Company is a quoted company and has a premium listing.
Company does not prepare group financial statements.
Corporate governance statement incorporated into the directors’ report, either directly
or by incorporation by reference as explained in APB Bulletin 2009/4(see example 7
for an illustration of an auditor’s report where the corporate governance statement is
not incorporated into the directors’ report).
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Statement of Financial
Position, the Statement of Comprehensive Income, the Statement of Cash Flows, the
Statement of Changes in Equity21] and the related notes22. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
21 The names used for the primary statements in the auditor’s report should reflect the precise titles used
by the company for them.
22 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
22
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European
Union; and
have been prepared in accordance with the requirements of the Companies Act
2006.
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in note [x] to the financial statements, the company in addition to applying IFRSs
as adopted by the European Union, has also applied IFRSs as issued by the International
Accounting Standards Board (IASB).
In our opinion the financial statements comply with IFRSs as issued by the IASB.]23
23 See footnote 12
THE AUDITING
PRACTICES BOARD
23
Bulletin 2010/2 (Revised) February 2011
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200624; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
the directors’ statement, [set out [on page...]], in relation to going concern;
the part of the Corporate Governance Statement relating to the company’s
compliance with the nine provisions of the [June 2008 Combined Code] [UK
Corporate Governance Code25] specified for our review; and
certain elements of the report to the shareholders by the Board on directors’
remuneration26.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
24 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
25 The UK Corporate Governance Code was issued in May 2010 and applies to financial years beginning
on or after 29 June 2010
26 The report on directors’ remuneration should clearly identify those elements that have been audited.
24
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 2
GROUP AND PARENT COMPANY FINANCIAL STATEMENTS
REPORTED ON IN A SINGLE AUDITOR’S REPORT
5.
Non-publicly traded group preparing financial statements under UK GAAP
6.
Non-publicly traded group preparing financial statements under IFRSs as adopted by
the European Union (applicable to a company admitted to trading on AIM)
7.
Publicly traded standard listed group – Parent company financial statement
prepared under UK GAAP and corporate governance statement not
incorporated into directors’ report
8.
Publicly traded premium listed group – Parent company financial statements
prepared under IFRSs as adopted by the European Union
THE AUDITING
PRACTICES BOARD
25
Bulletin 2010/2 (Revised) February 2011
Example 5 – Non-publicly traded group preparing financial
statements under UK GAAP
Company is not a quoted company.
Section 408 exemption taken for parent company’s own profit and loss account.
Company does prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED/PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Group Profit and Loss
Account, the Group and Parent Company Balance Sheets, the Group Cash Flow Statement,
the Group Statement of Total Recognised Gains and Losses, the Group and Parent Company
Reconciliation of Movements in Shareholders’ Funds] and the related notes27. The financial
reporting framework that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on pages ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
27 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
26
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the group’s and of the parent company’s affairs
as at ....... and of the group’s profit [loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting
records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
27
Bulletin 2010/2 (Revised) February 2011
Example 6 – Non-publicly traded group preparing financial
statements under IFRSs as adopted by the European Union
Company is not a quoted company.
Shaded text to be included and struck through text omitted, where section 408
exemption not taken in respect of parent company’s own profit and loss account.
Company does prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED/PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Group and Parent Company
Statements of Financial Position, the Group and Parent Company Statements of
Comprehensive Income, the Group and Parent Company Statements of Cash Flow, the Group
and Parent Company Statements of Changes in Equity] and the related notes28. The financial
reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on pages ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
28 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
28
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the
parent company’s affairs as at ....... and of the group’s and the parent company’s
profit [loss] for the year then ended;
the group financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
.
the parent company financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of
the Companies Act 2006.
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note X to the financial statements, the group in addition to applying IFRSs as
adopted by the European Union, has also applied IFRSs as issued by the International
Accounting Standards Board (IASB).
In our opinion the financial statements comply with IFRSs as issued by the IASB.]29
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
29 See footnote 12
THE AUDITING
PRACTICES BOARD
29
Bulletin 2010/2 (Revised) February 2011
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting
records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
30
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 7 – Publicly traded standard listed group – Parent
company financial statements prepared under UK GAAP and
corporate governance statement not incorporated into directors’
report
Company is a quoted company and has a standard listing.
Shaded text to be included only where section 408 exemption not taken in respect of
parent company’s own profit and loss account.
Company does prepare group financial statements.
Corporate governance statement not incorporated into the directors’ report, either
directly or by incorporation by reference as explained in APB Bulletin 2009/4 (the
underlined text is included in the auditor’s report as a consequence of the statement
not being incorporated into the directors’ report).
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as the Group Statement of
Financial Position and Parent Company Balance Sheet, the Group Statement of
Comprehensive Income, the Parent Company Profit and Loss Account, the Group Statement
of Cash Flows, the Group Statement of Changes in Equity, the Parent Company Statement of
Total Recognised Gains and Losses, the Parent Company Reconciliation of Movements in
Shareholders’ Funds] and the related notes30. The financial reporting framework that has
been applied in the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
30 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
31
Bulletin 2010/2 (Revised) February 2011
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the
parent company’s affairs as at ....... and of the group’s and the parent company’s
profit [loss] for the year then ended;
the group financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance
with United Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of
the Companies Act 2006; and, as regards the group financial statements, Article 4 of
the IAS Regulation.
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in note [x] to the group financial statements, the group in addition to complying
with its legal obligation to apply IFRSs as adopted by the European Union, has also applied
IFRSs as issued by the International Accounting Standards Board (IASB).
32
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
In our opinion the group financial statements comply with IFRSs as issued by the IASB.]31
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200632;
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements:
the information given in the Corporate Governance Statement set out [on pages] [in
describe document] [at include web-address] with respect to internal control and risk
management systems in relation to financial reporting processes and about share
capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
a Corporate Governance Statement has not been prepared by the company.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
31 See footnote 12
32 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
THE AUDITING
PRACTICES BOARD
33
Bulletin 2010/2 (Revised) February 2011
Example 8 – Publicly traded premium listed group – Parent
company financial statements prepared under IFRSs as adopted
by the European Union
Company is a quoted company and has a premium listing.
Shaded text to be included, and struck through text omitted, where section 408
exemption not taken in respect of parent company’s own profit and loss account.
Company does prepare group financial statements.
Corporate governance statement incorporated into the directors’ report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the financial statements of (name of company) for the year ended ... which
comprise [specify the titles of the primary statements such as, the Group and Parent Company
Statements of Financial Position, the Group and Parent Company Statements of
Comprehensive Income, the Group and Parent Company Statements of Cash Flow, the Group
and Parent Company Statements of Changes in Equity]33 and the related notes34. The
financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
33 The names used for the primary statements in the auditor’s report should reflect the precise titles used
by the company for them.
34 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
34
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the
parent company’s affairs as at ....... and of the group’s and the parent company’s
profit [loss] for the year then ended;
the group financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
.
the parent company financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the group financial statements, Article 4 of
the IAS Regulation.
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in note [x] to the group financial statements, the group in addition to complying
with its legal obligation to apply IFRSs as adopted by the European Union, has also applied
IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the group financial statements comply with IFRSs as issued by the IASB.]35
35 See footnote 12
THE AUDITING
PRACTICES BOARD
35
Bulletin 2010/2 (Revised) February 2011
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200636; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
the directors’ statement, [set out [on page...]], in relation to going concern;
the part of the Corporate Governance Statement relating to the company’s
compliance with the nine provisions of the [June 2008 Combined Code] [UK
Corporate Governance Code37] specified for our review; and
certain elements of the report to shareholders by the Board on directors’
remuneration38.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
36 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
37 The UK Corporate Governance Code was issued in May 2010 and applies to financial years beginning
on or after 29 June 2010
38 The report on directors’ remuneration should clearly identify those elements that have been audited.
36
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 3
GROUP FINANCIAL STATEMENTS REPORTED ON SEPARATELY
FROM THE PARENT COMPANY FINANCIAL STATEMENTS
9.
Publicly traded premium listed group – Auditor’s report on group financial statements
prepared under IFRSs as adopted by the European Union
THE AUDITING
PRACTICES BOARD
37
Bulletin 2010/2 (Revised) February 2011
Example 9 – Publicly traded premium listed group – Auditor’s
report on group financial statements prepared under IFRSs as
adopted by the European Union
Company is a quoted company and has a premium listing.
Corporate governance statement reported on in the auditor’s report on the group
financial statements and incorporated into the directors’ report, either directly or by
incorporation by reference as explained in APB Bulletin 2009/4 (see example 7 for an
illustration of an auditor’s report where the corporate governance statement is not
incorporated into the directors’ report).
Directors’ Remuneration Report reported on in the auditor’s report on the parent
company financial statements.
Company does prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the group financial statements of (name of company) for the year ended ...
which comprise [specify the titles of the primary statements such as the Group Statement of
Financial Position, the Group Statement of Comprehensive Income, the Group Statement of
Cash Flows, the Group Statement of Changes in Equity]39 and the related notes40. The
financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the group financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the group financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
39 The names used for the primary statements in the auditor’s report should reflect the precise titles used
by the company for them.
40 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
38
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the group financial statements:
give a true and fair view of the state of the group’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European
Union; and
have been prepared in accordance with the requirements of the Companies Act 2006
and Article 4 of the IAS Regulation.
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in note [x] to the group financial statements, the group in addition to complying
with its legal obligation to apply IFRSs as adopted by the European Union, has also applied
IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the group financial statements comply with IFRSs as issued by the IASB.]41
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
group financial statements are prepared is consistent with the group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
41 See footnote 12
THE AUDITING
PRACTICES BOARD
39
Bulletin 2010/2 (Revised) February 2011
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
the directors’ statement, [set out [on page...]], in relation to going concern; and
the part of the Corporate Governance Statement relating to the company’s
compliance with the nine provisions of the [June 2008 Combined Code] [UK
Corporate Governance Code42] specified for our review;
certain elements of the report to shareholders by the Board on directors’
remuneration43.
