Chapter 2 Flashcards
What are the general duties of directors under the Companies Act?
Act in the way most likely to promote the success of the company for the benefit of its members as a whole
Safeguarding assets
Books and records of the company
Preparation and delivery of company FS
What are the laws and regulations management should ensure company complies with?
Money laundering Health and safety Public Liability Employers liability PAYE and payroll matters
According to CA 2006 what is the external auditors responsibility?
Form independent opinion on truth and fairness of annual accounts
confirm annual accounts properly prepared accordance with CA 2006
state auditors report whether opinion given in directors reports consistent with annual accounts
Define error?
an unintentional misstatement in FS including omission of an amount or disclosure
Define Internal Control?
Process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about achievement of entity’s objectives, and compliance with applicable laws and regulations
If material weaknesses are found auditors are responsible for ?
Reporting these to management
Carrying out additional tests of details to uncover any potential errors as a result of the weaknesses
Which ISA sets out managements responsibility towards fraud
ISA 240
Define non compliance?
Acts of omission or commission intentional or unintentional, committed by the entity or by those charged with governance by management by other individuals working for or under the direction of the entity which are contrary to prevailing laws and regulations. Non compliance doesn’t include personal misconduct unrelated to the business activities of the entity.
What 2 categories of laws and regulations?
Those which have a direct effect on FS
Those which provide legal framework within which company operates
What should auditors do if they become aware of non compliance?
- Obtain an understanding of non compliance, together with info evaluate effect on FS.
- if suspect after this discuss matter with appropriate level of management unless law prohibits.
- If can’t obtain sufficient appropriate evidence about suspected non compliance, might represent limitation on scope of Audit, so auditors may have to give unmodified opinion
What are the six principles of bribery prevention policies?
Proportionate procedures to mitigate risks and prevent unethical conduct
Top level commitment that creates culture in which bribery is unacceptable
risk assessment that’s periodic, informed and documented
Due diligence procedures that take a proportionate and risk based approach
Communication ensure bribery preventions embedded and understood through organisation
Monitoring and review and making improvements to procedures where necessary
Define related parties?
Those people or companies that might have or be expected to have an influence on the company being audited
Explain what ISA 550 recognises?
Risks of material misstatement are higher where there are related party transactions
What procedures should be carried out in the detailed testing stage?
Detailed tests of transactions and balances
Reviewing minutes of meetings of shareholders and directors to observe if any related parties or transaction with them become apparent
Reviewing records for large or unusual transactions or balances mainly those recognised near end of reporting period
Reviewing confirmation fo loans and receivable and payable and confirmations from banks
Reviewing investment transactions
What is the purpose of money laundering?
Disguise the origins of funds derived from illicit sources and enable illicit funds to be used by those who control them
