Lecture 2

Question 1

IAASB- Strategy

Answer 1

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

Question 2

FRC

Answer 2

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

Question 3

FRC goal

Answer 3

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

Question 4

FRC plan to serve public interest

Answer 4

• 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

Question 5

FRC membership COMITTEE

Answer 5

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

Question 6

Reg of how audits done (gov)

Answer 6

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

Question 7

Reg of how audits done (FRC)

Answer 7

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

Question 8

Reg of how audits done (Account profess)

Answer 8

• 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

Question 9

Comp act 2006 -small comps

Answer 9

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

Question 10

what auditor must give his opinion on

Answer 10

Annual accounts
- prep, truth

directors report
- truth, reflect actual busin

Question 11

who may audit a comp

Answer 11

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

Question 12

Director legal respons

Answer 12

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

Question 13

Auditors legal respon

Answer 13

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

Question 14

Audtior exposure to legal liability

Answer 14

• Breach of stat duties
• Breach of common law duties

Question 15

Breach of stat duties

Answer 15

civil wrong or criminal act
* fine or imprisonment

Question 16

Breach of common law duties

Answer 16

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

Question 17

stat duties of Auditor

Answer 17

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

Question 18

how the auditor will form their opinion

Answer 18

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

Question 19

Civil Wrong

Answer 19

entity suffers a loss as a result

Question 20

Crimin act

Answer 20

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

Question 21

auditor stat rights

Answer 21

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

Question 22

theft act 1968

Answer 22

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

Question 23

Fraud Act

Answer 23

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

Question 24

Re London & Genreal Bank

1895

Answer 24

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

Question 25

Re Kingston Cotton Mill Co. 1896

Answer 25

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

Question 26

other common law- duty of care

Answer 26

• 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

Question 27

Caparo 3 part test

Answer 27

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

Question 28

liability to 3rd parties now

Answer 28

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

Question 29

Audtiors defence

Answer 29

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