Exam prep Flashcards
for listed companies what can you mention
KAM (comes after basis of opinion)
matters of complexity and judgement which raises the risk of material misstatement and impacts the focus of the audit.
Contents:
- explain what a KAM is,
- why each matter has been included and
- how this matter was addressed by the audit process.
What are basic money laundering polices and procedures
should have a Anti Money laundering programme within the firm which staff should attend training for
appoint a MLRO who is a senior member of staff with level of expertise
internal report available for suspected money laundering (which is used to anonymously report to MLRO)
Upon receipt of a completed report the MLRO has to review the evidence, documenting the process and noting the conclusion made. Details made whether external authorities (national crime agency in UK) are informed.
The auditors have a legal duty to report even though this conflicts with the duty of confidentiality to the client.
FROM AUDIT Perspective
Do ML checks as part of client due diligence (where does their money come from, if it’s cash the business could be used as a laundering device)
how is money laundering done and indicators
Placement, layering, integration
Cash intensive business- Significant risk as cash funds passed off as legitimate sales. e.g. sale to a business associate of $33,000 cleaning products may be an example of placement, trying to legitimise the funds as a genuine sale.
significant number of transactions may indicate layering in an attempt to conceal the origin of the funds.
buying / sellings xxx It’s possible these transactions could be purchased with illegal funds (placement) and then sold and repurchased to make the origin of funds harder to trace (integration).
what does the FRC say about work you can do for listed client
there’s a list of non-audit services you are prohibited from doing for listed clients
tax and internal audit is one of them
read page 60 on the text book
What’s included in a tender document
- Outline of the audit firm
- Audit approach
- Deadlines
- Non-Audit work
- Communications with those charged with governance
- out code of ethics and ISQC
- Outline of the audit firm (Our expertise, staff, background, location of firm offices)
- audit requirement of client ( include an outline of the statutory requirement in Jones Co’s country of incorporation, confirming the company is of the required size to require an audit. )
- Audit approach (planning, interim, final visits / audit methodology / control testing / other stuff e.g. opening balances and comparatives)
- Deadlines (include deadlines + manage client’s expectations of timing)
- Non-Audit work (sell yourself on what other work you provide + senior partners you have on board + highlight that any additional services will be contingent on meeting any ethical requirements.)
- Communications with those charged with governance (deficiencies in internal controls / misstatements )
- out code of ethics and ISQC (show our firm is compliant with these codes and standards)
what is audit fee based on and what is not allowed?
The audit fee needs to be based on the costs of the audit team working on the job. (experience of the staff required, and how long they will be needed on the engagement / firms charge out rates to determine the appropriate audit fee /adding in any travel costs expected.
Low balling which is not prohibited, however it should be avoided- audit quality suffers
contingent fees is also prohibited- give rise to a self-interest threat which is considered so significant that there are no safeguards to reduce the threat to a suitable level.
how does the auditor know if something is pervasive
it’s not pervasive if it’s an isolated area and doesn’t affect many balnces
if it changes a profit to a loss it is pervasive
what is emphasis of matter used for
only used for issues that do NOT impact the opinion
discuss attention to a note regarding a matter of fundamental important
in the basis for paragraph, what must be mentioned
This paragraph should be used to describe the reason for the modified opinion and to quantify any effects.
also The Basis for Opinion paragraph should reference the appropriate ethical code in full. This should be IESBA International Code of Ethics for Professional Accountants (INT) (or FRC Ethical Code (UK)). The extract does not refer to the ethical code that has been followed.
what is the other information section used for
The other information paragraph is used for the auditor to describe their responsibility towards other information in the annual report apart from the financial statements and to report the result of carrying out that responsibility.
