Assurance Flashcards
What are the five IFAC fundamental ethical principles?
Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour
What are the five threats in the IFAC code of ethical standards?
Self interest Self review Familiarity Advocacy Intimidation
What is the sixth assurance threat in the FRC ethical standard (that is not in the IFAC code)
Management
What are the 3 parties involved in a statutory audit assignment?
Auditors (Practitioners)
Shareholders (Users)
Management/Directors (Responsible party)
What are the two main aspects of limited assurance?
Moderate/Low level of assurance
Negatively expressed conclusion
What are the two main aspects of Reasonable assurance?
High level of assurance
Conclusion/opinion expressed positively
Which threat is this:
The auditor is reluctant to take actions that are adverse to the interests of the audit firm
Self-interest
Which threat is this:
The auditor is predisposed to accept/reluctant to question the work done by others in the audit firm
Self review
Which threat is this:
The auditor is predisposed to accept work done by the audit client
Familiarity
Which threat is this:
The auditor takes managements side, adopting a position closing aligned with management
Advocacy
Which threat is this:
The auditors conduct is influence by fear
Intimidation
What is audit risk?
The risk of an auditor arriving at an inappropriate conclusion
What three risks make up audit risk?
Inherent risk
Control risk
Detection risk
What three levels of inherent risk are there?
Industry level
Entity level
Balance level
What is inherent risk?
The inherent chance of a material misstatement
What is control risk?
The chance a material misstatement not being caught by internal control systems
What is detection risk?
The risk an auditor will not detect a material misstatement
What are the components of internal control?
Control environment Risk assessment process Information system Control activities Monitoring
What are the five control activities?
Authorisation Performance reviews Information processing Physical controls Segregation of duties
What are performance reviews?
Comparing actual results to expected results
What is information processing?
Controls to check the completeness and accuracy of information
What are the two computer controls?
General controls
Application controls
How do you calculate gross/net profit margin?
((Gross or net profit)/revenue)x100
How do you calculate the current ratio? (For short term liquidity)
Current assets/current liabilities
