Chapter 8: Professional standards Flashcards
Why do we need Professional standard regulation?
- Adds quality
- Promotes comparability (all F/S audited to same standard = improves confidence)
All assurance engagements are governed by:
1.
2.
3.
4.
- Ethics
- Risk assessment
- Engagement terms
- ISQCs
UK audits are governed by:
1.
2.
- Companies Act 2006
2. ISA
What is the IAASB?
Subsidary of IFAC
Who nominates IAASB members?
IFAC
Forum of firms (group of large accountancy firms)
What is the PROFESSIONAL STANDARD for
ALL AUDITS?
ISA
International Standards on Auditing
What is the PROFESSIONAL STANDARD for
ASSURANCE ENGAGEMENT OTHER THAN THOSE ON HISTORIC FINANCIAL INFORMATION?
ISAE
International Standards on Assurance Engagements
What is the PROFESSIONAL STANDARD for
ASSURANCE ENGAGEMENTS TO REVIEW HISTORIC FINANCIAL INFORMATION?
ISRE
International Standards on Review Engagements
What is the PROFESSIONAL STANDARD for
NON-ASSURANCE ENGAGEMENTS?
ISRS
International Standards on Related Services
What is the PROFESSIONAL STANDARD for
ALL ASSURANCE ENGAGEMENTS?
ISQC
International Standards on Quality Control
Who creates new professional standards?
Subcommittee of IAASB
Explain the 3 step Professional standard setting process.
- Subcommittee of IAASB issue an exposure draft for IAASB and IFAC to look at
- Use feedback from them to revise standard.
- Once IAASB approves, the standard is issued.
What does FRC stand for?
Financial Reporting Council
What are the three main areas of FRC?
Codes and Standards - actuarial/accounting/reporting/policy, aa, corp governance
Conduct - professional discipline/oversight, audit quality/corp reporting review
Executive - oversight of the work of the FRC
What does FRC do to ISAs?
Amend for any UK factors and issue as ISA (UK)
What does the FRC issue?
ISA (UK)
Ethical standards for auditors
Bulletins - on new issues
Practice notes - guidance to apply ISAs to circumstances
Standards to review interim F/S
Audit quality
What is harmonisation?
Align global standards to companies are audited in a comparable way regardless of location
What did the EU directive and Regulation introduce with regard to the audit?
Re-tendering after 10 years
Change auditor after 20 years
Ban on non audit services to public interest companies
Cap on fees for non audit service
Improve quality of audit
What is professional scepticism?
Questioning mind
Alert to conditions –> misstatement error or fraud
Critical assessment of audit evidence
What was the briefing paper that FRC released?
recognised that audit firms work close with clients
stressed to challenge management assertions
What is big data?
Large/complex data
Why did IAASB set up Data Analytics Working group?
Monitor use of data analytics and impact on risk assessment, audit approach
Future of Audit:
What did the Kingman Review suggest?
Replace FRC with ARGA (Audit, Reporting, Governance Authority)
Future of Audit:
What did the Competition and Market Authority Review suggest?
Mandatory Joint audit
Regular oversight of committees to ensure quality prioritized
Operational split between Big four audit and non audit business
What does a Joint audit involve?
Joint auditor opinion
Joint audit report
Jointly liable
Why has CMA (Competition and Market Authority) introduced mandatory joint audits?
More competition
Higher quality services
Smaller firms benefit = higher level audit services
What is a criticism of Joint audit?
expensive for client
