Final Review CFE

Question 1

Rules of professional conduct (5)

Answer 1

1. Objectivity
   
   • must be independent and have an objective state of mind
2. Integrity and due care
3. Professional competence
4. Confidentiality
5. Professional behaviour

Question 2

Threats to independence (5)

Answer 2

1. Self interest
2. Self review
3. Advocacy
4. Familiarity
5. Intimidation

Question 3

Self interest threat

Answer 3

When the practitioner has financial interest in the clinet

• assurance team members or their immediate family members own shares of made a loan to the client
• client’s fees are significant in relation to the total fee base of hte practitioner
• loan is made by a client to an assurance team member that it outside of normal lending terms

Question 4

Self review threat

Answer 4

The practitioner is in the position of having to form an opinion on their own work.

• if the team member has recently been an employee of the client and had the opportunity to prepare original data or records for the clien

Question 5

Advocacy threats

Answer 5

The practitioner is perceived to promote, or actually promotes the position of the client

• the pracitioner promotes the sale of shares for the client
• represents the client in a legal dispute
  *

Question 6

Familiarity threats

Answer 6

occurs when there is a close relationship b/w client and pratitioner

Question 7

Intimidation threats

Answer 7

The client intimidates the practitioner

• threatens to replace the practitioner next year
• pressure from client to reduce number of audit hours in an effort to reduce assurance engagement fees.

Question 8

Client acceptance

Answer 8

• The integrity of the principal owners, key mgmt, and those charged with governance of the entity
• whether the engagement team is compotent to perform the audit engagement and has the necessary capabilities, including time and resources
• whether the firm and the eng team can comply with relevant ethical requiremetns
  
  • significant matters that have arisen during hte current or previous audit engagement and their implications for continuing the relationship

Question 9

Purpose of an engagement letter

Answer 9

To lay out the terms of the engagement

• The objective and scope of the audit of the financial statements
• the responsibilities of the practitioner/ mgmt
• identification of the applicable financial reporting framework
• reference to the expected form and content of any reports to be issued by the practitioner and a statement that there may be circumstances in which a report may differ from its expected form and content
• the basis on which fees are computed and any billing arrangements

Question 10

Interim FS

Answer 10

Example Q3, Dec 31 YE

BS

• As at Sept 30, 2012
• As at Dec 31, 2011

IS

• Q3 2012, Q3 2011
• Year to date comparatives for both years

Changes in equity, CFS

• Year to date comparatives for both years