Key figures Flashcards
Materiality
0.5% - 1% Revenue
5% PBT
1% to 2% Total assets
Fee rules listed entity
non audit service- 70% of avg audit fee for past 3 years. If exceeds disclose to ethics partner and safeguard
over:
10% fee income- cannot act
5% fee income- disclose to ethics partner and those charged with governance and consider safeguards
Fee rules non-listed entity
over:
15% fee income- cannot act
10% fee income- disclose to ethics partner and those charged with governance and consider safeguards
GPM formula and use
Gross profit/Rev (profit before overheads)
ROCE formula and use
Operating profit / equity + debt
(how resources used to pay debts)
Current ratio formula and use
Current asset/Current liability
(ability to pay debts from assets)
TR collection
TR/Rev x 365
TP collection
TP/Purchases x 365
Inventory collection
Inv/COS x 365
Audit procedure
VICTOR
verify, inspect, compare, trace, observe, recalc
if partner leaves firm to work for client what happens
Firm resign as auditor and not audit for 2 yrs. If client joins audit firm they cannot join engagement for 2 years
Rules for audit engagement partner on listed client
Rotate after 5 years no return within 5. Audit committee may increase to 7 with safeguards.
If firm becomes listed what is ruling on partner
If served more than 4 years, continue for max of 2
Rulings on time for EQR
7 year rotation no return 5 yrs
Describe EQR role
understand nature of engagement
discuss sig matters with engagement partner
eval conclusions on difficult matter
assess independence, risks and responses
What is a cold review
Asses firm policy/procedure implemented during engagement to identify deficiencies AFTER report signed
