Chapters 5-6 Flashcards
5 fundamental principles
objectivity confidentiality professional competence and due care integrity professional behaviour
5 types of threat
self interest familiarity self review advocacy intimidation
explanation of self review
this arises when the same person needs to review work they have been involved with - solution is to use different teams
explanation of self interest
when a financial or other interest will inappropriately influence your decisions
explanation of familiarity
the risk that due to a long relationship with a client that you are more willing to accept their work
explanation of advocacy
the risk that you as an accountant will promote the client to the point where their objectivity is compromised, i.e in a litigation or dispute
explanation of intimidation
the risk that the accountant will be pressured into not acting objectivitely
safe guard for self interest threat
sell shares
remove that individual from the team
inform audit committee
have an independant partner review
4 acceptance procedures
ensure your professionally qualified to act
ensure existing resources are adequate
obtain references
communicate with present auditors
6 signs of a low risk audit client
long term prospects well financed strong internal controls conservative/prudent accounting policies competent management few and usual transation
6 signs of a high risk client
poor recent forecast lack of finance control deficiencies evidence of questionable integrity lack of FD unexplained transactions
what is an engagement letter
the written terms of an engagement in the form of a letter
x
x
5 areas of a good engagement performance
direction supervision review consultation resolution of disputes
whats a peer review
a review of the audit by another partner
