Assurance and Audit Defined Flashcards
Explain the concept of assurance engagement and CAS
Assurance engagement - process of engaging an auditor or practitioner to provide an opinion on subject matter
Canadian Audit Standard (CAS) - assurance engagement “ engagement in which practitioner aims to obtain sufficient appropriate evidence to express conclusion
Explain what is a third party relationship
Third-party relationship - assurance engagement involves the practitioner, a responsible party and the intended user
Management and TCWG Subject matter - responsible for preparation
(Subject matter)
Intended user - Read
Practitioner/ auditor - perform procedures and conclude
Provide 4 examples of the intended user
- Lenders - Would like to know whether entities will be able to pay interest on their loans and repay principal
- Suppliers - Often offer credit to entities, which means they allow to make purchase from supplier and pay later date
- Investors - Rely on financial statement and other public report to determine whether they should pursue, hold or sell shares
- Employees - Read assurance report about their employers to determine entity is stable and profitable
Provide three applicable frameworks and explain what sufficient appropriate audit standards are
Applicable framework - IFRS & ASPE, COSO - Integrated by committee of sponsoring organization of treadway commission for internal control
Sufficient appropriate audit evidence (SAAE) - practitioner plans to perform the assurance engagement with an attitude of professional skepticism
- Obtain evidence that helps conclude that F/S are free from material misstatement
Five engagement requirements - Third-party relationship, subject matter, criteria, evidence, conclusion
What is the economic purpose of assurance engagement
- Agency risk - is the risk that managers and other responsible parties within the entity are not acting in the best interest of the user & shareholder
- Agency cost - cost of techniques used to reduce agency risk due to the potentially conflicting interest of users
Information risk - the risk that subject matter information presented to sure is not reliable and that decision made based on information may not yield result expected
Provide the three types of assurance level
- Reasonable assurance - High, but not absolute level Ex. CAS 210- 800, CSAE 2400
- Limited assurance - Obtain where engagement risk is reduce to an acceptable level - CSAW 3530, 3531
- No assurance - Engagement does not assure the intended user
Ex. Compilation engagement CSRS 4400, 4200
What is the difference between statutory and voluntary audit
Statutory audit - is required by law
Voluntary audits - are those not required by law
Risk-based approach - Requires by CAS and involves focusing on risks that are the most likely to cause a material misstatement in the audit
Stages - Acceptance and continuance of engagement, planning, execution, conclusion and reporting
Explain what management responsibilities are
- To prepare the F/S in accordance with FRF, internal controls that are necessary to enable F/S be prepared
- Provide auditors with all information relevant to audit and unrestricted access
Financial information presented:
- Relevance, Comparability, REliability, Understandability, Fairly presented
Explain what are the auditors responsibility
- Shall comply with ethical requirements
- Shall plan and perform an audit with professional skepticism
- Shall exercise professional judgment in planning and performing the audit
- Obtain reasonable assurance, by obtaining SAAE.
Explain the expectation gap and the types of audit opinions
The expectation gap is to understand what the public has about the auditor’s responsibilities and the actual defined responsibilities of the audit
Type of audit opinion
1. Qualified Opinion
2. Adverse Opinion
3. Disclaimer of opinion
