1

Question 1

Opposite of going concern basis

Answer 1

Break up basis

• assets written down to recoverable amount
• liabilities reassessed and changed to short-term

Question 2

Lowballing A/NAS

Answer 2

FRC ethical standards state that audit fees should not be influenced by NAS

Question 3

How long can key staff be kept on an audit for?

Answer 3

7 years, additional 2 if need to maintain audit quality (audit committee agreed)

Question 4

Mgt rep needed for forecast

Answer 4

1) intended use of forecast
2) Completeness of mgt assumptions
3) Mgt acceptance of responsibility for the forecast

Question 5

Forecasts: Limiting liability

Answer 5

1) restrict distribution
2) shouldn’t be shown to 3rd party w/o permission (frm accountant)
4) liability cap agreed
5) caveat warning about diff between predicted and actual

Question 6

Reasons for quality control

Answer 6

1) ISAs and standards require it
2) protects firms reputation
3) limits firms liability
4) ensures correct conclusions are drawn
5) maintain standard of audit work in line w/ reg expectation

Question 7

Cold Review

Answer 7

~ conducted after date of audit report on sample of files
~ ensures compliance: firms policies, ISAs, ethical standards, regs
~ identifies improvement areas

Question 8

When to revise engagement terms:

Answer 8

~misunderstood audit object + scope
~ revised terms
~sig change in ownership, mgt, nature/size of biz
~ change in legal requirements, reporting framework or requirements and engagement partner

Question 9

Supervision before engagement

Answer 9

~ assess skills and set out responsibilities
~ brief on nature of client, risks and potential issues
~ explain audit approach and timings
~ introduce team to client staff

Question 10

Supervision during engagement

Answer 10

~ review work to ensure correct audit evidence obtained that supports conclusions
~ check carrying out work as per audit plan
~ provide feedback on work reviewed
~ track progress against audit plan + update
~ answer questions
~ consider consulting upwards

Question 11

When can you disclose confidential info w/o permission

Answer 11

1) required by law e.g. ML, bribery
2) required to report to regulators e.g. on reg breaches
3) in public interest
4) professional duty to disclose e.g. response to ICAEW inquiry/defend self in legal proceedings

Question 12

Evidence collection procedures

Answer 12

A nalytical procedures
E nquire
I nspect
O bserve
U recalcUlate

Question 13

Audit threshold exemptions

Answer 13

1) <50 e’ees
2) revenue <10.2m
3) gross assets <5.1m
~ got to have 2/3