Other matter
We have reported separately on the parent company financial statements of (name of
company) for the year ended ... and on the information in the Directors’ Remuneration Report
that is described as having been audited. [That report includes an emphasis of matter] [The
opinion in that report is (qualified)/(an adverse opinion)/(a disclaimer of opinion)].
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
42 The UK Corporate Governance Code was issued in May 2010 and applies to financial years beginning
on or after 29 June 2010
43 The report on directors’ remuneration should clearly identify those elements that have been audited.
40
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 4
PARENT COMPANY FINANCIAL STATEMENTS REPORTED ON
SEPARATELY FROM THE GROUP FINANCIAL STATEMENTS
10. Publicly traded group – Auditor’s report on parent company financial statements
prepared under UK GAAP
11. Publicly traded group – Auditor’s report on parent company financial statements
prepared under IFRSs as adopted by the European Union
THE AUDITING
PRACTICES BOARD
41
Bulletin 2010/2 (Revised) February 2011
Example 10 – Publicly traded group – Auditor’s report on parent
company financial statements prepared under UK GAAP
Company is a quoted company and could be either standard or premium listed.
Shaded text to be included only where section 408 exemption not taken in respect of
parent company’s own profit and loss account.
Corporate Governance Statement incorporated into the directors’ report. For premium
listed companies the review requirements under the Listing Rules are reported on in
the auditor’s report on the group financial statements.
Directors’ Remuneration Report reported on in the auditor’s report on the parent
company financial statements
Company does prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the parent company financial statements of (name of company) for the year
ended ... which comprise [specify the titles of the primary statements such as the Parent
Company Balance Sheet, the Parent Company Profit and Loss Account, the Parent Company
Statement of Total Recognised Gains and Losses, the Parent Company Reconciliation of
Movements in Shareholders’ Funds] and the related notes44. The financial reporting
framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the parent company financial statements and
for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the parent company financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
44 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF‘ format may refer to the financial statements by reference to page numbers.
42
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the parent company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the parent company financial statements:
give a true and fair view of the state of the company’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200645; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the parent company financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
45 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
THE AUDITING
PRACTICES BOARD
43
Bulletin 2010/2 (Revised) February 2011
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of (name of company) for the
year ended .... [That report includes an emphasis of matter] [The opinion in that report is
(qualified)/(an adverse opinion)/(a disclaimer of opinion)].
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
44
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 11 – Publicly traded group – Auditor’s report on parent
company financial statements prepared under IFRSs as adopted
by the European Union
Company is a quoted company and could be either standard or premium listed.
Shaded text to be included, and struck through text omitted, where section 408
exemption not taken in respect of parent company’s own profit and loss account.
Corporate Governance Statement incorporated into the directors’ statement. For
premium listed companies the review requirements under the Listing Rules are
reported on in the auditor’s report on the group financial statements.
Directors’ Remuneration Report reported on in the auditor’s report on the parent
company financial statements.
Company does prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the parent company financial statements of (name of company) for the year
ended ... which comprise [specify the titles of the primary statements such as the Statement of
Financial Position, the Statement of Comprehensive Income, the Statement of Cash Flow, the
Statement of Changes in Equity]46 and the related notes47. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the parent company financial statements and
for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the parent company financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
46 The names used for the primary statements in the auditor’s report should reflect the precise titles used
by the company for them.
47 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
45
Bulletin 2010/2 (Revised) February 2011
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the parent company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the parent company financial statements:
give a true and fair view of the state of the company’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006;
and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
46
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200648; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the parent company financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of (name of company) for the
year ended .... [That report includes an emphasis of matter] [The opinion in that report is
(qualified)/(an adverse opinion)/(a disclaimer of opinion).]
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
48 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
THE AUDITING
PRACTICES BOARD
47
Bulletin 2010/2 (Revised) February 2011
APPENDIX 5
EMPHASIS OF MATTER PARAGRAPHS
12. Emphasis of matter: Material uncertainty that may cast significant doubt about the
company’s ability to continue as a going concern
13. Emphasis of matter: Uncertain outcome of a lawsuit
48
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 12 – Emphasis of matter: Material uncertainty that may
cast significant doubt about the company’s ability to continue as
a going concern
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The company incurred a net loss of £X during the year ended 31 December 20X1 and,
as of that date, the company’s current liabilities exceeded its total assets by £Y and it
had net current liabilities of £Z.
These conditions, along with other matters set forth in the notes to the financial
statements, indicate the existence of a material uncertainty, which may cast significant
doubt about the Company’s ability to continue as a going concern.
The company makes relevant disclosures in the financial statements including those
referred to in paragraphs 18 and 19 of ISA (UK and Ireland) 570 ‘‘Going Concern’’.
The auditor issues an unmodified opinion with an emphasis of matter paragraph
describing the situation giving rise to the emphasis of matter and its possible effects
on the financial statements, including (where practicable) quantification.
Extract from auditor’s report
...
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at 31 December 20X1
and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Emphasis of matter – Going concern
In forming our opinion on the financial statements, which is not modified, we have considered
the adequacy of the disclosure made in note [x] to the financial statements concerning the
company’s ability to continue as a going concern. The company incurred a net loss of £X
during the year ended 31 December 201X and, at that date, the company’s current liabilities
exceeded its total assets by £Y and it had net current liabilities of £Z. These conditions, along
with the other matters explained in note [x] to the financial statements, indicate the existence
of a material uncertainty which may cast significant doubt about the company’s ability to
THE AUDITING
PRACTICES BOARD
49
Bulletin 2010/2 (Revised) February 2011
continue as a going concern. The financial statements do not include the adjustments that
would result if the company was unable to continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
...
50
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 13 – Emphasis of matter: Uncertain outcome of a
lawsuit
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
A lawsuit alleges that the company has infringed certain patent rights and claims
royalties and punitive damages. The company has filed a counter action, and
preliminary hearings and discovery proceedings on both actions are in progress.
The ultimate outcome of the matter cannot presently be determined, and no provision
for any liability that may result has been made in the financial statements.
The company makes relevant disclosures in the financial statements.
The auditor issues an unmodified opinion with an emphasis of matter paragraph
describing the situation giving rise to the emphasis of matter and its possible effects
on the financial statements, including that the effect on the financial statements of the
resolution of the uncertainty cannot be quantified.
Extract from auditor’s report
...
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Emphasis of matter – uncertain outcome of a lawsuit
In forming our opinion on the financial statements, which is not modified, we have considered
the adequacy of the disclosures made in note [x] to the financial statements concerning the
uncertain outcome of a lawsuit, alleging infringement of certain patent rights and claiming
royalties and punitive damages, where the company is the defendant. The company has filed
a counter action, and preliminary hearings and discovery proceedings on both actions are in
progress. The ultimate outcome of the matter cannot presently be determined, and no
provision for any liability that may result has been made in the financial statements.
Opinion on other matter prescribed by the Companies Act 2006
...
THE AUDITING
PRACTICES BOARD
51
Bulletin 2010/2 (Revised) February 2011
APPENDIX 6
PARTNERSHIPS
14. Limited liability partnership preparing financial statements under UK GAAP
15. Limited liability partnership preparing financial statements under IFRSs as
adopted by the EU
16. Qualifying partnership preparing financial statements under UK GAAP
52
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 14 – Limited liability partnership49 preparing financial
statements under UK GAAP
The limited liability partnership does not prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ LLP
We have audited the financial statements of (name of limited liability partnership) for the year
ended ... which comprise [specify the titles of the primary statements such as the Balance
Sheet, the Profit and Loss Account, the Cash Flow Statement, the Statement of Total
Recognised Gains and Losses] and the related notes50. The financial reporting framework that
has been applied in their preparation is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of members and auditor
As explained more fully in the Members’ Responsibilities Statement [set out [on page ...]], the
members are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
49 Regulations relevant to audit reports of limited liability partnerships are set out in Statutory Instrument
2008 No. 1911 ‘‘The Limited Liability Partnerships (Accounts and Audit) (Application of Companies act
2006) Regulations 2008’’.
50 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
53
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the limited liability
partnership’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
designated members; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the [describe the annual report]
to identify material inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the limited liability partnership’s affairs as at ...
and of its profit [loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006
as applied to limited liability partnerships by the Limited Liability Partnerships
(Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
as applied to limited liability partnerships requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
we have not received all the information and explanations we require for our audit[; or
the members were not entitled to prepare financial statements in accordance with the
small limited liability partnerships’ regime]51.
51 This bullet point is only required where the LLP has prepared the financial statements in accordance
with the small LLP’s regime.
54
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
55
Bulletin 2010/2 (Revised) February 2011
Example 15 – Limited liability partnership52 preparing financial
statements under IFRSs as adopted by the EU
The limited liability partnership does not prepare group financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ LLP
We have audited the financial statements of (name of limited liability partnership) for the year
ended ... which comprise [specify the titles of the primary statements such as the Statement of
Financial Position, the Statement of Comprehensive Income, the Statement of Cash Flows, the
Statement of Changes in Equity] and the related notes53. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of members and auditor
As explained more fully in the Members’ Responsibilities Statement [set out [on page ...]], the
members are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
52 Regulations relevant to audit reports of limited liability partnerships are set out in Statutory Instrument
2008 No. 1911 ‘‘The Limited Liability Partnerships (Accounts and Audit) (Application of Companies act
2006) Regulations 2008’’.
53 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
56
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the limited liability
partnership’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
designated members; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the [describe the annual report]
to identify material inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the limited liability partnership’s affairs as at
....... and of its profit [loss] for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European
Union; and
have been prepared in accordance with the requirements of the Companies Act 2006
as applied to limited liability partnerships by the Limited Liability Partnerships
(Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
as applied to limited liability partnerships requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
we have not received all the information and explanations we require for our audit[; or
the members were not entitled to prepare financial statements in accordance with the
small limited liability partnerships’ regime]54.
