framework Flashcards
what are the different mechanisms of regulation
-legal /state
-commercial /market
-ethical/peers
-integrity/self/morals
what is the need for laws/ regulations and guidelines for audit?
-auditors serve the public interest so they are imp to maintain trust
-it ensures accuracy and reliability
-preventing fraud
-consistency and comparability
-global integration, increase in cross border collabs and investments
-adapting to changes and challenges
why is there a need for laws for audit related services
failure of:
-people to live up to reasonable moral standards;
-people to hold each other properly to account; and
-the market adequately to squeeze out bad behaviour.
what is the companies act
In most jurisdictions “Companies Act” regulate matters such as:
-management and administration of corporate entities;
-form and content of financial reports;
-the appointment of auditor, etc.
what is public interest
the collective well-being of the community of people and institutions the professional accountant serves
who is the “public” of the accountancy profession
clients;
governments;
employers and employees;
investors and lenders;
the business and financial community; and
others who rely on professional accountants to maintain the orderly functioning of commerce.
what is corporate governance and why is it important
definition: the system by which organisations are directed and controlled.
CG important because it looks at:
-how the organisation’s decision makers act;
-how they can or should be monitored; and
-how they can be held to account for their decisions and actions.
“Comply or Explain” vs “Rules-based” Corporate governance
-follow or explain, flexible, transparent
-follow strict rules, rigid, consistent
what is ISA 510- inital audit engagements - opening balances
it provides guidance regarding opening balances when the FS are audited for the first time or where the FS of the prior period were audited by another auditor
what are the planning procedures specific to an initial audit engagement
-incremental client and engagement acceptance procedures
-communicate with predecessor auditor if available
-consult from DPP or Risk management partner if there are special circumstances like being asked to report on adjusted last yr FS(error correction or retrospective policy)
-obtain evidence by performing the following procedures:
1) read fs/ management reports, predecessor audit reports
2) review predecessor audit documentation
3)perform procedures over opening balances
4) assess prior FS and current FS for consistency (presentation, accounting policies, comparative FS)
5) perform additional procedures when a possible misstatement is identified
what to do when opening balance contains misstatements?
if opening balance contains MMS that could affect current yr FS:
-perform additional audit procedures to determine their effect (inquire management about facts and circumstances, if MS exists, treat it as a current period ms)
-If restatement of prior FS is necessary, then consult if: (predecessor auditor refuses to reissue report or doesn’t agree with amending the FS)
reporting responsibilities specific to an initial engagement
auditor needs to obtain SAE that opening balances are not missttated
if evidence cannot be obtained:
-qualified opinion (inability to obtain SAE) or disclaimer of opinion or in juirsdictions where permitted:
qualified/ disclaimer regarding result of operations and unmodified opinion in SOFP.
IF opening balance is misstated, talk to management or predecssor. if not disclosed/accounted for, issue qualified or adverse opinion.
if accounting policies not consistent and change not treated properly or disclosed, a qualified ot adverse opinion will be expressed
if last yr auditor report was modified, if still relevant and material, current yr auditor report shud also be modified
other matter para if prior FS have not been audited at all or by another auditor, irrespective whether they are misstated or not and does not relieve the auditor of need to obtain SAE.
Procedures performed over opening balances
Reconcile w last yr closing balances in GL, agree with last year FS, reconcile with predecessor auditors documentation
