An Introduction to Auditing Flashcards
What are the 4 types of auditors?
External auditors
Internal auditors
Government auditors
Forensic Auditors
Who must all auditors be independnent of?
The department they are auditing.
What is the purpose of external audits?
To provide reasonable assurance that financial statements are faithful representations.
What Acts significantly affects auditing?
The Companies Act 71 of 2008
The Auditing Profession Act 26 of 2005
How often must public companies be audited?
Annually
What is considered when determining whether to audit non-public for-profit and non-profit companies?
Annual turnover
Size of workforce
Nature and extent of activities
What are 5 advantages of being audited?
Detection and rectification of errors
Audited statements are readily accepted by authorities
Increased statement credibility
Audited statements provide reasonable basis for company valuation
Provides platform for accounting system advice
What are 2 disadvantages of being audited?
Cost of auditing fees
Disruption to company operations
Who must auditors be registered with?
The Independent Regulatory Board for Auditors (IRBA)
What must auditors to do be registered?
Complete a prescribed training period and the ITC and APC exams
Who represents the interests of internal auditors globally?
The Institute of Internal Auditors (IIA)
What are assurance engagements?
Engagements that result in an auditor expressing an opinion on whether financial statements comply with IFRS.
What are the 7 components of assurance engagements?
A registered auditor
Users of financial statements
Parties responsible for preparing financial statements
A subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
What is reasonable assurance?
A high, but not absolute, level of assurance
What is fair presentation?
Presenting information in a manner that is:
relevant
reliable
comparable
understandable
What internal control?
The process designed by governance to provide reasonable assurance about:
the entity’s financial reporting reliability
operational efficiency
legal and regulatory compliance
How long may an auditor serve for?
No more than 5 consecutive years.
What right does an auditor have?
The right of access at all times to the accounting records and all books and documents of the company being audited.
What is a reportable irregularity?
Any unlawful act or omission that may cause material financial loss to the entity or stakeholder, any fraudulent act and any act that represents a material breach of fiduciary duty.
What is fiduciary duty?
The legal duty to act solely in another party’s interests.
What are the International Standards on Auditing?
The ISA are a set of professional standards created to provide guidance for the performance of external audits
Who sets ISAs?
The International Auditing and Assurance Standards Board (IAASB), under the International Federation of Accountants (IFAC).
What are the 3 categories of directors assertions?
transactions
account balances
presentation and disclosure
What are the 5 assertions about transactions?
Occurence
Completeness
Accuracy
Cut-off
Classification
What are the 4 assertions about account balances?
Existence
Rights and obligations
Completeness
Valuation and allocation
What are the 4 assertions about presentation and disclosure?
Occurrence and rights and obligations
Completeness
Classification and understandability
Accuracy and valuation
What are the 5 Fundamental Principles of IRBA’s code of professional conduct?
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
What is the conceptual framework approach?
An approach used to ensure compliance to the 5 Fundamental Principles
What are the 5 categories of threats?
Self-interest threats
Self-review threats
Advocacy threats
Familiarity threats
Intimidation threats
What are the 2 categories of safeguards?
Safeguards created by the profession, legislation or regulation
Safeguards in the work environment
