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Assurance > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

what is assurance

A

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

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2
Q

what are the 5 key elements of assurance?

A
  1. 3 party involvement (practitioner, intended user, responsible party)
  2. subject matter (e.g. financial statements, company systems)
  3. suitable criteria (e.g. accounting standards and law)
  4. evidence
  5. written report
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3
Q

who is part of the 3 party relationship?

A

practitioner- auditor, assurance firm
intended user - depends on the assignment i.e. shareholders
responsible party- usually the directors

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4
Q

what are the two levels of assurance and what do they include?

A
  1. Limited assurance- moderate/lower level, conclusion expresses negatively
    2.Reasonable assurance- High level but not absolute, conclusion expressed positively
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5
Q

what are the types of assurance engagement?

A
  • statutory audit
  • fraud investigations
  • due diligence
  • internal controls assessment
  • business plan/ projection reviews
  • environmental audits
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6
Q

who are audits governed by?

A

companies act 2006
international standards on auditing (ISAs)

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7
Q

what are the overall objectives of the auditor (ISA (UK) 200)?

A

-financial statements are as a whole free from material misstatement, whether due to fraud or error
- opinion on whether financial statements are prepared in accordance with applicable financial reporting framework

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8
Q

how must the auditor be if they are to comply withe the standards?

A
  • ethical requirements
  • professional scepticism
  • professional judgement
  • evidence that is sufficient and appropriate
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9
Q

what is professional scepticism?

A

questioning mind, being alert to conditions, which may indicial possible misstatement due to error or fraud, and a critical assessment of audit evidence

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10
Q

what is professional judgement?

A

application of relevant training, knowledge and experience in making informed decisions about the courses of actions that are appropriate in the circumstances of the audit.

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11
Q

what does the companies act 2006 exempt small private limited companies from?

A

a mandatory audit if they satisfy 2 conditions from the criteria

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12
Q

what is the criteria which exempts small private limited companies from a mandatory audit?

A
  • no more than 50 employees
  • turnover does not exceed £10.2 million
  • gross assets total does not exceed £5.1 million
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13
Q

to be an auditor they must

A
  • hold appropriate qualifications or be part of a firm controlled by qualified persons
  • not be an officer, employee, partner of the company
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14
Q

what are the benefits of assurance?

A
  1. independent scrutiny of the business by experts
  2. added credibility
  3. by-products/subsidiary benefits (e.g. fraud deterrent)
  4. draws attention to issues (including ethical issues)
  5. reduces risk of management bias
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15
Q

what are the limitations of assurance?

A
  1. sampling- 100% of transactions cannot be reviewed
  2. inherent limitations of systems that produce the financial statements
  3. evidence is generally persuasive not conclusive
  4. collusion to defraud
  5. financial information includes subjective and judgemental matters
  6. use of management representations as evidence may be unavoidable
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16
Q

what are examples of the expectation gap

A
  1. auditor detects all fraud and error
  2. 100% of transactions are reviewed
  3. the auditor verifies the accuracy of financial statements
    4.
17
Q

what is meant by sustainability?

A

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

18
Q

what is meant by ESG?

A

environmental, social and governance- approaches sustainability through a corporate lens

19
Q

what is meant by sustainability impacts?

A

how the business of an organisation positively or negatively effects environmental, societal and governance issues.

20
Q

what is meant by sustainability dependencies?

A

Environmental, social and governance issues that can affect the organisation’s ability to create and maintain value.

21
Q

what are the key governance guidance, legislation and regulation for organisations on sustainably issues?

A
  1. United Nations Global Impact (2000)
  2. Global reporting initiative (2000)
  3. Task force on climate related Financial Disclosure or TCFD
  4. Sustainable Development Goals (2016)
22
Q

What must ICAEW accountants do with regards to sustainability?

A
  • recognise sustainability is at the core of what they do and analyse how to make the sustainable economy work for business, client and public interest.
  • do more than simply measuring and reporting impact of climate change, need to advise and understand implications
23
Q

Sustainability impacts across all modules of the ACA qualification. For Assurance, this impacts the following four areas:

A

Risk management
Assurance
Governance
Sustainability Metrics and Targets.

24
Q

What are the current guidelines with climate related risk and audits?

A

Currently, there is no mandatory international framework for reporting climate related risks. However, there is a growing support for climate related financial reporting generally within the financial statements

25
Q

what is the ISSB?

A

International sustainability standards board
- ISSB will deliver a global baseline of sustainability disclosures to meet investors information needs
2 Exposure drafts which have been issued:
- IFRS 1, General requirements for disclosure of sustainability-related financial information
- IFRS 2, Climate related disclosures

26
Q

Governance and climate related issues

A
  • directors are not held responsible for climate related disclosures
27
Q

what changes were made in the companies act 2006 about sustainability and the environment?

A

listed companies have to report on issues relating to sustainability and environment in both the strategic report and directors report.
UK auditors are then required to give an opinion on whether the strategic report and the directors report are consistent with the financial statements

28
Q

what is the strategic report?

A

contains a review of the companies business, including risks and key performance indicators.

29
Q

what must a strategic report include?

A
  • main trends and factors likely to affect future development, performance and position of the companies business
  • information about environmental matters
  • companies employees
  • social community and human rights issues
30
Q

what must the directors report include?

A

CO2 emissions in tonnes and as a result of companies activity

Assurance (17 decks)

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