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AA > Chapter 8: Professional standards > Flashcards

Chapter 8: Professional standards Flashcards

1
Q

Why do we need Professional standard regulation?

A
  • Adds quality

- Promotes comparability (all F/S audited to same standard = improves confidence)

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2
Q

All assurance engagements are governed by:

1.

2.

3.

4.

A
  1. Ethics
  2. Risk assessment
  3. Engagement terms
  4. ISQCs
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3
Q

UK audits are governed by:

1.

2.

A
  1. Companies Act 2006

2. ISA

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4
Q

What is the IAASB?

A

Subsidary of IFAC

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5
Q

Who nominates IAASB members?

A

IFAC

Forum of firms (group of large accountancy firms)

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6
Q

What is the PROFESSIONAL STANDARD for

ALL AUDITS?

A

ISA

International Standards on Auditing

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7
Q

What is the PROFESSIONAL STANDARD for

ASSURANCE ENGAGEMENT OTHER THAN THOSE ON HISTORIC FINANCIAL INFORMATION?

A

ISAE

International Standards on Assurance Engagements

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8
Q

What is the PROFESSIONAL STANDARD for

ASSURANCE ENGAGEMENTS TO REVIEW HISTORIC FINANCIAL INFORMATION?

A

ISRE

International Standards on Review Engagements

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9
Q

What is the PROFESSIONAL STANDARD for

NON-ASSURANCE ENGAGEMENTS?

A

ISRS

International Standards on Related Services

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10
Q

What is the PROFESSIONAL STANDARD for

ALL ASSURANCE ENGAGEMENTS?

A

ISQC

International Standards on Quality Control

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11
Q

Who creates new professional standards?

A

Subcommittee of IAASB

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12
Q

Explain the 3 step Professional standard setting process.

A
  1. Subcommittee of IAASB issue an exposure draft for IAASB and IFAC to look at
  2. Use feedback from them to revise standard.
  3. Once IAASB approves, the standard is issued.
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13
Q

What does FRC stand for?

A

Financial Reporting Council

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14
Q

What are the three main areas of FRC?

A

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

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15
Q

What does FRC do to ISAs?

A

Amend for any UK factors and issue as ISA (UK)

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16
Q

What does the FRC issue?

A

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

17
Q

What is harmonisation?

A

Align global standards to companies are audited in a comparable way regardless of location

18
Q

What did the EU directive and Regulation introduce with regard to the audit?

A

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

19
Q

What is professional scepticism?

A

Questioning mind

Alert to conditions –> misstatement error or fraud

Critical assessment of audit evidence

20
Q

What was the briefing paper that FRC released?

A

recognised that audit firms work close with clients

stressed to challenge management assertions

21
Q

What is big data?

A

Large/complex data

22
Q

Why did IAASB set up Data Analytics Working group?

A

Monitor use of data analytics and impact on risk assessment, audit approach

23
Q

Future of Audit:

What did the Kingman Review suggest?

A

Replace FRC with ARGA (Audit, Reporting, Governance Authority)

24
Q

Future of Audit:

What did the Competition and Market Authority Review suggest?

A

Mandatory Joint audit

Regular oversight of committees to ensure quality prioritized

Operational split between Big four audit and non audit business

25
Q

What does a Joint audit involve?

A

Joint auditor opinion

Joint audit report

Jointly liable

26
Q

Why has CMA (Competition and Market Authority) introduced mandatory joint audits?

A

More competition

Higher quality services

Smaller firms benefit = higher level audit services

27
Q

What is a criticism of Joint audit?

A

expensive for client

AA (21 decks)

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