Key Differences: Shareholder, Management, and Audit Report Analysis

This report delves into the core distinctions between shareholder and management reports, highlighting the roles and responsibilities of each. It provides examples to illustrate these differences, such as the contrasting roles of shareholders as investors and management as company operators. The report explores audit-related topics, including examples of how auditors obtain reasonable assurance of financial statements and the components of audit reports, such as statements of auditor and management responsibility. Different types of audit opinions (qualified, adverse, disclaimer) are also explained, along with the circumstances that necessitate a modified opinion and potential auditor liabilities. Furthermore, the report analyzes management letters from companies like Facebook and Marks & Spencer, identifying key areas such as cyber security, business continuity, and financial statement presentation. Finally, the report presents extracts from management letters of listed companies in the UK/US stock exchange, focusing on key areas like fair presentation of statements and internal control over financial reporting.

What are the main difference between the report shareholder and management?
Provide examples.
The report shareholders refer to the individuals who have monetary stake in the company that
is they have invested money in the company by purchasing shares of the company. On the
other hand, the management referred in the report are the individuals who manage the
company on behalf of owners and shareholders. Owners are also the shareholders. In some
cases, owners also act as the management of the company. As for example, the chief
executive Steve Rowe, chief financial officer Helen Weir, food director Andy Adcock and
others represent the management of the company.
Provide 5 examples where the external auditor can obtain reasonable assurance of the
financial statement?
Given below are five examples:
- Use of sampling techniques
- Cost-benefit analysis
- Inherent limitation of financial statement
- Legal limitation
- Engagement letter limitation
Provide an example of statement of auditor’s responsibility from a report of a listed
company?
Given below statement from the M&S financial statement reflects the auditor’s
responsibility:
“The Group audit team performs the audit of the UK business without the involvement of a
component team. During the course of our audit, the Group audit team conducted 13
distribution centre and 18 retail store visits in the UK to understand the current trading
performance and, at certain locations, perform tests of internal controls and validate levels of
inventory held.”
Provide an example of statement of management responsibility from an audit report of
a listed company.
Given below statement from the M&S financial statement shows management responsibility:
“Implementing actions to recover and grow Clothing & Home: > Re-establish style authority:
focus on product, quality and fi t; > Restore price position: lowering prices and reduced
promotional stance; > Enhanced customer experience: sharper ranges, better availability and
investment in store staffing.”
Provide an example of statement of auditor’s opinion form an audit report of listed
company.
Given below is the opinion from the M&S’s financial report 2016:

“IN OUR OPINION: The financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at 2 April 2016 and of the Group’s profi t for
the 53 weeks then ended.”
“The Group fi nancial statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union.”
What are different types of audit opinions?
Different types of opinion can be Qualified Opinion, Adverse Opinion, and Disclaimer of
Opinion.
Why is a modified opinion required?
It is required when the auditor has some conclusion that the audit evidence obtained is not
free from any form of misstatement or the auditor is unable to obtain sufficient appropriate
audit evidence to conclude that the financial statement is not free from misstatement.
Provide three circumstances where the auditors can be made liable for the audits
carried out.
Auditors can be sued for negligence if they are breaching the duty of care for the third party
as the result suffers the loss. If the auditor issues inappropriate audit opinion, then they can be
made liable. Moreover, the presence of any misleading information in the audit report can
lead to holding the auditors liable.
In UK what is implied by an unmodified audit report.
Unmodified report means that contains the unmodified opinion.
What is an auditor saying in disclaimer of opinion?
The disclaimer of opinion says that the information provided cannot be opinionated
considering the limitations of the examinations conducted.
Review the management letter of both Facebook and Marks and Spencer. Provide the
top 5 key areas addressed in both companies.
Given below are the top 5 areas addressed in both the companies:
Cyber Security: Proactive approach has been taken towards the cyber security of the
company system and software.
Business Continuity: Several initiatives have been made for continuing the business such as
opening more retail stores in the case of M&S case, and actively working on Oculus in the
case of Facebook.
Governance and Compliance: Whistleblowing, anti-bribery, code of ethics, employees
awareness, and compliance monitoring has been given attention.

Financial Statement Presentation: The financial statement was informative and detailed
enough to satisfy the need of the concerned parties.
Health and Safety: Employee health and safety was focused with various safety
arrangements.
Research on listed company in the UK/US stock exchange and provide extract of the
management letter and highlight 3 key areas.
Given below is the snapshot from Ford Motor:
Given below is the snapshot from GE:
Given below is the snapshot from Wells Fargo:

Three key areas discussed are fair presentation of statements, internal control over financial
reporting, and financial statements free of misstatements.