54 This bullet point is only required where the LLP has prepared the financial statements in accordance
with the small LLP’s regime.
THE AUDITING
PRACTICES BOARD
57
Bulletin 2010/2 (Revised) February 2011
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
58
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 16 – Qualifying partnership55 preparing financial
statements under UK GAAP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
PARTNERSHIP
We have audited the financial statements of (name of qualifying partnership) for the year
ended ... which comprise [specify the titles of the primary statements such as the Profit and
Loss Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total
Recognised Gains and Losses, the Reconciliation of Movements in Members’ Funds] and the
related notes56. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of members and auditor
As explained more fully in the Members’ Responsibilities Statement [set out [on page ...]], the
members are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
55 Regulations relevant to auditor’s reports of qualifying partnerships are set out in Statutory Instrument
2008 No. 569 ‘‘The Partnerships (Accounts) Regulations 2008’’.
56 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
59
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the qualifying
partnership’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
members; and the overall presentation of the financial statements. In addition, we read all
the financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the qualifying partnership’s affairs as at .......
and of its profit [loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006
as applied to qualifying partnerships by The Partnerships (Accounts) Regulations
2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
as applied to qualifying partnerships requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of members’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
60
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
APPENDIX 7
INSURERS
17. Publicly traded insurer with a standard listing preparing financial statements
under UK GAAP and having equalisation provisions
18. Lloyd’s syndicate – annual financial statements
19. Lloyd’s syndicate – underwriting year accounts – closed year of account
20. Lloyd’s syndicate – underwriting year accounts – run off year of account
21. Non-directive friendly society with no subsidiaries preparing financial statements under
UK GAAP
22. Directive friendly society group preparing financial statements under UK GAAP
THE AUDITING
PRACTICES BOARD
61
Bulletin 2010/2 (Revised) February 2011
Example 17 – Publicly traded insurer with a standard listing
preparing financial statements under UK GAAP and having
equalisation provisions
Insurer is a quoted company and has a standard listing.
Insurer does not prepare group financial statements
Corporate governance statement incorporated into the directors’ report.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ PLC
We have audited the financial statements of (name of insurer) for the year ended ... which
comprise [specify the titles of the primary statements such as the Profit and Loss Account, the
Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and
Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related notes57. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice), having regard to the statutory requirement for insurance companies to maintain
equalisation provisions. The nature of equalisation provisions, the amounts set aside at ..., and
the effect of the movement in those provisions during the year on shareholders’ funds, the
balance on the general business technical account and profit before tax, are disclosed in
note x.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
57 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
62
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the insurer’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ....... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 200658; and
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
58 Part 3 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008 No. 410) sets out the information in the Directors’ Remuneration Report that
is subject to audit. Companies should describe clearly within the Directors’ Remuneration Report
which disclosures have been audited.
THE AUDITING
PRACTICES BOARD
63
Bulletin 2010/2 (Revised) February 2011
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
64
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 18 – Lloyd’s syndicate annual financial statements
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SYNDICATE XYZ
We have audited the syndicate annual financial statements for the year ended ... which
comprise [specify the titles of the primary financial statements such as the Profit and Loss
Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised
Gains and Losses]59, [the Statement of Accounting Policies]60 and the related notes 1 to X61.
The financial reporting framework that has been applied in their preparation is applicable law
and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
Respective responsibilities of the managing agent and the auditor
As explained more fully in the Statement of Managing Agent’s Responsibilities [set out [on
page ... ]], the managing agent is responsible for the preparation of syndicate annual financial
statements which give a true and fair view. Our responsibility is to audit and express an
opinion on the syndicate annual financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the syndicate annual financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
59 The terms used to describe the primary financial statements should be the same as those used by the
managing agent.
60 Reference is only made to the Statement of Accounting Polices where the accounting policies are not
included within the numbered notes to the financial statements.
61 Auditor’s reports of syndicates that do not publish their financial statements on a website or publish
them using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
65
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the annual
financial statements sufficient to give reasonable assurance that the annual financial
statements are free from material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are appropriate to the
syndicate’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
managing agent; and the overall presentation of the annual financial statements. In
addition, we read all the financial and non-financial information in the [describe the annual
report] to identify material inconsistencies with the audited financial statements. If we
become aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.
Opinion on syndicate annual financial statements
In our opinion the annual financial statements:
give a true and fair view of the syndicate’s affairs as at ... and of its profit [loss] for the
year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
Opinion on other matter prescribed by The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
In our opinion the information given in the Managing Agent’s Report for the financial year in
which the annual financial statements are prepared is consistent with the annual financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where The Insurance Accounts
Directive (Lloyds’s Syndicate and Aggregate Accounts) Regulations 2008 requires us to report
to you, if in our opinion:
66
the managing agent in respect of the syndicate has not kept adequate accounting
records; or
the syndicate annual financial statements are not in agreement with the accounting
records; or
we have not received all the information and explanations we require for our audit.
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
67
Bulletin 2010/2 (Revised) February 2011
Example 19 – Lloyd’s syndicate underwriting year accounts –
closed year of account
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SYNDICATE XYZ – 20XX CLOSED YEAR OF ACCOUNT
We have audited the syndicate underwriting year accounts for the 20XX year of account of
syndicate [XYZ] for the three years ended ...... which comprise [specify the titles of the primary
financial statements such as the Profit and Loss Account, the Balance Sheet, the Cash Flow
Statement, the Statement of Total Recognised Gains and Losses]62, [the Statement of
Accounting Policies]63, the related notes 1 to X64 and the Statement of Managing Agent’s
Responsibilities. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of the managing agent and the auditor
As explained more fully in the Statement of Managing Agent’s Responsibilities [set out [on
page ... ]], the managing agent is responsible for the preparation of the syndicate underwriting
year accounts, under the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and in accordance with the Lloyd’s Syndicate Accounting Byelaw
(no. 8 of 2005), which give a true and fair view. Our responsibility is to audit and express an
opinion on the syndicate underwriting year accounts in accordance with applicable legal and
regulatory requirements and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the syndicate underwriting year accounts
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
62 The terms used to describe the primary financial statements should be the same as those used by the
managing agent.
63 Reference is only made to the Statement of Accounting Polices where the accounting policies are not
included within the numbered notes to the financial statements.
64 Auditor’s reports of syndicates that do not publish their financial statements on a website or publish
them using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
68
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the syndicate
underwriting year accounts sufficient to give reasonable assurance that the syndicate
underwriting year accounts are free from material misstatement, whether caused by fraud
or error. This includes an assessment of: whether the accounting policies are appropriate
to the syndicate’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
managing agent; and the overall presentation of the syndicate underwriting year
accounts. In addition, we read all the financial and non-financial information in the
[describe the annual report] to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Opinion on syndicate underwriting year accounts
In our opinion the syndicate underwriting year accounts:
give a true and fair view of the profit [loss] for the 201X closed year of account;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and have
been properly prepared in accordance with the Lloyd’s Syndicate Accounting Byelaw
(no. 8 of 2005).
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Lloyd’s Syndicate
Accounting Byelaw (no. 8 of 2005) requires us to report to you if, in our opinion:
the managing agent in respect of the syndicate has not kept proper accounting
records; or
the syndicate underwriting year accounts are not in agreement with the accounting
records.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
69
Bulletin 2010/2 (Revised) February 2011
Example 20 – Lloyd’s syndicate underwriting year accounts –
run-off year of account
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
SYNDICATE XYZ
We have audited the syndicate underwriting year accounts for the 20XX run-off year of account
for the xx years ended ......, which comprise [specify the titles of the primary financial
statements such as the Profit and Loss Account, the Balance Sheet, the Cash Flow Statement
the Statement of Total Recognised Gains and Losses]65, [the statement of accounting
policies]66, the related notes 1 to X67 and the Statement of Managing Agent’s Responsibilities.
The financial reporting framework that has been applied in their preparation is applicable law,
the Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005) and applicable United Kingdom
Accounting Standards.
Respective responsibilities of the managing agent and the auditor
As explained more fully in the Statement of Managing Agent’s Responsibilities [ set out [on
page ... ]], the managing agent is responsible for the preparation of the syndicate underwriting
year accounts in accordance with the financial reporting framework described above. Our
responsibility is to audit and express an opinion on the syndicate underwriting year accounts
in accordance with applicable legal and regulatory requirements and International Standards
on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the syndicate underwriting year accounts
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report.
Or:
65 The terms used to describe the primary financial statements should be the same as those used by the
managing agent.
66 Reference is only made to the Statement of Accounting Policies where the accounting policies are not
included within the numbered notes to the financial statements.
67 Auditor’s reports of syndicates that do not publish their financial statements on a website or publish
them using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
70
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the syndicate
underwriting year accounts sufficient to give reasonable assurance that the syndicate
underwriting year accounts are free from material misstatement, whether caused by fraud
or error. This includes an assessment of: whether the accounting policies are appropriate
to the syndicate’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
managing agent; and the overall presentation of the syndicate underwriting year
accounts. In addition, we read all the financial and non-financial information in the
[describe the annual report] to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Opinion on syndicate underwriting year accounts
In our opinion the syndicate underwriting year accounts for the ... run-off year of account have
been properly prepared in accordance with the Lloyd’s Syndicate Accounting Byelaw (no. 8 of
2005).
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Lloyd’s Syndicate
Accounting Byelaw (no. 8 of 2005) requires us to report to you if, in our opinion:
the managing agent in respect of the syndicate has not kept proper accounting
records; or
the syndicate underwriting year accounts are not in agreement with the accounting
records.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
71
Bulletin 2010/2 (Revised) February 2011
Example 21 – Non directive friendly society with no subsidiary
companies, preparing financial statements under UK GAAP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
FRIENDLY SOCIETY
We have audited the financial statements of (name of friendly society) for the year ended ...
which comprise [specify the titles of the primary statements such as the Income and
Expenditure Account, the Balance Sheet] and the related notes68. The financial reporting
framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of the Committee of Management and auditor
As explained more fully in the Committee of Management’s Responsibilities Statement [set out
[on page ...]], the Committee of Management is responsible for preparing financial statements
which give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Boards [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page] of the Annual
Report]
Or:
68 Auditor’s reports of societies that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
72
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Committee of
Management; and the overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the [describe the annual report] to
identify material inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view, in accordance with UK Generally Accepted Accounting
Practice, of the state of the society’s affairs as at ... and of its income and expenditure
for the year then ended; and
have been properly prepared in accordance with the Friendly Societies Act 1992.
