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AA > mistakes > Flashcards

mistakes Flashcards

1
Q

Questions to ask potential clients

A

Potential conflicts of interest
Previous auditor contact process
Any scenarios from questions been fixed/changed, or problems for the company/future.

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2
Q

going concern

A

Retirement of leader,
Or lack of succession plans

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3
Q

Auditors can prepare FS for who

A

LTDs only

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4
Q

Assurance report on controls can be…

A

Either limited or Reasonable assurance, never absolute (expectations gap)

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5
Q

Opinion shopping additional procedures.

A

Perform back ground checks on MGMT
Ensure adequate resources and expertise are available in the firm

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6
Q

legal proceedings extra point

A

LICENSE REVOCATION or Closure of business

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7
Q

MGMT override tests

A

Whistle blowing procedures
Review significant estimates/judgements

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8
Q

Intimidation threat safeguard

A

Safeguard:
More experienced workers
Impact on other areas of the audit

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9
Q

Self interest threat

A

Anything relating to loss + fee income
Misstatements
Disciplinary action

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10
Q

considerations for new appointments

A

Opening balance concerns + companies

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11
Q

Enquiries of MGMT over RATIOS:

A

is it due to …( (list changes in activities)
Due to over/under statement of … (link to ratio)
GPM and OM differences due to:
> Changing classification of costs
> Provisions for damages…

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12
Q

sources of evidence/documents

A

Aged receivables, inventory, payables
Contracts/Correspondence with suppliers/customers
Breakdown of {COGS}{operating costs}
Product costs + selling prices

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13
Q

Client evaluating Firm tender

A

Auditors experience in sector + with systems

[quality] Audit strategy, reliance on controls/IA, Use of data analytics

proposed fee, BEST VFM

personnel for audit,
>can they work with them?
> efficiency

Proposed timeline> deadlines >busy periods

References

Any other services they can provide?

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14
Q

Points for Engagement letter + reason

A

Who report is directed to

Intended use:
> to avoid reliance by unforeseen 3rd parties
> limited liability

Period covered by forecast info

nature of assumptions
> clarity on what subject to review
> Accountant reports on reasonableness

Statement of MGMTs responsibilities… (SPECIFIC)
Performed in accordance with … (ISAs, ISAEs)
caveat/disclaimer -> avoid over reliance
nature of assurance to be provided (reasonable/limited)

Form of reports provided

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15
Q

after date payments for

A

FINES

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16
Q

Analytical procedures

A

Compare year on year

Compare average per:
>for prior year
>for budget
>for each office

Providing finance to client
= credit checks
= review their budgets + forecasts

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17
Q

sensitivity analysis

A

inflation

interest rates
exchange rates
time to achieve…
amounts received…
variations in seasonality, costs, demand

cost of selling/making etc

loss of customers when opening stores from on lines

rent reviews

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18
Q

receivables

A

check terms of contract for credit details
check date on contract
direct confirmation of balance with customers
re perform calculations, exclude certain customers

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19
Q

reasonable assurance

A

detailed testing (controls, systems, numbers) + analytical …

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20
Q

limited assurance

A

mgmt enquiries + analytical review

21
Q

third party revenue holder

A

cut off issues due to banking of revenue at third party

recognition of revenue net of costs

22
Q

purchase of NCA

A

Vouch purchase costs to…
vouch ownership/registration documents
consider significant losses/profits on disposal

23
Q

process of analytical procedures

A

Substantive analytical procedures assist the external auditor in forming an overall conclusion on the financial statements. The procedures are used to obtain relevant and reliable audit evidence by identifying expected relationships or detecting material misstatements and can be used as a ‘proof in total’. The procedures assist audit efficiency as they can reduce the need for tests of details, reduce sample sizes and identify areas where further work is required.

24
Q

Consequences of: Dont check assets to register

A

Assets may not be available when required for use resulting in business disruption.

Additionally, incorrect capital allowances may be claimed and depreciation charges/useful life may be inappropriate.

Compliance with covenants may be affected by misstated assets/profits.

