AA Flashcards
Inherent risks with charity audits
Regulation compliance,
Lots of cash,
No COS linked to income so easy for ML/Fraud,
Future income uncertainty.
Charity control environment risks
Not many staff, no seg duties
Independence of trustees
Incompetent volunteers
Budgetary control
Example charity internal controls
Sealed cash collection tins Regular collection of cash tins Dual cash counting Cash and post locked away Regular checks on gift aid claims and grants Good records kept Budget controls
Audit vs other assurance, level of assurance and type of opinion
Audit-Reasonable assurance with a positive opinion.
Other-Limited assurance with a negative opinion.
Audit thresholds
Employees 50
Revenue 5.1m
Gross assets 10.2m
Audit procedures
Analytical Enquiry Inspection Observation recalcUlation
Plus external confirmations and rep letter.
Who’s responsibility is preventing and detecting fraud?
Management!
The auditor only provides reasonable assurance that the fin stats are free from material misstatement and considers susceptibility to fraud.
Professional scepticism definition
An attitude of a questioning mindset, being alert to possible misstatement due to fraud or error, and a critical assessment of audit evidence.
3 big reviews into problems with audit
Some big incorrect GC collapses,
Big 4 monopoly (CMA),
Low public trust.
FRC Ethical Standards
Part A:
Integrity, Objectivity, Independence
Part B:
S1-Firm and team procedures/roles,
S2-Threats (Interests, Rships, employment 2yrs),
S3-Long assoc (listed 5yrs partner rotation and 20yrs need to find a new firm, non listed 10yr partner rotation),
S4-Fees (no contingent or reliance, no low balls),
S5-Non audit services (REP email, listed don’t do anything else),
S6-Rules relaxed for small cos.
Informed management definition
Someone who has: Capability and Opportunity to make Decisions and Judgements.
Materiality guidance
Revenue 0.5-1%
Assets (gross) 1-2%
Profit before tax 5-10%
Understanding the entity and it’s environment 9Qs?
1 What do? 2 Industry? 3 Regs? 4 Relationships? 5 Takeover? 6 RPT? 7 Mgt good? 8 Controls? 9 Acc policies?
Assertions?
SFP - VERP2C Valuation Existence Rights and obs Completeness Classification
SPL - COCCAP Cut off Occurrence Completeness Classification Accuracy Presentation
Audit report components?
Title, Addressee, Opinion, Basis for opinion, Conclusions related to GC, \+Material uncertainty GC, \+Emphasis of matter, Our application of materiality, L- Our approach key audit matters, Other info, Opinion on matters required by co act, L- UK Corp gov code, Matters required to report by exception, Responsibilities of directors, Auditors responsibilities, Partner, Signature, Address, Date
