Assurance Responsibilities

Question 1

What is an assurance engagement?

Answer 1

It is one in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria

Question 2

What is the audit threshold?

Answer 2

No more than 50 employee

Revenue not more than £10.2m

Gross assets do not exceed £5.1m

Question 3

Which companies regardless of their size still require an audit?

Answer 3

Banking and insurance companies

Where shareholders holding at least 10% of the shares request one

Where the companies articles of association require one

Non-dormant public companies, wherever they’re registered

Any company which is a member of a group - however? Subsidiaries are exempt if the parent company agreed to guarantee the liabilities of the subsidiary

Question 4

Re: an audit of the FS under the companies act 2006, what is the external auditor’s responsibility?

Answer 4

• to form an independent opinion on the truth and fairness of the accounts
• to confirm that the accounts have been properly prepared in accordance with the CA 2006
• state in the auditor’s report whether in their opinion the information given in the directors report and strategic report is consistent with the FS

Question 5

What must the auditor do to make sure they comply with the objectives of a statutory audit?

Answer 5

• planned properly
• collect sufficient appropriate audit evidence
• is evidence must be properly reviewed and valid conclusions drawn and reported

Question 6

What is an internal control?

Answer 6

A process designed and effected by TCWG, management and other personal to provide reasonable assurance about the achievement of the entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations

Question 7

After how many years should a partner on an unlisted company consider rotation?

Answer 7

10 years

Question 8

After how long must the audit partner on a listed company rotate?

Answer 8

5 years

Question 9

If an unlisted company becomes listed and the audit partner has already done 4 years, how many more can they do?

Answer 9

2 years more

Question 10

How do you calculate audit risk?

Answer 10

AR = IR x CR x DR

IR and CR are not under auditor’s control