Definite Flashcards
The BEIS white paper consists of …
- The Kingsman review
- CMA statutory audit market study
- Brydon’s review
The BEIS white paper addresses what issues?
- concerns about audit quality and ability to detect fraud
- threat to investor confidence and integrity of financial market
- threat to independence and objectivity between audit and non-audit services
- Bad Corporate Governance standards
- high corporate failures = increased pressure on auditors
BEIS suggested reforms
- Strengthening regulatory oversight by replacing FRC with ARGA (Auditing, Reporting and Governance Authority)
- same staff in both?
- Strengthened Audit and Corporate Governance Requirements
- increased accountability of company directors, ensuring they take greater responsibilities
- Enhanced Transparency and Accountability
- detailed disclosure of financial health
- increased whistleblowing protections
IFAC Code of Ethics
- Integrity
- Objectivity
- Professional Competence and Due Care
- Confidentiality
- Professional Behavior
Threats to Independance
- Familiarity
- Intimidation
- Self-review
- Advocacy
- Self-interest
Directors responsibilities
- Duty to act within powers
- Duty to promote the success of the company
- Duty to exercise independent judgement
- Duty to exercise reasonable care, skill and diligence
- Duty to avoid conflict of interest
- Duty to not accept benefit from 3rd parties
- Duty to declare interest in proposed transactions or management
Define Inherent Risk
Susceptibility of an assertion about a significant account or disclosure to a misstatement that could be material, individually or when aggregated with other misstatements, before consideration of related controls
What are two inherent risks present in Rapston Hotels
- Valuation of PPE
- Revenue Recognition
Explain why valuation of PPE is an inherent risk
- involves signifying amount of judgement and estimation
- complex due to market fluctuations and depreciation and impairment
- Real Estate Market is very volatile
- Modern paintings
- Ukraine vs Russia
- Brexit
- COVID
- depreciation amounts and impairments
Explain why Revenue recognition is an inherent risk for Rapston
- diverse revenue streams (rooms, event, food, alcohol etc.)
- complicated because different and timing and volume
- recognized during period
- deposits, refunds create complications
What are the audit assertions for Sales and Recievables
- Presentation and Disclosure
- accurately reported
- complicated by multiple revenue streams - Accuracy, classification, and valuation
- considering all discounts
- complexity of costs - Rights and Obligations
- right to recorded receivables and fulfilled its obligations
- verifying all receivables not overstated or improperly included - Completeness and Cut-off
- recorded in correct period
- deposits and transaction volume make it difficult - Existence or Occurrence
- confirmation
- fictitious sales or overstating not happening in cases such as paintings
Name 5 test of controls for sales and revenue and link
- Authorisation of sales transactions
- Segregation of duties
- Reconcilliation of sales records
- Review of IT controls over sales system
- How management revniews sales reports
Define test of controls
Audit procedure designed to evaluate the effectiveness of internal controls within an organization’s processes and systems to ensure that financial transactions are accurately recorded, authorized, and processed in accordance with established policies and procedures
Aim of EU audit reforms
- Enhance audit quality and transparency
- Increase auditor independence
- restore investor confidence by implementing mandatory audit rotation
- stricter regulations
- higher disclosure
What is included in extended audit report
- risk assessment
- findings and conclusions
- responsibilities of the auditor and management
