Audit and Assurance

Question 1

What is an assurance engagement?

Answer 1

Where a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users

Question 2

What are the practical uses of assurance?

Answer 2

Audits
Internal controls reports
Review of business plans
Sustainability and CSR
Performance reviews

Question 3

How is assurance expressed for an audit?

Answer 3

Positively with reasonable assurance

Question 4

How is the conclusion expressed for assurance engagements?

Answer 4

Negatively with limited assurance.

Question 5

What are the benefits of assurance?

Answer 5

Enhances credibility
Reduces risk of management bias
Draws attention to deficiencies
High quality information in market
Gives investors added faith
Improves reputation

Question 6

What are the audit exemption thresholds?

Answer 6

No more than 50 employees
Revenue does not exceed £10.2m
Gross assets do not exceed £5.1m

Question 7

What companies must have an audit?

Answer 7

Banking and Insurance companies
Companies where 10% shareholders request one.
Companies where articles of association require an audit
Non dormant public companies
A company part of a group with the characteristics listed above.

Question 8

What are the benefits of an audit?

Answer 8

Value in having business scrutinised
Assurance provided to third parties
Subsidary benefits

Question 9

What is sustainability?

Answer 9

Meeting the needs of the present without compromising the ability of future generations to meet their own needs

Question 10

What are examples of physical risks to businesses?

Answer 10

Storms
Drought
Wildfires
Flooding

Question 11

What is a transition risk?

Answer 11

Risks which arise that relate to social and economic shifts to a low carbon economy

Question 12

Examples of transition risk?

Answer 12

Changes to policy
Changes to regulation
Technology changes
Changes in markets

Question 13

What does IFRS S1 relate to?

Answer 13

General requirements for the disclosure of sustainability related financial information

Question 14

What does IFRS S2 relate to?

Answer 14

Climate related disclosures required to be made

Question 15

What do the responsibilities of the assurance provider depend on?

Answer 15

Requirements of related legislation and regulations
Terms of the engagement agreed
Ethical and professional standards
Quality management standards

Question 16

What is not the responsibility of an external auditor?

Answer 16

Design and operation of accounting systems
Maintenance of accounting records
Preparation of financial statements
Prevention of fraud
Detection of immaterial fraud
Compliance with laws and regs

Question 17

Which areas of law affect all businesses?

Answer 17

Employment law
Social security law
Health and safety law

Question 18

What should an auditor do when considering laws and regulations?

Answer 18

Make enquiries of management

Inspect any correspondence with licensing or regulatory bodies

Ask TCWG if they are aware of any non compliance

Question 19

What is a related party?

Answer 19

Related parties are people or companies that might have or be expected to have an undue influence on the company being audited.

Question 20

How to test related parties?

Answer 20

Obtain a list of related parties from management

Scan receivables / payables listings for the names of these related parties

Check disclosures for transactions w related parties

Obtain written representations from directors / management