Audit (Campbell's Notes) Flashcards
Which companies benefit from audit exemptions?
1 Dormant companies
2 Very small companies
What two main things must the auditor do?
1 Express an opinion as to whether the accounts present a true and fair picture of the business
2 Confirm the financial statements have been prepared in accordance with the Companies Acts and the relevant Accounting standards
What is an adverse opinion?
The auditor believes the results are misleading and do not give a true and fair picture of the business.
What is an unequivocal opinion?
The auditor is satisfied that the financial statements comply with the relevant regulations and do give a true and fair picture of the business.
What is a fundamental uncertainty?
The auditor may be uncertain about an aspect of the company’s activities (e.g. a claim in the courts where the outcome is unknown)
What is qualification to the accounts?
This may arise where the auditor cannot express a view about an aspect of the report and accounts, for example where there is a disagreement regarding a disclosure in the financial statements.
What is a disclaimer opinion?
There is insufficient information for an auditor to form an opinion.
What is the overall purpose of audit?
To ensure that financial statements may be relied upon, to ensure compliance with laws and standards and to express an opinion on the financial statements.
What techniques does the auditor use to form their opinion?
1 Sampling - i.e they do not check every item
2 Making use of the control systems
3 Interviews, test data, accounting ratios
What are the 5 duties of the external auditor?
To ensure that
1 Proper records have been kept
2 Accounts agree with the records
3 Accounts comply with legislation/standards
4 Statement of financial position gives a true and fair view
5 Directors’ report is consistent with the information provided by the Financial Statements
For which sections of the financial statements must auditors state whether they believe the accounts to be true and fair?
1 Statement of profit and loss 2 Statement of comprehensive income 3 Statement of financial position 4 Statement of cash flows 5 Whether Directors' report is consistent with accounting information
What is “audit risk”?
The risk that auditors may take inappropriate action.
What is detection risk?
The auditor will not discover a material fact in the financial statements
What is control risk?
The control systems operated by the business fail to find errors.
What is inherent risk?
Some aspects of the business may be risky and it is therefore difficult to form an opinion.
