assurance Flashcards
what is the objective of an assurance
must have one by law
allow the auditor to express an opinion whether the financial statements prepared in all material respects and applicable financial reporting framework
how to reduce the expectation gap
issue engagement letter
regularly review the form and content of assurance reports
what are the acceptance procedures once accepted client
ensure professionally qualified ensure existing resources adequate management integrity and obtain references communicate with present auditors --> high low risk
how to assess when a client is a high or low risk
published information
company lawyers or other advisors
management team
what are the after acceptance procedures
ensure outgoing auditors removal or resignation properly conducted with material legislation
ensure new auditor appointment is valid
to send and receive back engagement letter from company directors
perform money laundering checks and procedures
what are the objectives of audit planning
appropriate attention devoted to important areas
to identify potential problems and solve on a timely basis
ensures audit properly organized and managed
assign work to engagement team members
facilitate directions and supervision of engagement team members
facilitate review of work
what is audit risk made up of
inherent risk - the risk of misstatement due to the nature of the entity
control risk - the risk material misstatement will not be prevented detected or corrected
detection risk - procedures performed to detect audit risk will not detect a misstatement that exists. made up of sampling and nonsampling
what are caat examples
test of detail - used to test the integrity of clients system
audit software - used to access auditor to perform substantive audit procedures
what are factors that would effect audit samples
auditors assessment of the risk of material misstatement
auditors desired level of assurance
misstatements auditor expects to find
the use of analytical procedures to test some balance
what are some control activities
authorization performance review information processing segregation of duties physical controls
explain information processing
type of control activities
controls check accuracy, completeness, and authorization of processes
manual procedures
- application controls; controls check over input accuracy + completeness, input authorization, over processing of inputs
-general controls; development of and changes computer application presentation or detection unauthorized changes ensure continuing of operations
explain factors of internal audit
improve operational effectiveness and efficiency
report to the board, audit committee, head of the department
the varied scope of work; internal controls, specific projects, compliance, efficiency/effectiveness
no requirement for professional qualification but many are
employees or external to the company - but have some independence
explain the factors of an external audit
give an opinion on the truth and fairness of financial statements
report to shareholders
gather sufficient and appropriate evidence to support an opinion on financial statements
must be professionally qualified
must be independent cant be employees
functions of an internal audit
examine financial and operative information
review compliance with laws regulations and other external requirements
review of economic efficiency and effectiveness of operations
monitor effectiveness of internal controls
special investigations
why do we have audit documentation
provide evidence basis of conclusion about achieving the overall objective
evidence audit well performed and planned accordance applicable legal and regulatory
assists the audit team to plan and perform
assists the relevant team to direct and supervise work
holds individuals members accountable for work
record of matters of the continuing significance of future audits
enable the experienced auditor to carry out quality control reviews
what is audit documentation affected by
size and complexity of client nature audit procedures identified the risk of material misstatements significance of audit evidence nature and extent of exceptions need to document a conclusion methodology and tools used
examples of permanent audit files
engagement letter
control system notes
prior year signed financial statements
examples of current audit files
draft financial statements
final signed financial statements
list of uncorrected misstatements
review notes
sources of information for tangible non current assets
non current asset register purchase invoice third party valuations physical inspection assets themselves depreciation records or calculations
sources of information for inventory
company control over inventory count aufitor attendance at annual count purchase invoices third party confirmation post year end sales invoice post-year-end sales order post year end records work in progress records
sources of information for receivables
receivables ledger information
remittance advance slip
customer confirmation
settlements received customers offer year end
sources of information for bank and cash
confirmation from bank/bank letter
cash book
bank statements
bank reconcilliation done by the client
sources of information for payables and accruals
payables ledger records
confirmation from suppliers
supplier invoices
suuplier statement reconcilliation
controls over inventory count
organisation of count
counting of inventory
recording of the count
sources of information for long term liabilities
cash book
loan agreements
board minutes
what is ethics
a system of behaviour deemed acceptable in society or context under consideration
what is an ethical culture
a business culture where basic values and beliefs in a company encourage people within the company to behave in line with acceptable business ethics
what are business values
in a company underpin both policy and behaviour throughout the company from the top down
what are business ethics
ways in which a company behaves in the society which has certain expectations of how decent company should behave represent moral standards than expected
what are fundemental principles
integrity objectivity professional competence/due care confidentiality professional behaviour
what are the types of ethical threat
self interest self-review advocacy familiarity intimidation management
safeguard to threats in work environment
involve an additional professional accountant consult independent third party rotating senior personnel discuss ethical issues with changed declaration of independence
safeguard to threats by proffession legislation or regulation
educational training CPD corporate governance regulations professional or regulatory monitoring and disciplinary procedures external reviews
