Concept of assurance Flashcards

1
Q

What is an assurance engagement?

A

When a practitioner expresses a conclusion to enhance the degree of confidence of intended user (other then responsible party) about the outcome of the evaluation/measurement of subject matter against criteria.

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2
Q

Information asymmetry

A

When agents act in their own self-interest. This has increase the need for assurance due to separation of ownership.

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3
Q

What are the objectives of an auditor?

A

To obtain reasonable assurance about whether the financial statements are free from material misstatement (error/fraud)

Express whether the financial statements are prepared in accordance to financial reporting framework.

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4
Q

What is reasonable assurance?

A

High but not absolute
Conclusion expressed positively
Engagement level risk is at an acceptable low level.

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5
Q

What is limited assurance?

A

Moderate/low level
Conclusion expressed negatively
Engagement risk is at an acceptable low level.

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6
Q

Why can absolute assurance not be given?

A

There are limitations of an audit including:
Evidence persuasive
Sample testing
Judgement involved

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7
Q

Statutory audit

A

collecting evidence/exercising judgement to form a opinion on whether the financial statements are true and fair.

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8
Q

True

A

Conform with standards and laws (correctly extracted from books + records)

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9
Q

Fair

A

Info free from discrimination and bias. Accounts should reflect commercial substance of company

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10
Q

Going concern

A

It is the directors responsibility to conclude whether the business is a going concern.

It is the auditors responsibility to conclude whether there is a material uncertainty about the going concern.

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11
Q

What should happen if the business isn’t a going concern?

A

Accounts prepared on a break up basis
Concept of ‘non-current’ doesn’t apply
Assets shown at a recoverable amount.

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12
Q

What is a unmodified audit opinion?

A

When the auditor issues a “true and fair view”

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13
Q

What is a modified audit opinion?

A

When the auditor is dissatisfied with sufficiency/appropriateness of evidence or has issues with financial statements.

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