The framework for the statutory audit
The purpose of the statutory audit is to provide an independent opinion to the shareholders on the truth and fairness of the financial statements, whether they have been properly prepared in accordance with the Companies Act 2006, and to report by exception to the shareholders on the other requirements of company law such as where, in the auditors’ opinion, proper accounting records have not been kept. Directors are delegated responsibility for managing the affairs of the company and the audit is an important mechanism that helps owners of companies assess the stewardship of directors, and in so doing provides an important stimulus for directors to place a proper emphasis on their fiduciary responsibilities.
The purpose of financial statements
In seeking to articulate the purpose of the statutory audit, it is also important to consider the purpose of financial statements. Having considered the current UK legal framework, DKR would support a definition which is founded on stewardship and places greater emphasis on decision usefulness.
Auditing and assurance services
Our audits aim to provide quality, integrity, technical excellence, exceptional service and a broad understanding of both financial and non-financial factors. We approach your audit with an understanding of your business, the industry in which you operate, helping you deliver value confidently through transparency of your reporting to stakeholders.
Some of our clients seek audit or assurance for regulatory or constitutional reasons, others because they seek the comfort of external assurance over their accounts. At DKR, we can provide these services as your auditors, independent examiners or assurance providers through our registration with ICAEW ensuring a quality service without paying large firm prices.
Our services include:
• Statutory audits
• Voluntary audits
• UK subsidiaries
• Charities and not for profit
• Pension scheme audits
• SRA Accounts Rules
• Grant audits
We also provide
• Independent examinations for companies, charities and not for profit organisations
• Assurance reports on company accounts
As part of our audit process we aim to summarise our audit approach, highlight significant audit risks and areas of key judgements and provide you with the details of our audit team. It is a fundamental requirement that an auditor is, and is seen to be, independent of its clients and some key points noted the heading Independence below summarises our considerations and conclusions on our independence as auditors.
We value two-way communication with yourselves and we prepare an Audit Strategy Memorandum document, which is prepared following our initial planning discussions with management, as being the basis for a discussion through which we can also understand your expectations.
We are required by the Financial Reporting Council to confirm to you at least annually in writing that we comply with the Auditing Practices Board’s Ethical Standards. In addition, we communicate any matters or relationship which we believe may have a bearing on our independence or the objectivity of the audit team.
We have policies and procedures in place which are designed to ensure that we carry out our work with integrity, objectivity and independence.
We wish to confirm that in our professional judgement, as at the date of this document, we are independent and comply with UK regulatory and professional requirements.
Our audit approach is designed to provide you with an audit that complies with all professional requirements. Our audit of the financial statements will be conducted in accordance with International Standards of Auditing (UK and Ireland) and in accordance with the terms of our engagement. Our work is focused on those aspects of your business which we consider to have a higher risk of material misstatement such as those impacted by management judgement and estimation, application of new accounting standards, changes of accounting policy, changes to operations or areas which have been found to contain material errors in the past.
Our audit approach is a risk based approach primarily driven by the risks we consider resulting in a higher risk of material misstatement of the financial statements. Once we have completed our risk assessment, we develop our audit strategy and design audit procedures in response to this assessment. The work undertaken will include a combination of the following as appropriate:
• Testing of internal controls;
• Substantive analytical procedures; and
• Detailed substantive testing.
If we conclude that appropriately designed controls are in place, then we may plan to test and rely upon these controls. If we decide controls are not appropriately designed, or we decide it would be more efficient to do so, we may take a wholly substantive approach to our audit testing.
Our audit will be planned and performed so as to provide reasonable assurance that the financial statements are free of material misstatement and give a true and fair view.
Significant risks and key judgement areas
In addition, we meet with management as part of the audit planning process to discuss the risks that, in management’s opinion, the business faces and have considered the impact on our audit risk. The risks that we identify as significant for the purpose of our audit are the risks of material misstatement that in our judgement require special audit consideration.