Opinion on other matters prescribed by the Friendly Societies Act 1992
In our opinion the Report of the Committee of Management has been prepared in accordance
with the Friendly Societies Act 1992 and the regulations made under it, and the information
given therein is consistent with the financial statements for the financial year.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Friendly Societies Act
1992 requires us to report to you if, in our opinion:
proper accounting records have not been kept; or
the financial statements are not in agreement with the accounting records; or
we have not received all the information and explanations and access to documents
that we require for our audit.
In accordance with our instructions from the Society we review whether the Corporate
Governance Statement reflects the Society’s compliance with the 8 provisions of the
Annotated Combined Code specified by the Association of Financial Mutuals.
Statutory Auditor
Date
Address
THE AUDITING
PRACTICES BOARD
73
Bulletin 2010/2 (Revised) February 2011
Example 22 – Directive friendly society group preparing financial
statements under UK GAAP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
FRIENDLY SOCIETY
We have audited the financial statements of (name of friendly society) for the year ended ...
which comprise (specify the titles of the primary statements such as the Group and Society
Income and Expenditure Accounts, the Group and Society Balance Sheets) and the related
notes69. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice)[, having regard to the statutory requirement to maintain
equalisation provisions. The nature of equalisation provisions, the amounts set aside at ..., and
the effect of the movement in those provisions during the year on the fund for future
appropriations, the balance on the general business technical account and on excess of
income over expenditure before tax are disclosed in note x70].
Respective responsibilities of the Committee of Management and auditor
As explained more fully in the Committee of Management’s Responsibilities Statement [set out
[on page ...]], the Committee of Management is responsible for preparing financial statements
which give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Boards [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page] of the Annual
Report]
Or:
69 Auditor’s reports of societies that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
70 The wording in square brackets is only included where the society has one or more general insurance
subsidiaries that prepare financial statements in accordance with UK GAAP and which are required to
provide statutory equalisation provisions.
74
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Committee of
Management; and the overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the [describe the annual report] to
identify material inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view, in accordance with UK Generally Accepted Accounting
Practice, of the state of the society’s and the group’s affairs as at ... and of the income
and expenditure of the society and the group for the year then ended; and
have been properly prepared in accordance with the Friendly Societies Act 1992.
Opinion on other matters prescribed by the Friendly Societies Act 1992
In our opinion the Report of the Committee of Management has been prepared in accordance
with the Friendly Societies Act 1992 and the regulations made under it, and the information
given therein is consistent with the financial statements for the financial year.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Friendly Societies Act
1992 requires us to report to you if, in our opinion:
proper accounting records have not been kept; or
the financial statements are not in agreement with the accounting records; or
we have not received all the information and explanations and access to documents
that we require for our audit.
In accordance with our instructions from the Society we review whether the Corporate
Governance Statement reflects the Society’s compliance with the 8 provisions of the
Annotated Combined Code specified by the Association of Financial Mutuals.
[Signature]
John Smith (Senior statutory auditor)
For and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
75
Bulletin 2010/2 (Revised) February 2011
APPENDIX 8
BANKING INSTITUTIONS THAT ARE NOT COMPANIES
23. Building society preparing financial statements under UK GAAP
24. Building society preparing financial statements under IFRSs as adopted by the
European Union
25. Credit union in Great Britain
26. Credit Union in Northern Ireland
76
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 23 – Building society preparing financial statements
under UK GAAP
Group and Society financial statements reported on in a single auditor’s report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
BUILDING SOCIETY
We have audited the [Group and Society] financial statements of (name of Building Society)
for the year ended ... which comprise [specify the titles of the primary statements such as the
[Group and Society] Profit and Loss Account[s], [Group and Society] Balance Sheet[s], the
Group Cash Flow Statement, the Group Statement of Total Recognised Gains and Losses and
the [Group and Society] Statement[s] of Movements in Member’s Interests] [, the Accounting
Policies71] and the related notes72. The financial reporting framework that has been applied in
their preparation is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on pages..]], the
directors are responsible for the preparation of financial statements which give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page] of the Annual
Report].
Or:
71 Include if the accounting policies are presented in a separate statement and not as a note to the
financial statements.
72 Auditor’s reports of building societies that do not publish their financial statements on a website or
publish them using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
77
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the [Group’s and]
Society’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the [Group’s and the] Society’s affairs as at ... and
of [the Group’s and] the Society’s income and expenditure for the year then ended;
and
have been prepared in accordance with the requirements of the Building Societies
Act 1986.
Opinion on other matters prescribed by the Building Societies Act 1986
In our opinion:
the Annual Business Statement and the Directors’ Report have been prepared in
accordance with the requirements of the Building Societies Act 1986;
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the accounting records and the
financial statements; and
the information given in the Annual Business Statement (other than the information
upon which we are not required to report) gives a true representation of the matters in
respect of which it is given.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Building Societies Act
1986 requires us to report to you if, in our opinion:
78
proper accounting records have not been kept by the Society; or
the [Society] financial statements are not in agreement with the accounting records;
or
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
we have not received all the information and explanations and access to documents
we require for our audit.
[Signature]
John Smith (Senior Statutory Auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
79
Bulletin 2010/2 (Revised) February 2011
Example 24 – Building society preparing financial statements
under IFRSs as adopted by the European Union
Group and Society financial statements are both prepared under IFRSs as adopted
by the EU and reported on in a single auditor’s report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
BUILDING SOCIETY
We have audited the [Group and Society] financial statements of (name of Building Society)
for the year ended ... which comprise [specify the titles of the primary statements such as the
[Group and Society] Income Statement[s], [Group and Society] Statement[s] of
Comprehensive Income, [Group and Society] Balance Sheet[s] and the [Group and Society]
Statement[s] of Movements in Member’s Interests and the [Group and Society] Cash Flow
Statement[s]], [the Accounting Policies73] and the related notes74. The financial reporting
framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on pages..]], the
directors are responsible for the preparation of the financial statements which give a true and
fair view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page] of the Annual
Report].
Or:
73 Include if the accounting policies are presented in a separate statement and not as a note to the
financial statements.
74 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
80
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the [Group’s and]
Society’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view, in accordance with IFRSs as adopted by the European
Union, of the state of the [Group’s and the] Society’s affairs as at ... and of [the
Group’s and] the Society’s income and expenditure for the year then ended; and
have been prepared in accordance with the requirements of the Building Societies
Act 1986 [and, as regards the group financial statements, Article 4 of the lAS
Regulation].
[Separate opinion in relation to IFRSs as issued by the IASB
As explained in note [x] to the group financial statements, the group in addition to complying
with its legal obligation to apply IFRSs as adopted by the European Union, has also applied
IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the group financial statements comply with IFRSs as issued by the IASB.]75
Opinion on other matters prescribed by the Building Societies Act 1986
In our opinion:
the Annual Business Statement and the Directors’ Report have been prepared in
accordance with the requirements of the Building Societies Act 1986;
the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the accounting records and the
financial statements; and
75 See footnote 12.
THE AUDITING
PRACTICES BOARD
81
Bulletin 2010/2 (Revised) February 2011
the information given in the Annual Business Statement (other than the information
upon which we are not required to report) gives a true representation of the matters in
respect of which it is given.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Building Societies Act
1986 requires us to report to you if, in our opinion:
proper accounting records have not been kept by the Society; or
the [Society] financial statements are not in agreement with the accounting records;
or
we have not received all the information and explanations and access to documents
we require for our audit.
[Signature]
John Smith (Senior Statutory Auditor)
for and on behalf of ABC LLP, Statutory Auditor
82
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 25 – Credit Union in Great Britain
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
CREDIT UNION
We have audited the financial statements of (name of credit union) for the year ended ... which
comprise [specify the titles of the primary statements such as the income and expenditure
account, appropriation account, the statement of general reserve, the balance sheet] and the
related notes76. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]] the
directors are responsible for the preparation of financial statements which give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
76 Auditor’s reports of credit unions that do not publish their financial statements on a website or publish
them using ‘‘pdf’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
83
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the credit union’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the credit union’s affairs as at .... and of its
income and expenditure for the year then ended;and
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, and with the Industrial and Provident Societies Acts
1965 to 2002 and the Credit Unions Act 1979.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Friendly and Industrial
and Provident Societies Acts 1965 to 2002 require us to report to you if, in our opinion:
proper books of account have not been kept by the credit union in accordance with
the requirements of the legislation,
a satisfactory system of control over transactions has not been maintained by the
credit union in accordance with the requirements of the legislation,
the revenue account or the other accounts (if any) to which our report relates, and the
balance sheet are not in agreement with the books of account of the credit union.
we have not obtained all the information and explanations necessary for the
purposes of our audit.
Statutory Auditor
Date
84
THE AUDITING
PRACTICES BOARD
Address
Bulletin 2010/2 (Revised) February 2011
Example 26 – Credit Union in Northern Ireland
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
CREDIT UNION LIMITED
We have audited the financial statements of (name of Credit union) for the year ended ... which
comprise [specify the titles of the primary statements such as the income and expenditure
account, appropriation account, the statement of general reserve, the balance sheet] and the
related notes77. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]] the
directors are responsible for the preparation of financial statements which give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...]] of the Annual
Report].
