Auditing and Assurance Standards and Guidance

Auditing Standards (UK)

FRC ISAs (UK) applicable for periods beginning on or after 17 June 2016 in the UK

ISA (UK) 210 (Revised June 2016) Agreeing the Terms of Audit Engagements

Application and Other Explanatory Material

Preconditions for an Audit

Agreement of the Responsibilities of Management (Ref: Para. 6(b))

Preparation of the Financial Statements (Ref: Para. 6(b)(i))

Most financial reporting frameworks include requirements relating to the presentation of the financial statements; for such frameworks, preparation of the financial statements in accordance with the financial reporting framework includes presentation. In the case of a fair presentation framework the importance of the reporting objective of fair presentation is such that the premise agreed with management includes specific reference to fair presentation, or to the responsibility to ensure that the financial statements will "give a true and fair view" in accordance with the financial reporting framework.

In the UK, accounting standards relating to the small companies regime are prohibited by EU law from specifying disclosure requirements in addition to the limited number of disclosures set out in the Accounting Directive, even though the financial statements of those small entities are required by law to give a true and fair view.^13a Further, it is not sufficient for the auditor to conclude that the financial statements give a true and fair view solely on the basis that the financial statements were prepared in accordance with accounting standards and any other applicable legal requirements.^13b The auditor therefore considers whether additional disclosures will be necessary in the financial statements when compliance with an accounting standard is insufficient to give a true and fair view.

Where the auditor determines that the financial statements do not provide the additional disclosures necessary to achieve fair presentation, ISA (UK) 450 (Revised June 2016)^13c and ISA (UK) 700 (Revised June 2016)^13d establish requirements and provide guidance on the evaluation and disposition of misstatements and the effect on the auditor's opinion in the auditor's report.

^13a In the United Kingdom, the Companies Act 2006 establishes this requirement.

^13b ISA (UK) 700 (Revised June 2016), paragraph 16.

^13c ISA (UK) 450 (Revised June 2016), Evaluation of Misstatements Identified During the Audit.

^13d ISA (UK) 700 (Revised June 2016).

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