Lecture 2 Flashcards

1
Q

IAASB- Strategy

A

support global financial stabilty
enchane the role, relevance and quality of assurance
facilate adopt and implement of standards

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2
Q

FRC

A

more stringent than international standards
* ISA- international standard on auditing

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3
Q

FRC goal

A

adpated international standards for uk- adds to it
inform auditors about work required from them
enchance rep of and increases public confidence in profess

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4
Q

FRC plan to serve public interest

A
  • set uk corp goverance and stew codes
  • set uk stand for accounting and acturial
  • monitior and take action to promote qual of corp report
  • operate independantly enforcement arrangements for acc and actuaries
  • comptenent auth stat audit in uk
    set audit and ethic stand
    monitor and enforce audit qual
    oversight of statut audit reg in uk
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5
Q

FRC membership COMITTEE

A

majortiy of members shouldnt be practicing accountants, auditors or actuaries
1. not for 5 year- carry out stat audits, voting rights/ member
2. be working

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6
Q

Reg of how audits done (gov)

A

respons for maintaining the legal framework for audit reg
most stat requir come from the EU at point of transition

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7
Q

Reg of how audits done (FRC)

A

gov delegate most reposn to them
FRC respon to recog and oversee the reg of auditors by professional accountancy bodies

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8
Q

Reg of how audits done (Account profess)

A
  • prim respons for supervision of their members in profess capacity
  • must have effec arrange in place that their audit qualif meet stat require
  • as recog supervisory bodies, they must have in place effect arragne to registration, monitor and disclpin auditors
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9
Q

Comp act 2006 -small comps

A

not required by all comps if 2 out of 3 conditions met
1. turnover- before 2016 £6.5m, after £10.2m
2. TA- before 2016 £3.26m, after £5.1m
3. no of employ- before and after <50

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10
Q

what auditor must give his opinion on

A

Annual accounts
- prep, truth

directors report
- truth, reflect actual busin

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11
Q

who may audit a comp

A

individ
* approp qualif, RQB- ACCA
* Member of/ resigester with, RSB- ICAS

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12
Q

Director legal respons

A

prep accounts
keep prop account records
safegaurd assets and take steps to prevent and detect fraud
provide auditors with all relevant audit info

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13
Q

Auditors legal respon

A
  • opinion - director respons
  • give a true and fair view
  • properly prepated in accord with
  • consistent with
  • non-compliance not prop disclosed
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14
Q

Audtior exposure to legal liability

A
  • Breach of stat duties
  • Breach of common law duties
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15
Q

Breach of stat duties

A

civil wrong or criminal act
* fine or imprisonment

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16
Q

Breach of common law duties

A

under contract (liable to client
under common law ( liable to 3rd parties
* pentalty, but must show:
audtior was neglient
auditor owed the plantiff a duty of care
plantiff suffered a loss as a result of the auditors neglience

17
Q

stat duties of Auditor

A
  1. ident of fs
  2. description of the scope of audit
  3. true and fair view ** in accord wuth the relevent financial reporting framework (IAS)**, accord with comp act 2006
  4. statement in auditors opinion on the directors report
  5. for quoted comps a report on the auditable part of Directors remunmeration report
18
Q

how the auditor will form their opinion

A

carry out investigation on:
1. adequate acc records
2. fs are in agree with account records and returns
3. listed comp= auditable part of directors rumneration report is agree with account record
4. if fs have been preped in accord with small comp provioson, the auditor agrees

19
Q

Civil Wrong

A

entity suffers a loss as a result

20
Q

Crimin act

A

specific offence causing a report to include misleading/ false in material matters

21
Q

auditor stat rights

A
  1. rights of access at all times to comp books and account
  2. reight to require explan from comp manage and from a parent comp
  3. legal penatiles for knowingly or reckless making false statemnt
  4. entitlement to attedn any general meeting, recieve notices that sh recieve, heard at any general matter that concerns them as audutors
22
Q

theft act 1968

A

Destroy, conceal, or falsify any doc required for acc purposes
supply info which make use of documents known by them to me materially false

23
Q

Fraud Act

A

Fraud by:
1. false repres
2. failing to disc info
3. abuse of position

24
Q

Re London & Genreal Bank

1895

A

auditor not expected to find every fruad and error in comp
* not an guarantor
* expected of him is reasonable skill and care

25
Q

Re Kingston Cotton Mill Co. 1896

A

auditor has to peform work with skill, care, caution which reasponably comptent, careful auditor would use
not a bloodhound, but a watchdog

26
Q

other common law- duty of care

A
  • Touche- auditors liability only arise under a contractual relationship
  • Stephenson- duty of care owed where it can be seen that failure may result in phyiscal injury (3rd party)
  • Crane- court confirmed no duty of care to 3rd party in case of financial loss
27
Q

Caparo 3 part test

A
  1. reaonable foreseeabilty of damages
  2. relationship of proximity- person A knew statement would be communciated to person B
  3. fairness

courts may voluntary apply voluntary assumption of respons

28
Q

liability to 3rd parties now

A

unsure who will win, so most of them settled outside courts

29
Q

Audtiors defence

A

engagement letter
qual of work, prop planned, supervised and reviewed
use of approp qual staff
procedure for taking on new clients and renewing old ones
maintian audtior indep and ethicalty
internal qual control
external qual inspecti