Audit Flashcards
Set of summarised financial statements which are prepared and presented regularly for organisation’s management.
Objective is to provide regular, up-to-date financial information to management to allow them to make short-term decisions about the day to day running of the organisation.
Management Accounts
capital asset
significant pieces of property such as homes, cars, investment properties, stocks, bonds, and even collectibles or art.
Management accounts
Set of summarised financial statements which are prepared and presented regularly for organisation’s management.
Objective is to provide regular, up-to-date financial information to management to allow them to make short-term decisions about the day to day running of the organisation.
significant pieces of property such as homes, cars, investment properties, stocks, bonds, and even collectibles or art.
capital asset
a long-term, capital-intensive investment project with a purpose to build upon, add to, or improve a capital asset
capital project
capital project
a long-term, capital-intensive investment project with a purpose to build upon, add to, or improve a capital asset
Capital project management
the process for managing large scale capital projects.
large scale and large cost relative to other investments that
involve less planning and resources.
the process for managing large scale capital projects.
large scale and large cost relative to other investments that
involve less planning and resources.
capital project management
established to assist an organisation with meeting its responsibilities regarding:
- Producing annual accounts
- Financial reporting
- Maintaining a system of internal controls (to protect the organisation against fraud and
incorrect financial reporting)
IT ALSO:
- Monitors the effectiveness of internal and external audit
- Assists the organisation in establishing and monitoring its risk management arrangements
IT SHOULD:
- consist of non-executive members who are independent of the
organisation’s management.
Audit & Risk Committee
Audit & Risk Committee
established to assist an organisation with meeting its responsibilities regarding:
- Producing annual accounts
- Financial reporting
- Maintaining a system of internal controls (to protect the organisation against fraud and
incorrect financial reporting)
IT ALSO:
- Monitors the effectiveness of internal and external audit
- Assists the organisation in establishing and monitoring its risk management arrangements
IT SHOULD:
- consist of non-executive members who are independent of the
organisation’s management.
organisation often maintains this as part of its risk management arrangements. Document which lists all risks which may impact aspects of the organisation, such as its service delivery, its financial health or its reputation.
Risks are usually scored based on likelihood and impact, and it documents procedures put in place to address the risk, as well as the staff
member responsible for updating each risk.
Usually presented to
an organisation’s Audit & Risk Committee to allow Committee members to monitor the risk management arrangements.
Risk Register
Risk Register
organisation often maintains this as part of its risk management arrangements. Document which lists all risks which may impact aspects of the organisation, such as its service delivery, its financial health or its reputation.
Risks are usually scored based on likelihood and impact, and it documents procedures put in place to address the risk, as well as the staff
member responsible for updating each risk.
Usually presented to
an organisation’s Audit & Risk Committee to allow Committee members to monitor the risk management arrangements.
Stage 1 Audit Process
Planning and Risk Assessment
Stage 2 Audit Process
Assessment and testing of internal controls
Stage 3 Audit Process
pre-accounts substantive testing
Stage 4 Audit Process
Final accounts audit work
Stage 5 Audit Process
Audit reporting
What is aim of planning and risk assessment stage?
to establish the risks areas for the audit, things
which could cause the auditor to give an incorrect audit opinion. Audit risks are likely to focus on areas of the accounts which could contain errors.
how does planning work help to identify risks? (5)
- Gathering information on the nature and activities of the organisation, including its objectives and strategies
- Directing attention to important areas of the accounts
- Discussing risk areas and issues with client staff
- Setting out the scope, timing and direction of the audit
- Reviewing the organisation’s financial performance
What does the system of internal controls ensure?
the accuracy and reliability of the information in the accounting records, and ultimately the annual accounts.
What does Assessment and Testing of Internal Controls stage involve? (6)
- Understanding and documenting processes, systems and controls
- Observing the controls to ensure they operate as expected
- Evaluating the design of the controls – deciding whether they are effective
- Testing the controls – getting evidence that they work
- Assessing whether the effectiveness (or lack of) of the controls gives risk to an audit risk
- Considering required audit work in response to audit risks identified
What is the aim of the testing of internal controls stage?
to be able to place reliance on the effectiveness of the controls, in order to
gain assurance over the accuracy and reliability of the information in the annual accounts.
What does substantive testing involve?
selecting a sample of transactions and then confirming that those transactions are the correct value have been recorded properly within the accounting records. This is done by agreeing the transaction to supporting evidence provided by either the client or a third party (usually an invoice or a contract for income and expenditure).
What happens during final accounts stage?
auditors will also confirm that the annual report and financial statements have been prepared in accordance with laws and regulations.
What is the main output from the audit work?
The annual audit report
What does the annual audit report contain?
report any errors or issues which have been found throughout the audit process and make recommendations for improvement.
We also provide our opinion on the annual report and accounts.
What happens if no significant errors or areas of non-compliance with regulations are found?
we would issue an unqualified opinion, meaning we believe the accounts give a true and fair view of the organisation’s year end position.
what would happen if significant issues which had not been corrected were found?
we would issue a modified opinion on the accounts.