Or:
77 Auditor’s reports of credit unions that do not publish their financial statements on a website or publish
them using ‘‘pdf’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
85
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the credit union’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the credit union’s affairs as at ... and of its
income and expenditure for the year then ended; and
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, and with the Credit Unions (Northern Ireland) Order
1985.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Credit Unions
(Northern Ireland) Order 1985 requires us to report to you if, in our opinion:
proper books of account have not been kept by the credit union in accordance with
the requirements of the legislation,
a satisfactory system of control over transactions has not been maintained by the
credit union in accordance with the requirements of the legislation,
the revenue account or the other accounts (if any) to which our report relates, and the
balance sheet are not in agreement with the books of account of the credit union.
we have not obtained all the information and explanations necessary for the
purposes of our audit.
Statutory Auditor
Date
86
THE AUDITING
PRACTICES BOARD
Address
Bulletin 2010/2 (Revised) February 2011
APPENDIX 9
OTHER REGULATED ENTITIES
27. Occupational pension scheme
28. Housing Association registered in England that is an industrial and provident society
THE AUDITING
PRACTICES BOARD
87
Bulletin 2010/2 (Revised) February 2011
Example 27 – Occupational pension scheme
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF THE XYZ
PENSION SCHEME
We have audited the financial statements of (name of pension scheme for the year ended ....
which comprise the fund account, the net assets statement and the related notes78. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page ...]], the
scheme’s trustees are responsible for the preparation of financial statements which give a true
and fair view. Our responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the scheme’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the trustees; and the overall
presentation of the financial statements. In addition, we read all the financial and nonfinancial information in the [describe the annual report] to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
78 Auditor’s reports of schemes that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
88
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Opinion on financial statements
In our opinion the financial statements:
show a true and fair view of the financial transactions of the scheme during the year
ended ..., and of the amount and disposition at that date of its assets and liabilities,
other than the liabilities to pay pensions and benefits after the end of the year;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
contain the information specified in Regulation 3 of, and the Schedule to, the
Occupational Pension Schemes (Requirement to obtain Audited Accounts and a
Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.
Statutory Auditor
Date
Address
THE AUDITING
PRACTICES BOARD
89
Bulletin 2010/2 (Revised) February 2011
Example 28 – Housing Association registered in England that is
an Industrial and Provident Society
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
HOUSING ASSOCIATION
We have audited the financial statements of [name of housing association] for the year ended
... which comprise (state the primary financial statements such as the Income and Expenditure
Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised
Gains and Losses)79 and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of the board and the auditor
As explained more fully in the Statement of Board’s Responsibilities [set out [on page]], the
board is responsible for the preparation of financial statements which give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
79 Auditors’ reports on Housing Associations that do not publish their financial statements on a website or
publish them using ‘PDF’ format may refer to the financial statements by reference to page numbers.
90
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the association’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the board; and the overall
presentation of the financial statements. In addition, we read all the financial and nonfinancial information in the [describe the annual report] to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the association’s affairs as at ... and of its
income and expenditure for the year then ended; and
have been properly prepared in accordance with the Industrial and Provident
Societies Acts, 1965 to 2002, the Housing and Regeneration Act 200880 and The
Accounting Requirements for Registered Social Landlords General Determination
2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Industrial and
Provident Societies Acts, 1965 to 2002 require us to report to you if, in our opinion:
a satisfactory system of control over transactions has not been maintained; or
the association has not kept proper accounting records; or
the financial statements are not in agreement with the books of account; or
we have not received all the information and explanations we need for our audit.
Statutory Auditor
Date
Address
80 For periods ending before 1 April 2010 the Housing Act 1996 is the relevant legislation that should be
referred to.
THE AUDITING
PRACTICES BOARD
91
Bulletin 2010/2 (Revised) February 2011
APPENDIX 10
CHARITABLE COMPANIES REGISTERED IN ENGLAND & WALES
29. Charitable company audited under the Charities Act 1993
30. Charitable company audited under the Companies Act 2006
31. Charitable company group whose consolidated financial statements are prepared and
audited under both the Companies Act 2006 and the Charities Act 1993
92
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 29 – Charitable company audited under the Charities
Act 1993
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF XYZ
CHARITABLE COMPANY [LIMITED]
We have audited the financial statements of (name of charitable company) for the year ended
... which comprise [specify the titles of the primary statements such as the Statement of
Financial Activities, the Summary Income and Expenditure Account, the Balance Sheet, the
Cash Flow Statement] and the related notes81. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page...]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view.
The trustees have elected for the financial statements to be audited in accordance with the
Charities Act 1993 rather than the Companies Act 2006. Accordingly we have been appointed
as auditor under section 43 of the Charities Act 1993 and report in accordance with regulations
made under section 44 of that Act.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
81 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
93
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charitable
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the trustees; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charitable company’s affairs as at ..., and of
its incoming resources and application of resources, including its income and
expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Charities Act 1993
requires us to report to you if, in our opinion:
the information given in the Trustees’ Annual Report is inconsistent in any material
respect with the financial statements; or
the charitable company has not kept adequate accounting records; or
the financial statements are not in agreement with the accounting records and
returns; or
we have not received all the information and explanations we require for our audit.
Statutory Auditor
Address
Date
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
94
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 30 – Charitable company audited under the Companies
Act 2006
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
CHARITABLE COMPANY [LIMITED]
We have audited the financial statements of (name of charitable company) for the year ended
... which comprise [specify the titles of the primary statements such as the Statement of
Financial Activities, the Summary Income and Expenditure Account, the Balance Sheet, the
Cash Flow Statement] and the related notes82. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page...]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
82 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
95
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charitable
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the trustees; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charitable company’s affairs as at ... and of
its incoming resources and application of resources, including its income and
expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Trustees’ Annual Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
96
adequate accounting records have not been kept or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of trustees’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit. [or
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
the trustees were not entitled to prepare the financial statements in accordance with
the small companies regime [and] [take advantage of the small companies
exemption in preparing the Trustees’ Annual Report]].83
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
83 Only applicable if a charitable company, below the small companies threshold, has chosen to prepare
its financial statements in accordance with the small companies regime.
THE AUDITING
PRACTICES BOARD
97
Bulletin 2010/2 (Revised) February 2011
Example 31 – Charitable company group whose consolidated
financial statements are prepared and audited under both the
Companies Act 2006 and the Charities Act 1993
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS AND
TRUSTEES OF XYZ CHARITABLE COMPANY [LIMITED]
We have audited the financial statements of (name of charitable company) for the year ended
which comprise [specify the titles of the primary statements such as the Group [and Parent
Charitable Company] Statement of Financial Activities, the Group [and Parent Charitable
Company] Summary Income and Expenditure Account, the Group and Parent Charitable
Company Balance Sheets, the Group [and Parent Charitable Company] Cash Flow
Statement] and the related notes84. The financial reporting framework that has been applied in
their preparation is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page...]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view.
We have been appointed auditor under the Companies Act 2006 and section 43 of the
Charities Act 1993 and report in accordance with those Acts. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
84 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
98
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charitable
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the trustees; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the group’s and the parent charitable
company’s affairs as at ..., and of the group’s incoming resources and application of
resources, including its income and expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006
and the Charities Act 1993.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Trustees’ Annual Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
and the Charities Act 1993 requires us to report to you if, in our opinion:
the parent charitable company has not kept adequate and sufficient accounting
records, or returns adequate for our audit have not been received from branches not
visited by us; or
the parent charitable company financial statements are not in agreement with the
accounting records and returns; or
certain disclosures of trustees’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit. [
or
THE AUDITING
PRACTICES BOARD
99
Bulletin 2010/2 (Revised) February 2011
the trustees were not entitled to prepare the financial statements in accordance with
the small companies regime [and] [take advantage of the small companies
exemption in preparing the Trustees’ Annual Report].]85
[Signature]
Address
John Smith (Senior statutory auditor)
Date
for and on behalf of ABC LLP, Statutory Auditor
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006.
85 Only applicable if a charitable company, below the small companies threshold, has chosen to prepare
its financial statemenst in accordance with the small companies regime.
100
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 11
CHARITABLE COMPANIES REGISTERED EITHER IN SCOTLAND OR
IN BOTH SCOTLAND AND ENGLAND & WALES
32. Charitable company where an election has been made for audit exemption
under the Companies Act 2006
33. Charitable company audited under the Charities and Trustee Investment (Scotland)
Act 2005 and the Companies Act 2006
34. Large charitable company group whose consolidated financial statements are
required to be prepared and audited under the Companies Act 2006
THE AUDITING
PRACTICES BOARD
101
Bulletin 2010/2 (Revised) February 2011
Example 32 – Charitable company where an election has been
made for audit exemption under the Companies Act 2006
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF XYZ
CHARITABLE COMPANY [LIMITED]
We have audited the financial statements of (name of charitable company) for the year ended
... which comprise [specify the titles of the primary statements such as the Statement of
Financial Activities, the Summary Income and Expenditure Account, the Balance Sheet, the
Cash Flow Statement] and the related notes86. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page ... ]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view
The trustees have elected for the financial statements to be audited in accordance with the
Charities and Trustee Investment (Scotland) Act 2005 [and the Charities Act 1993]87 rather
than also with the Companies Act 2006. Accordingly we have been appointed as auditor under
section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005 [and under
section 43 of the Charities Act 1993]88 and report in accordance with [that] [those] Act[s].
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us o comply with the Auditing Practices Board’s [(APB’s)] Ethical Standards
for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
86 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
87 This should only be included for cross border charitable companies registered in Scotland and
England and Wales
88 This should only be included for cross border charitable companies registered in Scotland and
England and Wales
102
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charitable
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the trustees; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charitable company’s affairs as at ... and of
its incoming resources and application of resources, including its income and
expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006, the Charities and Trustee Investment (Scotland) Act 2005 and regulation 8 of
the Charities Accounts (Scotland) Regulations 2006 (as amended).
