We audited a company for the first time for the 2021 financial year end. Because we were appointed after the year end we could not attend the stock take and had to qualify the 2021 audit opinion with respect to stock and cost of sales, as we could not get comfort over the closing stock figure through alternative procedures. Are there any implications for the 2022 financial year end audit opinion?

There can be implications on the 2022 audit opinion because of the potential impact on opening balances and the corresponding figures in the 2022 financial statements. The uncertainty over the 2021 closing stock figure means it is possible that the 2022 audit opinion needs to be qualified with respect to the cost of sales figure if its calculation incorporates the unsubstantiated opening stock balance at the start of 2022.

Additionally, ISA 710 ‘Comparative Information – Corresponding Figures and Comparative Financial Statements’ paragraph 11 confirms that an auditor may have to modify their audit opinion if a matter that led to a qualification in the prior year is unresolved, and this is impacting on the comparability of the current and corresponding figures.

This issue will need to be revisited for the 2023 period end audit, as the 2022 cost of sales figure will be a comparative in the 2023 financial statements.

The Audit and Assurance Faculty guide on limitation of scope (link below) goes into further details and includes example wording for modifying the audit report.

Key links:

ISA (UK) 710

Limitation on the scope of the audit | ICAEW

One of our responsible individuals (RIs) has retired. Most things were completed but we have one audit that we were not able to complete in time. Is one of the other RIs in the firm able to take over the audit and sign the audit report?

A different RI can take over the audit, but they are taking over full responsibility for that audit. Practically, the new RI will need to satisfy themselves that sufficient appropriate audit evidence has been obtained, and cannot simply rely on the reviews already performed by the retiring RI.

ISA (UK) 700 paragraph A64-10 says that where a firm changes the senior statutory auditor (ie, the engagement partner or RI) during the engagement, that the new senior statutory auditor reviews the audit work performed to the date of the change. This means that the new RI will need to review the full file, taking account of any reviews performed by the previous RI.

The review procedures undertaken need to be sufficient to satisfy the new senior statutory auditor that the audit work performed was planned and performed in accordance with professional standards, the law and the ISAs.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.