General Flashcards
What does disaggregate mean?
separate (something) into its component parts
What should the auditor consider when disaggregating overall planning materiality?
Auditor should consider materiality in relation to different classes of transactions and disclosures (ISA-320 para.4)
Therefore planning materiality gets allocated to various transaction classes
Considerations about inventory when determining materiality in auditing planning?
On what basis do you value inventory?
What is the valuation policy, is it inline with industry?
Is there WIP inventory as part of total inventory?
Is there an obsolescence factor?
Considerations on credit policy when determining materiality in auditing planning?
What steps do they use to determine credit worthiness
What credit control procedures are in place, and credit limits and policies
Look at debtors ledgers, how much of it is aged
What are the 5 principals for the code of ethics?
- Integrity
- Objectivity
- Professional competence and due care
- Confidentiality
- Professional behaviour
What does it mean to act ethically ?
can be described as doing “good” or “the right thing” and is fundamental to the profession’s survival
Who does the NZICA code of ethics apply to?
NZICA’s Code of Ethics applies to all members including Accounting Technicians (ATs) and Provisional Members
What are some of the threats that could compromise auditors’ ethics and independence? Five
Self interest - Potential or other existing work from the audit client.
Self review - Past association with the audit client
Advocacy - A member of the audit team becomes an advocate for or against the audit client’s position.
Familiarity - Close relationship with the auditor who becomes sympathetic towards the client’s position.
Intimidation - The auditor may be deterred from acting objectively by real or perceived threats.
What is independence in auditing?
The most important ethical issue for auditors is independence. Independence is about whether you are unbiased in how you approach your work and how you make decisions and come to opinions.
What is the result if an audit lacks independence?
Without independence the audit lacks authority and thus all value.
What are the five principles of the NZICA code of ethics?
Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour
What is OAR
It is overall audit risk and refers to the potential effects of audit failure.
What is audit failure?
In which the auditor provide and inappropriate opinion. It’s were the audit provides a clean (unqualified) opinion that statements are true and fair when they are not
What is the definition of an audit?
An audit is an objective examination and evaluation of the financial statements of an organization to make sure that the records are a fair and accurate representation of the transactions they claim to represent.
What does “True and fair” mean?
Conceptual benchmark of an audit
Not defined in the Companies Act 1993 nor by Courts.
Broad terms has come to mean : auditor is judging the reasonableness of the information being presented.
In NZ Sec 16 of FRA requires an auditor to express an opinion that accounts show a true and fair view and comply with GAAP
List reasons to explain why financial statement audits are necessary (four examples)
- Conflict of interest. (Financial statements prepared by managers and they report of managements own performance) Creates conflict of interest between management and shareholders
- Remoteness. Users of financial data not usually able to access the accounting data.
- Complexity. Need someone to check who has the expertise
- Consequence of error. Assurance that financials are reliable
What does integrity mean?
Not being involved in incompatible activities.
Not associated with false and misleading statements.
What does objectivity mean?
Professional accountants should not compromise their professional or business judgement because of:
- Bias
- Conflict of interest
- Undue influence of others
What is Professional competence and due care?
Maintain professional knowledge
Must remain abreast of relevant technical, professional and business developments
Act carefully and thoroughly in accordance with the requirements of the assignment
Ensure that those working under his/her authority have appropriate training and supervision
In the Code of Ethics what is Professional Behaviour about?
This fundamental principle requires that professional accountants:
- Comply with relevant laws and regulations - Avoid any action that may bring discredit to the profession - Market and promote themselves in an honest and truthful manner
