Assurance

Question 1

Levels of assurance

Answer 1

Limited
- Moderate, Negative conclusion
Reasonable
- High (not absolute), Positive opinion

Question 1

5 elements of assurance

Answer 1

3 Party relationship
Subject matter
Criteria
Evidence
Report

Question 2

Audit thresholds

Answer 2

No audit for small companies (2/3)
- No more than 50 employees
- Turnover does not exceed £10.2m
- Total assets not exceed £5.1m

Question 3

Letter of Engagement

Answer 3

Objectives of work
Responsibilities of auditor and management
Scope of work
Form of reports
Level of access to books and records
Reporting framework

Question 4

Pre-acceptance considerations

Answer 4

Professionally qualified to act
Communication with previous auditor
Money laundering regulations (ID, keep for 5 min and 5 after client ceases)
Adequate resources
Risk assessment

Question 5

Post-acceptance procedures

Answer 5

Ensure outgoing auditor
Ensure new auditor appointment is valid
Prepare engagement letter

Question 6

Audit strategy

Answer 6

Understand entity and environment
Materiality
Risk assessment
Nature, extent and timing of audit
Direction supervision and review

Question 7

Audit plan

Answer 7

Converts audit strategy into a detailed plan that staff can follow

Question 8

Materiality by size

Answer 8

5-10% of PBT
0.5-1% of revenue
1-2% of total assets

Question 9

Revenue system

Answer 9

Order taken - check inv levels
Goods dispatched - Match GDN to invoice and obtain customer sig
Invoice raised -
Sales recorded - Match receipt to invoice
Cash collected - Receipts and cheques

Question 10

Content of management representation letter

Answer 10

General matters
- Confirmation of management fulfilling responsibilities.
- Confirmation that all relevant info has been provided.
- Confirmation that tall transactions have been represented in FS