Chapter 7 - External Audit Flashcards
Which documents and records are auditors entitled to have access to?
All
What are the three categories of companies that can claim exemption from audit?
Small companies
Dormant companies
Subsidiaries
Is an audit intended to provide reassurance as to the future prospects of the company?
No
What type of individual or firm cannot be appointed as a company’s auditor?
An officer or employee of the company or an officer or employee of a connected undertaking, any person or firm that has a business relationship with the company
There are a number of non-audit services that auditors are prohibited from providing to a PIE, name five of them.
Tax services
Any part in management or decisions-making
Bookkeeping and preparation of accounting records
Payroll services
Design or implementation of internal control of risk management processes Valuation services
Legal services
Internal audit
Services linked to financial, capital structures, investment strategies
Promoting, dealing or underwriting in shares of the audit entity
HR services
What is the ratio of permitted audit: non-audit services fees for public interest entities?
70%
Can anyone be appointed as a company auditor?
No must be a registered auditor, or audit firm and not be prohibited from being appointed
Can the liability of the auditor be limited?
Yes but requires consent of the members
How many consecutive years can an auditor be appointed to a PIE?
Ten years plus an additional ten years if a tender has been carried out
What does audit partner rotation guard against?
Threat to auditor objectivity and independence
Do all companies need to change their audit firm regularly?
No only Public Interest Entities (PIE)
When does an auditor of a PIE need to make a statement if they cease to hold office as auditor?
Always
Who are the relevant audit authorities?
The auditor’s recognised supervisory body and in the case of a PIE the FRC
Who is the audit report prepared for?
The members
Is the audit process expected to uncover all errors or fraud?
No – only material errors and omissions
