L4

Question 1

what postulate does it focus on

Answer 1

independence, investigatory and reporting freedom

Question 2

what makes the postulate

Answer 2

1. independence, objectivity
2. ethical conduct integrity
3. materiality
4. judgement
5. scepticism

Question 3

ethics- IFRCA code of ethics

Answer 3

act in the public interest
fundamental principles
1. integrity
2. transparency
3. expertise

Question 4

IFAC- integrity

Answer 4

straightfwd and honest in all profess and busi relationships

Question 5

IFAC- Objectivity

Answer 5

not allow bias, conflict of interest or undue influence of others to override profess judge

Question 6

IFAC- Profess Comptence and due care

Answer 6

maintain profess knowledge at the level required to ensure client recieses competent profess service, based on the current landscapes
e.g.
legal
developments

Question 7

IFAC- Confidentiality

Answer 7

respect confidentiality of info got as a result of profess. not disclose info without permission. or use to your advatage

Question 8

IFAC- Profess behaviour

Answer 8

comply with laws
avoid any action that discredits the profession

Question 9

FRC 2019- standard- intergirty

Answer 9

trustworthy, striaght fwd, honest, fair, candid- apper matter
respect confidence except
*pub interest
* law
behaviour to maintain trust in audit profess

Question 10

FRC 2019- standard- objectivity

Answer 10

acting and making judgements
*impartially fairly and on merit
*no discrim, bias or compromise
* given due consid to best available evidence

Question 11

FRC 2019- standard- independence

Answer 11

freedom from conditions and relationships which in context may comp the integrity of audit

Question 12

difference between objectivity and indepence

Answer 12

object- personal state of mind
independence- circumstanc surrojnding the audit

Question 13

third party test -frc revised ethical stand

Answer 13

when reviewing some information, it might be best looking at it from a third party perspective, such as an investor or shareholder

Question 14

third party test- principles based

Answer 14

*qualitative and quantitative factors based on info available not hindsight
*overarching assessment of risk
* awarness of threat done by firm which will cause any threat to indepence

Question 15

independence from whom

Answer 15

1. state
2. politics
3. client
4. individual share holders
5. corporate iterests
6. anyone that suppress or delays bad news- rep damage

Question 16

threat to auditors independence

Answer 16

1. management- advice on control systems
2. self- review- non audit serve impacting fs
3. self interest- close relationships, financial
4. advocacy- take client side in tax
5. familiarity- not enough skepticism due to long association
6. intimidation- threat from executive

Question 17

what to do about threats to auditors independece

Answer 17

prevent, identify, elminate or mange
disclose any threats

Question 18

materiality

Answer 18

• consid, expected to influence the economic decision of users

judgement
* depends on context of surroundings, size and nature of the error
* based on collective need of fs users- error mistake significance depends on what these users need to make decisions
doesnt take individual needs of users into account

Question 19

what materiality should be

Answer 19

true and fair
Risk management- misstatements judge
* nature, timing, extent- assessment and audit procedures
* identify and assessing risk of material misstatement
sampling- cant look at everything

Question 20

how does materiality work

Answer 20

fs as whole- benchmark
performance materiality- amount set by auditor lower than materiality level for particular classess of transactions, acc balances. based on:
*understanding of entity
*updated for results of risk assement
* auditors judgem

Question 21

when does materilty take place

Answer 21

planning stage
during audit
evaluation

Question 22

materiality- reporting

Answer 22

isa 700- explanation how auditor applied concept of materiality in all stages specifies threshold used
auditors reporting, comply with- uk corp gove code

Question 23

professional scepticism

Answer 23

attitude that includes questioning mind, alert to condit which may indicate poss misstatement due to fraud or error

Question 24

Professional Scepticism - Conditions: individ auditors

Answer 24

good understanding of entity
questioning mind, willing to challenge
assess critically info
understand manage motives
avoid jumping to conclusion
alert to inconsistencies

Question 25

Professional Scepticism - Conditions: engagment teams

Answer 25

good busi knowledge
actively consider what maybe misstated
undertstand entity and business
partners & managers:
*engaged and alert to changes
*leading planning
documentation

Question 26

Professional Scepticism - Conditions: audit firm

Answer 26

culture
scepticism in training
engagement qual control
firm methologies- emphasize importance of scept

Question 27

Scepticism- most common issues

Answer 27

not enough challenge to management
1. auditors mindset- to familiar
2. confirmation not challenge- confirming what management says rather than question plausibility
3. audit is more than discussion- with management about complex accounting judgments
4. realistic deadlines