Annual Report 2016

16
Financial Audit | FAOA 2016
Points of focus for 2016 inspections
The FAOA published its points of focus
for the 2016 financial audit inspections
in the 2015 Activity Report
and examined these in detail in the
year under review 8 :
− Audit of income tax positions in
the income statement and balance
sheet (ISA 540/IAS 12)
− Audit of the cash flow statement
(ISA 500/IAS 7)
− Audit of earnings per share (ISA
500/IAS 33)
The FAOA analysed the internal
guidelines of the five largest audit
firms with respect to these inspection
focus areas and tested their application
on a sample basis.
estimates and assumptions regarding
forward-looking information. Most
especially as regards deferred tax assets
relating to carried forward losses,
an assessment has to be made as
to the probability that future taxable
profits will be available. This requires
the audit team to perform robust
audit procedures with professional
scepticism.
The FAOA assessed compliance with
the auditing and accounting standards
that apply to the audit of tax
positions in its file reviews. Out of a
total of 12 9 selected audits covering
various industries, the FAOA inspected
the audit of tax positions in eight.
All but two companies prepared their
financial statements under IFRS.
Audit of income tax positions in the
income statement and balance sheet
Subject to certain selective amendments,
the accounting standard
IAS 12, «Income taxes», has now been
in force in its current form since 1 January
1998.
The audit of taxes can present a challenge
to audit teams where there are
groups and complex tax structures,
as various auditing standards (e.g.
ISA 500, ISA 540, ISA 600) can come
into play alongside IAS 12. Robust
audit planning, in which the auditor
evaluates fundamental questions, always
serves as good preparation. This
includes, for example, evaluating the
complexity of group tax structures
and risks and the significance of deferred
taxes. The involvement of experts
by management and the need
to involve an expert also has to be
evaluated. Especially with groups and
differing tax regimes, the complexity
of the tax area increases the need for
expert tax knowledge. Where there
are material tax positions at components
proper group audit instructions
and communication with the group
auditor are essential. The audit of
deferred tax involves uncertainties,
8 For the results of the Regulatory Audit
2016 points of focus see section «Regulatory
Audit».
9 The inspection reports on two of the five
largest audit firms were yet to be finalised
at the reporting date and are therefore not
included in the evaluation.