Identify Five Deficiencies or Weaknesses in the Following Audit Report

question 47

Essay

Identify five deficiencies or weaknesses in the following audit report.
Audit Report
To the Management of XYZ Ltd
We have audited the financial report of XYZ Ltd for the year ended: 30 June 2004.
Directors' responsibility for the financial report
The directors of the entity are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Accounting Standards. These Accounting Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
Auditor's opinion
In our opinion, the financial report presents fairly in accordance with Australian Accounting Standards the financial position of XYZ Ltd and its performance.
Willie Tickett
A partner of the firm CA Partners
Sydney NSW.

---

Definitions:

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and entitles the shareholder to vote on corporate matters.

Stockholders' Equity

Signifies the stake of shareholders in a corporation, determined by subtracting total liabilities from total assets.

Preference Rights

A set of privileges or priorities given to shareholders, such as the right to purchase new shares before the general public.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with fixed dividends.