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Charities Accounts
(Scotland) Regulations 2006 (as amended) [and the Charities Act 1993]89 requires us to report
to you if, in our opinion:
the information given in the Trustees’ Annual Report is inconsistent in any material
respect with the financial statements; or
the charitable company has not kept proper and adequate accounting records; or
the financial statements are not in agreement with the accounting records and
returns; or
89 This is only included in respect of cross border charities registered in both Scotland and in England
and Wales
THE AUDITING
PRACTICES BOARD
103
Bulletin 2010/2 (Revised) February 2011
we have not received all the information and explanations we require for our audit.
Statutory Auditor
Address
Date
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
104
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 33 – Charitable company audited under the Charities
and Trustee Investment (Scotland) Act 2005 and the Companies
Act 2006
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES AND
MEMBERS OF XYZ CHARITABLE COMPANY [LIMITED]
We have audited the financial statements of (name of charitable company) for the year ended
... which comprise [specify the titles of the primary statements such as the Statement of
Financial Activities, the Summary Income and Expenditure Account, the Balance Sheet, the
Cash Flow Statement] and the related notes90. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page...]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view.
We have been appointed as auditor under section 44(1)(c) of the Charities and Trustee
Investment (Scotland) Act 2005 and under the Companies Act 2006 and report in accordance
with regulations made under those Acts.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
90 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
105
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charitable
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the trustees; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charitable company’s affairs as at ... and of
its incoming resources and application of resources, including its income and
expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the Companies Act 2006, the Charities and
Trustee Investment (Scotland) Act 2005 and regulation 8 of the Charities Accounts
(Scotland) Regulations 2006 (as amended).
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Trustees’ Annual Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
and the Charities Accounts (Scotland) Regulations 2006 (as amended) requires us to report to
you if, in our opinion:
106
the charitable company has not kept proper and adequate accounting records or
returns adequate for our audit have not been received from branches not visited by
us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of trustees’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit [ or
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
the trustees were not entitled to prepare the financial statements in accordance with
the small companies regime [and] [take advantage of the small companies
exemption in preparing the Trustees’ Annual Report.]91
[Signature]
Address
John Smith (Senior statutory auditor)
Date
for and on behalf of ABC LLP, Statutory Auditor
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
91 Only applicable if a charitable company, below the small companies threshold, has chosen to prepare
its financial statements in accordance with the small companies regime.
THE AUDITING
PRACTICES BOARD
107
Bulletin 2010/2 (Revised) February 2011
Example 34 – Large charitable company group whose
consolidated financial statements are required to be prepared
and audited under the Companies Act 2006
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS AND
TRUSTEES OF XYZ CHARITABLE COMPANY (LIMITED)
We have audited the financial statements of (name of charitable company) for the year ended
... which comprise [specify the titles of the primary statements such as the Group [and Parent]
Charitable Company Statements of Financial Activities, the Group [and Parent] Charitable
Company Summary Income and Expenditure Accounts, the Group and Parent Charitable
Company Balance Sheets, the Group [and Parent] Charitable Company Cash Flow
Statements] and the related notes92. The financial reporting framework that has been applied
in their preparation is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [ on page ... ]], the
trustees (who are also the directors of the charitable company for the purposes of company
law) are responsible for the preparation of the financial statements and for being satisfied that
they give a true and fair view.
We have been appointed as auditor under section 44(1)(c) of the Charities and Trustee
Investment (Scotland) Act 2005 and under the Companies Act 2006 and report in accordance
with regulations made under those Acts.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
92 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
108
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the
parent charitable company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates made by
the trustees; and the overall presentation of the financial statements. In addition, we read
all the financial and non-financial information in the [describe the annual report] to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the group’s and the parent charitable
company’s affairs as at ... and of the group’s [and the parent] charitable company’s
incoming resources and application of resources, including [its] [the group’s and the
parent] income and expenditure, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the Companies Act 2006, the Charities and
Trustee Investment (Scotland) Act 2005 and regulations 6 and 8 of the Charities
Accounts (Scotland) Regulations 2006 (as amended).
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Trustees’ Annual Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
and the Charities Accounts (Scotland) Regulations 2006 (as amended) requires us to report to
you if, in our opinion:
the parent charitable company has not kept proper and adequate accounting
records or returns adequate for our audit have not been received from branches not
visited by us; or
the parent charitable company’s financial statements are not in agreement with the
accounting records or returns; or
THE AUDITING
PRACTICES BOARD
109
Bulletin 2010/2 (Revised) February 2011
certain disclosures of trustees’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
Address
John Smith (Senior statutory auditor)
Date
for and on behalf of ABC LLP, Statutory Auditor
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
110
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
APPENDIX 12
NON- COMPANY CHARITIES
35. Charity registered in England & Wales
36. Charity registered in Scotland
THE AUDITING
PRACTICES BOARD
111
Bulletin 2010/2 (Revised) February 2011
Example 35 – Charity registered in England & Wales
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF XYZ
CHARITY
We have audited the financial statements of (name of charity) for the year ended ... which
comprise [specify the titles of the primary statements such as the Statement of Financial
Activities, the Balance Sheet, the Cash Flow Statement] and the related notes93. The financial
reporting framework that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page ... ]], the
trustees are responsible for the preparation of financial statements which give a true and fair
view.
We have been appointed as auditor under section 43 of the Charities Act 1993 and report in
accordance with regulations made under section 44 of that Act. Our responsibility is to audit
and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s [(APB’s)] Ethical Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
93 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
112
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charity’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the trustees; and the overall
presentation of the financial statements. In addition, we read all the financial and nonfinancial information in the [describe the annual report] to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charity’s affairs as at ..., and of its incoming
resources and application of resources, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Charities Act 1993.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Charities Act 1993
requires us to report to you if, in our opinion:
the information given in the Trustees’ Annual Report is inconsistent in any material
respect with the financial statements; or
sufficient accounting records have not been kept; or
the financial statements are not in agreement with the accounting records and
returns; or
we have not received all the information and explanations we require for our audit.
Statutory Auditor
Address
Date
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
THE AUDITING
PRACTICES BOARD
113
Bulletin 2010/2 (Revised) February 2011
Example 36 – Charity registered in Scotland
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF XYZ
CHARITY
We have audited the financial statements of (name of charity) for the year ended ... which
comprise [specify the titles of the primary statements such as the Statement of Financial
Activities, the Balance Sheet, the Cash Flow Statement] and the related notes94. The financial
reporting framework that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of trustees and auditor
As explained more fully in the Trustees’ Responsibilities Statement [set out [on page ... ]], the
trustees are responsible for the preparation of financial statements which give a true and fair
view.
We have been appointed as auditor under section 44(1)(c) of the Charities and Trustee
Investment (Scotland) Act 2005 and report in accordance with regulations made under that
Act. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s [(APB’s)] Ethical
Standards for Auditors.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Trustees’
Annual Report].
Or:
94 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘‘PDF’’ format may refer to the financial statements by reference to page numbers.
114
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the charity’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the trustees; and the overall
presentation of the financial statements. In addition, we read all the financial and nonfinancial information in the [describe the annual report] to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the charity’s affairs as at ... and of its incoming
resources and application of resources, for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Charities and
Trustee Investment (Scotland) Act 2005 and regulation 8 of the Charities Accounts
(Scotland) Regulations 2006 (as amended).
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Charity Accounts
(Scotland) Regulations 2006 (as amended) requires us to report to you if, in our opinion:
the information given in the Trustees’ Annual Report is inconsistent in any material
respect with the financial statements; or
proper accounting records have not been kept; or
the financial statements are not in agreement with the accounting records and
returns; or
we have not received all the information and explanations we require for our audit.
Statutory Auditor
Address
Date
ABC LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
THE AUDITING
PRACTICES BOARD
115
Bulletin 2010/2 (Revised) February 2011
APPENDIX 13
QUALIFIED OPINION ON FINANCIAL STATEMENTS
37. Disagreement – Inappropriate accounting treatment of debtors
38. Disagreement – Non-disclosure of a going concern problem
39. Disagreement – Non-disclosure of information required to be disclosed
40. Scope Limitation – Auditor not appointed at the time of the stocktaking
41. Scope Limitation – Directors did not prepare cash flow forecasts sufficiently far into the
future to be able to assess the going concern status of the company
116
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 37 – Qualified opinion: Disagreement – Inappropriate
accounting treatment of debtors
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The debtors shown on the balance sheet include an amount of £Y due from a
company which has ceased trading. XYZ Limited has no security for this debt.
The auditor’s opinion is that the company is unlikely to receive any payment and full
provision of £Y should have been made.
The auditor believes that the effect of the disagreement is material but not pervasive to
the financial statements and accordingly issues a qualified opinion – except for
disagreement about the accounting treatment of debtors.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for qualified opinion on financial statements
Included in the debtors shown on the balance sheet is an amount of £Y due from a company
which has ceased trading. XYZ Limited has no security for this debt. In our opinion the
company is unlikely to receive any payment and full provision of £Y should have been made.
Accordingly, debtors should be reduced by £Y, the deferred tax liability should be reduced by
£X and profit for the year and retained earnings should be reduced by £Z.
Qualified opinion on financial statements
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements:
give a true and fair view of the state of the company’s affairs as at ... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
THE AUDITING
PRACTICES BOARD
117
Bulletin 2010/2 (Revised) February 2011
Matters on which we are required to report by exception95
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
...
95 The auditor needs to consider whether the circumstances leading to the disagreement about the
accounting treatment affect the matters on which the auditor is required to report by exception.
118
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 38 – Qualified opinion: Disagreement – Non-disclosure
of a going concern problem
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The company’s year-end is 31 December 20X1 and neither the financial statements
nor the directors’ report disclose that the Company’s financing arrangements expire
and amounts outstanding are payable on 19 July 20X2 and that the Company has been
unable to re-negotiate or obtain replacement financing. The directors continue to talk
to potential alternative providers of finance.
This situation indicates the existence of a material uncertainty which may cast
significant doubt on the company’s ability to continue as a going concern and
therefore it may be unable to realise its assets and discharge its liabilities in the normal
course of business.
