Audit and Assurance Deck Flashcards
What are the threats to independence and objectivity?
Self-interest, Self-review, Management, Advocacy, Intimidation, Familiarity
What are the four steps of assurance?
Acceptance, planning, evidence, conclusion and reporting.
What are the steps of acceptance in assurance?
Law, Ethics, Risk analysis, Resources.
What are the steps of Planning in assurance?
Understand the entity, Materiality, Analytical procedures, Risk assessment
Why might receivables go up?
Generous payment, significantly grown, bad debt.
What are the steps of evidence in assurance?
Address risks, obtain sufficient and appropriate evidence, to support opinion.
What are the steps of Conclusion and reporting in Assurance?
Completion tasks, Report opinion, Other reporting.
What is a good layout for audit reporting questions?
What is the problem. How serious, What opinion would you give, what is the impact on report?
When are things material?
By size or by nature.
What can you use as a base for materiality?
Revenue, Profit before tax, gross assets.
What would be materiality if using revenue?
0.5 - 1%
What would be materiality if using profit before tax?
5 - 10%
What would be materiality when using gross assets?
1 - 2%
What things are material by nature?
Related party transactions, Anything that impacts a key point in accounts (e.g. changes from profit to loss), Misleading disclosure.
In exam, the material limits?
Don’t really exist, if bigger than 0.5, 5 or 1 for relevant area then material.
When talking about the problem for an audit?
Comment on things like misstatement, lack of evidence, uncertainty.
When talking about the seriousness of a problem in audit?
Talk about materiality guidelines, consider if material by nature?
The audit committee is?
A subsection of the board of directors
The auditor should ensure that those charged with governance are provided with the engagement letter which includes:
The form communications will take, appropriate contact persons, explanation that only matters that come to auditors attention will be communicated.
The responsibility of the auditor is to?
Form an opinion.
Matters to be communicated by auditor are?
Responsibilities of auditor, overview of scope, significant findings, for listed clients - factors relating to independence.
Matters relating to independence to be communicated for listed clients are?
Confirmation the audit team have complied with ethics, details of safeguards applied, declaration of matters that may have bearing on independence (disclosure of non audit fees)
Effective communication is?
Timely, appropriate extent form and frequency, fulfils expectations, includes management comments, repeats unresolved or relevant previous year comments, disclaimer for third partied (not to rely on us).
An auditors report will also include?
A cover letter and appendix setting out deficiencies, consequences and recommendations.