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Accounting 101 > Assurance ACA > Flashcards

Assurance ACA Flashcards

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1
Q

What are the four things companies are required to post regarding sustainability?

A

Governance,
Strategy,
Risk management,
Metrics.

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2
Q

Where is the expectation gap closed?

A

The letter of engagement.

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3
Q

How is an audit obtained?

A

Through selection and engagement.

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4
Q

What does TRIMROT stand for and what is it for?

A

Technical competence
Resources
Independence
Money laundering
References
Outgoing auditors
Terms of engagement.

It helps auditors decide on whether or not to accept an engagement.

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5
Q

What does SARD stand for and what is it used for?

A
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6
Q

What does RAP stand for, when is it used and what % are associated with each letter?

A

Revenue, assets and profit.

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7
Q

What are the assertions for account balances?

A

Existence.
Right and obligations.
Completeness.
Accuracy, valuation and allocation.
Classification.
Presentation.

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8
Q

What are the assertions for transactions?

A

Occurrence.
Completeness.
Accuracy.
Cut-off.
Classification.
Presentation.

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9
Q

What are the key sources of information to gather audit evidence for liabilities?

A

payables ledger account and supplier statements.
Confirmation from suppliers.
Payments made post year ended to suppliers.

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10
Q

What do auditors do when evaluating representations?

A

Seem corroborative audit evidence.
Evaluate reasonableness and consistency with information.
Assess individuals making up the presentation.

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11
Q

What does the auditor need to consider when providing an opinion?

A

Whether sufficient appropriate evidence has been obtained.
Whether uncorrected misstatements are material.

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12
Q

What are the main ethical threats?

A

Self-interest.
Self-review.
Advocacy.
Familiarity.
Intimidation.
Management.

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13
Q

How often does an engagement partner need to be rotated and how long should they not return for?

A

5 years.

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14
Q

How often does an engagement quality reviewer need to be rotated and how long should they not return for?

A

7 years for rotation and 5 years until return.

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15
Q

When should a key partner be rotated and how long should they not return for following this?

A

7 years for rotation and 2 years until they can return.

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16
Q

What happens when an engagement quality reviewer becomes the engagement partner?

A

Their combined service should not exceed seven years.

17
Q

What are the factors to consider when resolving ethical conflicts?

A

The relevant facts.
The relevant parties.
The ethical issues involved.
The fundamental principles related to the matter in question.
Established internal procedures.
Alternative courses of actions.

18
Q

What are the main types of sampling techniques?

A

Simple random.
Systematic.
Stratified.
Cluster.
Convenience.
Quota.
Purposive.

19
Q

What are 5 general principles relating to the quality of audit evidence ?

A

External.
Auditor.
Entities control systems.
Written over oral.
Originals.

20
Q

What are procedures for gathering evidence?

A

Inspection of tangible assets.
Inspection of documentation.
Observation.
Inquiry.
External confirmation.
Recalculation.
Re performance.
Analytical procedures.

21
Q

When do we test for an overstatement?

A

If the financial item in question is an asset.

22
Q

When do we test for understatement?

A

When the financial item is a liability.

23
Q

What are the three mandatory written representations?

A

That management has:
- Fulfilled it’s responsibility for the preparation of the financial statements in accordance with the applicable financial reporting network.
- provided the auditor with all the relevant information and access as agreed in terms of the audit engagement.
- recorded and reflected all transactions in financial statements.

24
Q

What are the major risk of tangible non-current assets being misstated?

A
  • The company not actually owning the assets.
  • the assets not actually existing or having been sold by the company.
  • omission of assets owned by the company.
  • assets being incorrectly presented in the financial statements.
  • assets being overvalued, either by inflating cost or valuation, or by undercharging depreciation.
25
Q

Why do assurance providers record their work?

A
  • to assist the audit team to plan and perform the audit.
  • assist relevant managers or the team to direct and supervise work.
  • enable the audit team to be accountable for its work.
  • retain a record of matters or continuing significance to future audits.
  • enable an experienced auditor to carry out quality reviews.
  • enable and experienced auditor to conduct external inspections in accordance with the applicable legal, regulatory or other requirements.
26
Q

What does the audit strategy do?

A

Sets out the scope and direction of the audit and guides the development of a plan.

27
Q

What’s an audit plan?

A

A more developed strategy that sets out the nature, timing and extent of audit procedures.

28
Q

What is performance materiality?

A

The amount set by the auditor at less and materiality to reduce to an appropriate low level, the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.

29
Q

When must firms undertake client due diligence and how?

A

Individuals will be asked for documents containing the full name and address of the client, plus identification with a photograph.

Companies will obtain information from the registrar of companies.

30
Q

How long must client identification documents be kept for?

A

A minimum of 5 years and until five years have elapsed since the relationship ended?

31
Q

What is the key content within an engagement letter?

A

Auditors responsibilities.
Directors responsibilities.
Directors representations.
Scope/objective of the assurance engagement.
Terms agreed.
Other services.
Fraud.
Irregularities.
Report to management.
Management of the audit.
Specialists.
Fees.

32
Q

What’s are matters to consider when obtaining an understanding of the entity?

A

Industry, regulators and other external factors.
Nature or the entity.
Objectives and strategies and related business risks.
Measurement and review of the entities financial performance.
Selection and application of accounting policies.
Internal control.

33
Q

What is verification?

A

Comparing an actual figure to a policy.

34
Q

What are the audit exemptions that a company just have at least 2/3 of to be exempt from audit?

A

Less than:
50 employees.
£10.2 million revenue.
£5.1 million gross assets.

Accounting 101 (9 decks)

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