The auditor concludes that there is a significant level of concern about going concern
and disagrees with the failure to disclose this information in the financial statements.
The auditor believes that the lack of disclosure although material is not pervasive to the
financial statements and accordingly issues a qualified opinion describing the
disagreement.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for qualified opinion on financial statements
The company’s financing arrangements expire and amounts outstanding are payable on 19
July 20X2. While the directors continue to investigate alternative sources of finance, the
company has so far been unable to re-negotiate or obtain replacement financing. This
situation indicates the existence of a material uncertainty which may cast significant doubt on
the company’s ability to continue as a going concern and therefore it may be unable to realise
its assets and discharge its liabilities in the normal course of business. The financial
statements (and notes thereto) do not disclose this fact.
Qualified opinion on financial statements
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements:
give a true and fair view of the state of the company’s affairs as at 31 December 20X1
and of its profit [loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
THE AUDITING
PRACTICES BOARD
119
Bulletin 2010/2 (Revised) February 2011
Opinion on other matter prescribed by the Companies Act 2006
...
120
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 39 – Qualified opinion: Disagreement – Non-disclosure
of information required to be disclosed
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The company has not disclosed that one of its bankers has a fixed and floating charge
over all of the company’s assets as security for a long term loan. Such disclosure is
required by paragraph 61 of Part 2 to Schedule 1 of The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for qualified opinion on financial statements
The notes to the financial statements do not disclose that one of the company’s bankers has a
fixed and floating charge over all of the company’s assets as security for a bank loan of £5
million which is included in creditors: amounts falling due after more than one year. Such
disclosure is required by the Companies Act 2006
Qualified opinion on financial statements
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion
paragraph, the financial statements:
give a true and fair view of the state of the company’s affairs as at 31 December 20X1
and of its profit [loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
...
THE AUDITING
PRACTICES BOARD
121
Bulletin 2010/2 (Revised) February 2011
Example 40 – Qualified opinion: Limitation on scope – Auditor
not appointed at the time of the stocktaking
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The evidence available to the auditor was limited because they did not observe the
counting of the physical stock as at 31 December 20X1, since that date was prior to
the time the auditor was initially engaged as auditor for the company. Owing to the
nature of the company’s records, the auditor was unable to satisfy itself as to stock
quantities using other audit procedures.
The limitation in audit scope causes the auditor to issue a qualified opinion ‘‘except
for’’ any adjustments that might have been found to be necessary had it been able to
obtain sufficient evidence concerning stock.
The limitation of scope was determined by the auditor to be material but not pervasive
to the financial statements.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for qualified opinion on financial statements
With respect to stock having a carrying amount of £X the audit evidence available to us was
limited because we did not observe the counting of the physical stock as at 31 December
20X1, since that date was prior to our appointment as auditor of the company. Owing to the
nature of the company’s records, we were unable to obtain sufficient appropriate audit
evidence regarding the stock quantities by using other audit procedures.
Qualified opinion on financial statements
In our opinion, except for the possible effects of the matters described in the Basis for
Qualified Opinion paragraph, the financial statements:
give a true and fair view of the state of the company’s affairs as at 31 December 20X1
and of its profit [loss]for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
122
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Matters on which we are required to report by exception
In respect solely of the limitation on our work relating to stock, described above:
we have not obtained all the information and explanations that we considered
necessary for the purpose of our audit; and
we were unable to determine whether adequate accounting records had been kept.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
returns adequate for our audit have not been received from branches not visited by
us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
123
Bulletin 2010/2 (Revised) February 2011
Example 41 – Qualified opinion: Limitation of scope – Directors
did not prepare cash flow forecasts sufficiently far into the future
to be able to assess the going concern status of the company
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The evidence available to the auditor was limited because the company had prepared
cash flow forecasts and other information needed for the assessment of the
appropriateness of the going concern basis of preparation of the financial statements
only for a period of nine months from the date of approval of the financial statements
and there were no sufficient alternative procedures that the auditor could perform.
Although this fact is disclosed in the financial statements had the information been
available the auditor might have formed a different opinion. The auditor considers that
the directors have not taken adequate steps to satisfy themselves that it is appropriate
for them to adopt the going concern basis.
The auditor does not consider that the future period to which the directors have paid
particular attention in assessing going concern is reasonable in the company’s
circumstances. The auditor considers that the particular circumstances of the
company and the nature of the company’s business require that such information be
prepared, and reviewed by the directors and auditor for a period of at least twelve
months from the date of approval of the financial statements.
The auditor considers that the possible effect of the limitation of scope is material but
not pervasive.
The auditor issues a qualified opinion referring to the adjustments that might have
been found to be necessary had they obtained sufficient evidence concerning the
appropriateness of the going concern basis of preparation of the financial statements.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for qualified opinion on financial statements
The audit evidence available to us was limited because the directors of the company have
prepared cash flow forecasts and other information needed for the assessment of the
appropriateness of the going concern basis of preparation of the financial statements for a
period of only nine months from the date of approval of these financial statements. We
consider that the directors have not taken adequate steps to satisfy themselves that it is
appropriate for them to adopt the going concern basis because the circumstances of the
company and the nature of the business require that such information be prepared, and
reviewed by the directors and ourselves, for a period of at least twelve months from the date of
approval of the financial statements. Had this information been available to us we might have
formed a different opinion on the financial statements.
124
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Qualified opinion on financial statements
In our opinion, except for the possible effects of the matter described in the Basis for Qualified
Opinion paragraph, the financial statements:
give a true and fair view of the state of the company’s affairs as at ... and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
In respect solely of the limitation on our work relating to the assessment of the
appropriateness of the going concern basis of preparation of the financial statements,
described above, we have not obtained all the information and explanations that we
considered necessary for the purpose of our audit.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
THE AUDITING
PRACTICES BOARD
125
Bulletin 2010/2 (Revised) February 2011
APPENDIX 14
ADVERSE OPINION ON FINANCIAL STATEMENTS
42. Adverse opinion: No provision made for losses expected to arise on long term
contracts
43. Adverse opinion: Significant level of concern about going concern status that is not
disclosed in the financial statements
126
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 42 – Adverse opinion: No provision made for losses
expected to arise on long-term contracts
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
No provision has been made for losses expected to arise on certain long-term
contracts currently in progress, as the directors consider that such losses should be
off-set against amounts recoverable on other long-term contracts.
In the auditor’s opinion, provision should be made for foreseeable losses on individual
contracts as required by SSAP 9.
In the auditor’s view, the financial effect of this disagreement in accounting treatment
is both material and pervasive to the financial statements such that an ‘‘except for’’
qualification of the auditor’s opinion would not be sufficient to disclose the misleading
nature of the financial statements.
The auditor issues an adverse opinion due to the failure to provide for the losses and
quantifies the impact on the profit for the year, the contract work in progress and the
deferred tax liability at the year end.
The auditor considers that notwithstanding its adverse opinion on the financial
statements that adequate accounting records had been kept by the company and that
it had received all the information and explanations it required for the audit.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for adverse opinion on financial statements
As more fully explained in note [x] to the financial statements no provision has been made for
losses expected to arise on certain long-term contracts currently in progress, as the directors
consider that such losses should be off-set against amounts recoverable on other long-term
contracts. In our opinion, provision should be made for foreseeable losses on individual
contracts as required by Statement of Standard Accounting Practice 9: Stocks and long-term
contracts. If losses had been so recognised the effect would have been to reduce the carrying
amount of contract work in progress by £X, the deferred tax liability by £Y and the profit for the
year and retained earnings at 31 December 20X1 by £Z.
Adverse opinion on financial statements
In our opinion, because of the significance of the matter described in the Basis for Adverse
Opinion paragraph, the financial statements:
do not give a true and fair view of the state of the company’s affairs as at 31
December 20X1 and of its profit [loss] for the year then ended; and
THE AUDITING
PRACTICES BOARD
127
Bulletin 2010/2 (Revised) February 2011
have not been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice.
In all other respects, in our opinion the financial statements have been prepared in
accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our adverse opinion on the financial statements, in our opinion the
information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception96
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
96 The auditor needs to consider whether the circumstances leading to the adverse opinion on the
financial statements affect the matters on which the auditor is required to report by exception.
128
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 43 – Adverse opinion: Significant level of concern about
going concern status that is not disclosed in the financial
statements
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
Although there is a significant level of concern about the company’s ability to continue
as a going concern the financial statements and notes do not disclose this fact and the
directors have prepared the financial statements on the going concern basis.
The auditor considers that the financial statements should disclose that there is a
material uncertainty, which may cast significant doubt on the company’s ability to
continue as a going concern.
As the effect of this disagreement is both material and pervasive to the amounts
included within the financial statements the auditor concludes that a qualification of
the opinion is not adequate to disclose the misleading and incomplete nature of the
financial statements.
The auditor issues an adverse audit opinion stating that, because the material
uncertainty regarding going concern is not disclosed, the financial statements do not
give a true and fair view.
EXTRACT FROM AUDITOR’S REPORT
...
Basis for adverse opinion on financial statements
As explained in note [x] to the financial statements the company’s financing arrangements
expired and the amount outstanding was payable on [a past date]. The company has been
unable to re-negotiate or obtain replacement financing and the directors of the company are
considering whether the company should enter insolvency proceedings [but are continuing to
investigate alternative sources of finance]. These events indicate a material uncertainty which
may cast significant doubt on the company’s ability to continue as a going concern and,
therefore, it may be unable to realise its assets and discharge its liabilities in the normal course
of business. The financial statements (and notes thereto) do not disclose this fact and have
been prepared on the going concern basis.
Adverse opinion on financial statements
In our opinion, because of the significance of the matter described in the Basis for Adverse
Opinion paragraph:
the financial statements do not give a true and fair view of the state of the company’s
affairs as at ... and of its profit [loss] for the year then ended; and
have not been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice.
