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aca - audit & assurance > Chapter 2 - Professional Standards > Flashcards

Chapter 2 - Professional Standards Flashcards

1
Q

why do professional standards concern the public?

A

because they add to the quality of assurance services & build trust in society

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2
Q

which elements do all assurance engagements consider?

A
  • ethics
  • risk assessment
  • terms of engagement
  • international standards on quality management (ISQMs)
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3
Q

what are UK audits governed by?

A

companies act 2006
ISAs

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4
Q

FRC?

A

financial reporting council

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5
Q

what do the FRC do?

A

supervise accountancy related issues and issues auditing standards in the UK

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6
Q

structure of the FRC?

A
  • FRC has a board

supported by:
- governance committee (audit & risk committee & people committee)

  • business committees (conduct committee, supervision committee etc)

responsibilities are delegated to these committees

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7
Q

what do the FRC do in relation to ISAs?

A

FRC amends ISAs for any specific UK factors

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8
Q

what do the FRC issue?

A
  • ISAs
  • ethical standards for auditors
  • practice notes (guidance on applying ISAs)
  • bulletins
  • standards for reviews of interim FSs
  • audit quality
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9
Q

harmonisation?

A

the process of aligning global standards so that companies are audited in a comparable way, regardless of location

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10
Q

what drives harmonisation?

A

a number of global factors including:
- globalisation
- harmonisation of rules & regulations affecting business in the EU

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11
Q

relationship between FRC and ISAs?

A

UK adopts ISAs, and the FRC amends and reissues them as ISAs (UK)

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12
Q

EU directive and regulation of April 2014 introduced which provision regarding audit?

A
  • improving the quality of audit & reporting
  • change of audit firm at least every 20 years
  • cap on fees for non-audit services
  • ban on providing non-audit services to public interest entities
  • mandatory re-tendering every 10 years
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13
Q

big data?

A

broad term for data sets that are large or complex

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14
Q

how are auditors responding to big data?

A

auditors are responding by increasing the use of technology in the audit approach

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15
Q

IAASB?

A

international auditing and assurance board

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16
Q

the kingman review?

A

kingman review led to the government announcing the abolition of the FRC

replacing it with ARGA (audit, reporting & governance authority)

17
Q

ARGA?

A

audit, reporting and governance authority

they:
- regulate big firms
- impose large sanctions for corporate failures
- require fast explanations from companies
- issue report publications regarding conduct

18
Q

is ARGA fully in operation yet?

A

no

19
Q

competition and market authority (CMA) review?

A

change to audit

plan on implementing the following changes:
- robust regulatory oversight

  • mandatory joint audit
  • operational split between big 4’s audit & non-audit businesses to ensure quality
  • 5 year progress review by the regulator
20
Q

brydon report - independent review into the quality and effectiveness of audit?

A

another review with a set of proposed changes to audit for the future

key recommendations include:
- redefine audit’s purpose

  • create corporate audit profession
  • replace ‘true & fair’ with ‘present fairly, in all material respects’
  • increased use of technology
21
Q

‘joint audits’ ?

A
  • more than one audit firm will be responsible for the audit opinion
  • audit will be performed on a joint basis and a joint audit report is then issued

CMA (competition and markets authority) proposed mandatory joint audits

22
Q

FRC’s findings of company and auditor responses to climate change?

A
  • companies weren’t considering climate change in their business models/strategies
  • users are requesting climate-change disclosures
  • firms must ensure climate change is factored into internal control monitoring processes
23
Q

what was a key step in sustainability in audit?

A

the creation of the ISSB (international sustainability standards board)

IFRS sustainability standards were issued also (IFRS S1 & IFRS S2)

24
Q

IFRS standards to promote sustainability?

A

IFRS S1 (requirements for disclosure of sustainability-related financial information) - entities must disclose significant sustainability related risks and opportunities

IFRS S2 (climate related disclosures) - entities must disclose climate related risks and opportunities

25
Q

most relevant types of technology in audit right now?

A

robotic process automation (RPA)

AI & cognitive computing

26
Q

RPA ?

AI ?

A

RPA = robotic process automation = software used to interpret existing applications with aim to automate activities

AI & cognitive computing = computer programme that’s able to complete tasks that usually would require human input

27
Q

blockchain?

A

digital set of records/transactions where individual digital items (blocks) are linked together in a public database (the chain)

aca - audit & assurance (7 decks)

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