Chapter 1

Question 1

What is the threshold for an audit

Answer 1

2 out 3 needs to be satisfied to qualify for audit

Over 50 employees
Turnover is over £10.2m
Total assets over £5.1m

Question 2

Who governs audits? What does FRC do

Answer 2

Companies act 2006 and ISA.
FRC supervises accountancy issues and issues auditing standards in UK

Question 3

What are the three FRC committees and what do they do?

Answer 3

Executive committee- everyday operation

Governance committee- Audit and risk committee provide financial, legal, regulatory oversight

Regulatory committee- considers members’ professional conduct: investigation, enquiry, enforcement

Question 4

Explain current issues surrounding climate change

Answer 4

Climate change- FRC findings show company integrating climate considerations in strategy is lagging behind user demand for better climate disclosure

Question 5

Explain current issues surrounding sustainability and give the IFRS disclosure standards. Give TCFD disclosure pillars

Answer 5

S1 (disclose sig sustainability risk) S2 (disclose climate related risk)

Useful for users to make decisions regarding providing resources

TCFD (taskforce on climate related financial disclosures)- Governance, strategy, risk management and metrics

Question 6

Explain 4 current issues surrounding tech

Answer 6

Robotic process automation- software used to interpret application with aim of automating activities

AI- program performing tasks which requires humans

Blockchain- set of records where individual items are linked (secure but auditor should understand risk)

Big data- large/complex data (monitor frequently, id anomalies)

Question 7

What is the Kingman Review

Answer 7

1. led to abolishment of FRC, replaced with ARGA. Regulate big firms and impose larger sanction for corporate failure and req quick explanations.

Question 8

What is the Brydon Report and mention key recommendations

Answer 8

its a review into audit quality and effectiveness. Key recommendations:

redefine audit purpose, replace true and fair with present fairly in all material respects

Question 9

What is the consequence of Brydon report and Kingman review

Answer 9

ARGA replaced FRC with more power
Large private companies = PIE if over 750 employees and turnover over £750m