THE AUDITING
PRACTICES BOARD
129
Bulletin 2010/2 (Revised) February 2011
In all other respects, in our opinion the financial statements have been prepared in
accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our adverse opinion on the financial statements, in our opinion the
information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
130
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
APPENDIX 15
DISCLAIMER OF OPINION ON FINANCIAL STATEMENTS
44. Disclaimer of opinion: Auditor unable to attend stocktaking and confirm trade debtors
45. Disclaimer of opinion: Multiple uncertainties
THE AUDITING
PRACTICES BOARD
131
Bulletin 2010/2 (Revised) February 2011
Example 44 – Disclaimer of opinion: Auditor unable to attend
stocktaking and confirm trade debtors
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
The evidence available to the auditor was limited because the auditor was not able to
observe all physical stock and confirm trade debtors due to limitations placed on the
scope of the auditor’s work by the directors of the company.
The limitation in scope is considered by the auditor to be both material and pervasive
so that it is unable to form an opinion on the financial statements.
As a result, the auditor issues a modified opinion disclaiming an opinion on the
financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED
We were engaged to audit the financial statements of (name of entity) for the year ended ...
which comprise [specify the titles of the primary statements such as the Profit and Loss
Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised
Gains and Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related
notes97. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors. Because of the matter described in the Basis
for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion.
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
97 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
132
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Basis for disclaimer of opinion on financial statements
The audit evidence available to us was limited because we were unable to observe the
counting of physical stock having a carrying amount of £X and send confirmation letters to
trade debtors having a carrying amount of £Y due to limitations placed on the scope of our
work by the directors of the company. As a result of this we have been unable to obtain
sufficient appropriate audit evidence concerning both stock and trade debtors.
Disclaimer of opinion on financial statements
Because of the significance of the matter described in the Basis for Disclaimer of Opinion on
Financial Statements paragraph, we have not been able to obtain sufficient appropriate audit
evidence to provide a basis for an audit opinion. Accordingly we do not express an opinion on
the financial statements.
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our disclaimer of an opinion on the financial statements, in our opinion the
information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Arising from the limitation of our work referred to above:
we have not obtained all the information and explanations that we considered
necessary for the purpose of our audit; and
we were unable to determine whether adequate accounting records have been kept.
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
THE AUDITING
PRACTICES BOARD
133
Bulletin 2010/2 (Revised) February 2011
returns adequate for our audit have not been received from branches not visited by
us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
134
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
Example 45 – Disclaimer of opinion: Multiple uncertainties
As discussed in ISA (UK and Ireland) 705 paragraph 10 the auditor disclaims an
opinion when, in extremely rare circumstances involving multiple uncertainties, the
auditor concludes that, notwithstanding having obtained sufficient appropriate audit
evidence regarding each of the individual uncertainties, it is not possible to form an
opinion on the financial statements due to the potential interaction of the uncertainties
and their possible cumulative effect on the financial statements.
This example does not include a description of the multiple uncertainties that might
lead to a disclaimer of opinion because circumstances will vary and auditors will have
to use their judgment when deciding whether it is an extreme case involving multiple
uncertainties that are significant to the financial statements. Often, if the matters
constituting the multiple uncertainties were considered individually the auditor may be
able to issue an unqualified auditor’s opinion with an emphasis of matter paragraph
describing the situation giving rise to the emphasis of matter and its possible effects
on the financial statements, including (where practicable) quantification but the audit
opinion would be unmodified.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XYZ
LIMITED
We were engaged to audit the financial statements of (name of entity) for the year ended ...
which comprise [specify the titles of the primary statements such as the Profit and Loss
Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised
Gains and Losses, the Reconciliation of Movements in Shareholders’ Funds] and the related
notes98. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement [set out [on page ...]], the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s [(APB’s)] Ethical Standards for Auditors. Because of the matters described in the
Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion.
98 Auditor’s reports of entities that do not publish their financial statements on a website or publish them
using ‘PDF’ format may refer to the financial statements by reference to page numbers.
THE AUDITING
PRACTICES BOARD
135
Bulletin 2010/2 (Revised) February 2011
Scope of the audit of the financial statements
Either:
A description of the scope of an audit of financial statements is [provided on the APB’s
website at www.frc.org.uk/apb/scope/private.cfm ] / [set out [on page ...] of the Annual
Report].
Or:
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the [describe the annual report] to identify material
inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our
report.
Basis for disclaimer of opinion on financial statements
In seeking to form an opinion on the financial statements we considered the implications of the
significant uncertainties disclosed in the financial statements concerning the following
matters:
[Describe uncertainty 1]
[Describe uncertainty 2]
There is potential for the uncertainties to interact with one another such that we have been
unable to obtain sufficient appropriate audit evidence regarding the possible effect of the
uncertainties taken together.
Disclaimer of opinion on financial statements
Because of the significance of the possible impact of the uncertainties, described in the Basis
for Disclaimer of Opinion on Financial Statements paragraph, to the financial statements, we
have not been able to obtain sufficient appropriate audit evidence to provide a basis for an
audit opinion. Accordingly we do not express an opinion on the financial statements.
136
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Opinion on other matter prescribed by the Companies Act 2006
Notwithstanding our disclaimer of an opinion on the financial statements, in our opinion the
information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception99
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
Address
Date
99 The auditor needs to consider whether the circumstances leading to the disclaimer of opinion on the
financial statements affects the matters on which the auditor is required to report by exception.
THE AUDITING
PRACTICES BOARD
137
Bulletin 2010/2 (Revised) February 2011
APPENDIX 16
MODIFIED OPINION ON OTHER REQUIREMENTS OF THE
COMPANIES ACT 2006
46. Qualified opinion on the consistency of the financial statements with the directors’ report
138
THE AUDITING
PRACTICES BOARD
Bulletin 2010/2 (Revised) February 2011
Example 46 – Qualified opinion on the consistency of the
financial statements with the directors’ report
UK non-publicly traded company prepares UK GAAP financial statements (Example 2).
Auditor gives an unqualified opinion on the financial statements.
There is an unresolved inconsistency between the directors’ report and the financial
statements.
EXTRACT FROM AUDITOR’S REPORT
...
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s affairs as at ........ and of its profit
[loss] for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Qualified opinion on other matter prescribed by the Companies Act 2006
In our opinion, the information given in the seventh paragraph of the Business Review in the
Directors’ Report is not consistent with the financial statements. That paragraph states without
amplification that ‘‘the company’s trading for the period resulted in a 10% increase in profit
over the previous period’s profit’’. The profit and loss account, however, shows that the
company’s profit for the period includes a profit of £Z which did not arise from trading but
arose from the disposal of assets of a discontinued operation. Without this profit on the
disposal of assets the company would have reported a profit for the year of £Y, representing a
reduction in profit of 25% over the previous period’s profit on a like for like basis. Except for this
matter, in our opinion the information given in the Directors’ Report is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and
returns; or
THE AUDITING
PRACTICES BOARD
139
Bulletin 2010/2 (Revised) February 2011
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
[Signature]
John Smith (Senior statutory auditor)
for and on behalf of ABC LLP, Statutory Auditor
140
THE AUDITING
PRACTICES BOARD
Address
Date
Bulletin 2010/2 (Revised) February 2011
APPENDIX 17
DIRECTORS’ RESPONSIBILITIES STATEMENT
47. Directors’ Responsibilities Statement for a non-publicly traded company preparing
financial statements under UK GAAP
THE AUDITING
PRACTICES BOARD
141
Bulletin 2010/2 (Revised) February 2011
Example 47 – Directors’ Responsibilities Statement for a nonpublicly traded company preparing financial statements under
UK GAAP
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Directors’ Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year.
Under that law the directors have elected to prepare the financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the company and the profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;100
state whether applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the financial statements;101
prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the company will continue in business102.
The directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the company’s transactions and disclose with reasonable accuracy at any
time the financial position of the company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
100 Paragraph 13 of Part II of Schedule 2 to each of the ‘‘The Small Companies and Groups (Accounts and
Reports) Regulations 2008’’ (SI 2008 No. 409) and ‘‘The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008’’ (SI 2008 No. 410) require that the amount of any
item must be determined on a prudent basis.
101 This bullet does not apply to companies subject to the small companies regime and medium-sized
companies as defined by CA 2006.
102 Included where no separate statement on going concern is made by the directors.
142
THE AUDITING
PRACTICES BOARD
Bulletin 2010_2 Cover.qxd
27/01/2011
10:55
Page 2
THE AUDITING PRACTICES BOARD
The Auditing Practices Board (APB), which is part of the Financial Reporting Council
(FRC), prepares for use within the United Kingdom and the Republic of Ireland:
Standards and guidance for auditing;
Standards and guidance for reviews of interim financial information performed by the
auditor of the entity;
Standards and guidance for the work of reporting accountants in connection with
investment circulars; and
Standards and guidance for auditor’s and reporting accountant’s integrity,
objectivity and independence
with the objective of enhancing public confidence in the audit process and the quality
and relevance of audit services in the public interest.
The APB comprises individuals who are not eligible for appointment as company
auditors, as well as those who are so eligible. Those who are eligible for appointment as
company auditors may not exceed 40% of the APB by number.
Neither the APB nor the FRC accepts any liability to any party for any loss, damage or
costs howsoever arising, whether directly or indirectly, whether in contract, tort or
otherwise from any action or decision taken (or not taken) as a result of any person
relying on or otherwise using this Bulletin or arising from any omission from it.
The purpose of Bulletins issued by the APB is to provide auditors and, where relevant,
reporting accountants, with timely guidance on new and emerging issues. They are
persuasive rather than prescriptive. However, they are indicative of good practice, even
though they may be developed without the full process of consultation and exposure
used for auditing standards.
# The Financial Reporting Council Limited 2011
The APB is part of the Financial Reporting Council Limited a company limited by guarantee.
Registered in England number 2486368.Registered Office: 5th Floor, Aldwych House,
71-91 Aldwych, London WC2B 4HN