Chapter 1 - Concept and need

Question 1

What is assurance?

Answer 1

Assurance firm’s satisfaction as to the reliability of an assertion being made by one party for the use of another party

Question 2

What is assurance engagement?

Answer 2

practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party

Question 3

What are the key elements of assurance engagement?

Answer 3

• 3 party relationship
• Subject matter
• Sufficient appropriate evidence to support assurance opinion
• Suitable criteria
• Written report providing an opinion on the subject matter

Question 4

What are the 3 parties involved in a 3 party relationaship?

Answer 4

Practitioner
Intended users
Responsible party

Question 5

What are the 2 types of assurance engagement?

Answer 5

Reasonable and Limited

Question 6

What is reasonable assurance engagement?

Answer 6

• Gives a positive opinion
• Sufficient and appropriate evidence

Question 7

What is limited assurance engagement?

Answer 7

• Gives a negative conclusion
• Sufficient and appropriate evidence (less intrusive)

Question 8

Is it practical to give absolute assurance?

Answer 8

No

Question 9

What is the key example of an assurance engagement in the UK?

Answer 9

Statutory audit

Question 10

What are other examples of audits required by regulators?

Answer 10

Bank
Pension scheme
Charity
Solicitors

Question 11

What are examples of voluntary engagements?

Answer 11

Environmental
Fraud
Internal
Due dilligence

Question 12

What is the objective of an audit of financial statements?

Answer 12

To deem whether statements have been prepared in accordance with framework

Question 13

What is meant by true and fair?

Answer 13

True - info is factual
Fair - info is free from bias

Question 14

What does the 2006 companies act require?

Answer 14

Auditors and members of a RSB, e.g. ICAEW

Question 15

What is the RSB responsible for ensuring?

Answer 15

• Only Individuals holding an appropriate qualification or Firms controlled by qualified persons can conduct audits
• Those individuals or firms are monitored on a regular basis

Question 16

Who monitors the accounting profession in the UK?

Answer 16

FRC through its codes and standards committee

Question 17

What does the ISA 200 state as the objective of independent auditors?

Answer 17

• Obtain reasonable assurance
• Report on financial statements

Question 18

What are the stages of an audit?

Answer 18

• Obtain engagement
• Planning
• Performance
• Review and completion
• Reporting

Question 19

Who are the primary users of an audit?

Answer 19

Shareholders

Question 20

What are the benefits of assurance?

Answer 20

Shareholders - verification
3rd party - confidence
Directors - prevent errors/fraud and reduce risk

Question 21

How is a small company identified?

Answer 21

2/3 of:
- Max turnover 10.2 mil
- Max total assets 5.1 mil
- <50 employees

Question 22

What are the limitations of assurance?

Answer 22

Testing and sampling
Reliance on controls
Nature of financial statements
Quality of auditor judgments

Question 23

What is the expectations gap?

Answer 23

Difference between what users think the auditor does and what the auditor actually does

Question 24

In assurance, what does the ICAEW say sustainability can be impacted by?

Answer 24

Risk management
Assurance
Governance
Sustainability metrics and targets

Question 25

What are the current developments regarding sustainability?

Answer 25

ISSB (sit alongside IASB)
FRC climate thematic audit
IAASB

Question 26

What level of assurance is given on a statutory audit?

Answer 26

Reasonable

Question 27

What level of assurance is given on a review of financial info?

Answer 27

Limited

Question 28

What level of assurance is given on a report on profit and cash flow forecasts?

Answer 28

Limited