4.1 - The Statutory Audit

Question 1

Why is an audit historically the most important type of assurance service in the UK?

Answer 1

It is a legal (statutory) requirement that all companies over a certain size have an audit (small companies exempt)

Question 2

Define audit of financial statements

Answer 2

The objective is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework

Question 3

What is the key outcome of the statutory audit?

Answer 3

The audit opinion

Question 4

In the UK, how will the auditor express their opinion?

Answer 4

By reference to the ‘true and fair view’ which is an expression of reasonable assurance

Question 5

Define true

Answer 5

Information is factual and conforms with reality, not false. In addition, the information conforms with required standards and law. The accounts have been correctly extracted from the books and records

Question 6

Define fair

Answer 6

Information is free from discrimination and bias in compliance with expected standards and rules. The accounts should reflect the commercial substance of the company’s underlying transactions