25
Q

Directors meeting should include what info

A

Information presented at directors’ meetings should include cash flow forecasts for at least the next 12 months (or the period of the bank loans),

key assumptions used in their preparation,

a sensitivity analysis

a commentary on compliance/non compliance with covenants.

26
Q

Substantive testing

A

Analytical procedures and test of detail

NOT CONTROLS TESTING

27
Q

Matters to be considered in respect of opening balances that weren’t audited:

A

• Check opening balances correctly brought forward
• Review client working papers for prior year
• Check appropriateness of accounting policies/accounting policies consistently applied year to year
• Any changes appropriately accounted for/disclosed
• Substantive work on opening balances (where no alternative available)
• State in auditor’s report that comparative figures not audited (ISA (UK) 710)
• Ensure disclosure of lack of audit in prior year in financial statements
• Integrity of accounting system/strength of control environment

28
Q

Report by exception on

A

Inadequate accounting records kept

Returns adequate for the audit not received and branches not visited

The FS don’t match underlying records

INFO +explanations necessary for audit not received

If No CG statement issued by PLC

If MM found int he directors/strategic report

29
Q

Why has a cold review been performed?
What actions should take on back of cold review?

(Fee is smaller than expected, and basis of fee not recorded)

A

Why performed?
> indication of low balling
> may indicate a lack of independence or
> lack of appropriate resources leading to lower audit quality
> audit firm losses potentially

Actions:

> discuss how fee calculated
consider if reasons for low fee calculated
provide additional training
consider if other clients impacted

30
Q

Mgmt responsibility of fraud

A

Implementing system on internal controls.

Whistle blowing procedures

Preventing+ detecting… culture etc

31
Q

Profit forecast vs Cash flow forecast

A

Profit forecast on accruals basis
(Depreciation in profit, not in cash flow
Allowances and provisions in profit)

Cash flow forecast on cash basis
(When cash is paid and received,
No provisions or liabilities)

32
Q

Audit risk in a question

A

State any reason for concern in the company regarding the audit.

Where are the potential sources of error?

33
Q

Listed companies
Additional disclosures in audit report:

A

KEY AUDIT MATTERS
specify materiality thresholds (FS and performance) + (judgements to determine them)
Compliance the UK CGC

34
Q

Deposits =

A

Cut off threat

35
Q

Over trading when company grows too quickly

A

Going concern

36
Q

Strong competition

A

Compete on price

37
Q

Online sales can lead to

A

Systematic recording errors

38
Q

Revenue risk and procedure for an arrangement

A

Obtain copy of agreement and understand how revenue is generated

39
Q

Prospective information

A

Provide opinion on
assumptions
Properly prepared

40
Q

Prospective information

A

Provide opinion on
assumptions
Properly prepared

41
Q

External auditor when we are other asssurance

A

Can help us

42
Q

No written representations provided

A

M+P
Report by exception under TCA
*adequate accounting records not maintained
* all information required was not maintained

43
Q

Confirmations that WR used for:

A

Inventory, valued at lower of…
TRADE REC, at recoverable amounts
Tangible assets, assumptions of useful life’s
RPT, fully disclosed in FS

44
Q

Confirmations that WR used for:

A

Inventory, valued at lower of…
TRADE REC, at recoverable amounts
Tangible assets, assumptions of useful life’s
RPT, fully disclosed in FS

45
Q

Dependencies =

Impacts =

A

Resources, regulation such as H&S (costs money)

Emissions, working conditions, employee right

46
Q

FS Level Misstatements

A

Window dressing
GC risk
Weak Control
New systems
Errors across the whole FS

47
Q

Mandatory firm rotation after…
Tender after…

A

20years
10years

48
Q

Auditors report of a listed entity

A

Name of EP
KAM
D/S report consistent
Corp Gov statement

49
Q

Elements to be included in the :
Opinion section

Matters to be communicated to TCWG:

A

Identify entity audited + period covered
Identify each FS audited
Reference to the notes, include sig acc pol
Identify applicable FRF
FS PP according to FRF
FS PP according to legislation

TCWG:

significant funding from audit:
- errors
- matters of disagreement
- effect on the firm + content of auditors report

IC deficiencies

AA (18 decks)

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