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ICAS - ABS > Module 10 > Flashcards

Module 10 Flashcards

1
Q

Procedures to be performed specified in

A

The engagement letter

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2
Q

Compilation engagements (3)

A
  • Compiling financial information
  • Use accounting expertise
  • No opinion provided
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3
Q

Assurance engagement

A

Practitioner aims to obtain sufficient appropriate evidence to express a conclusion designed to enhance the degree of confidence of the intended users about the outcome of measurement or evaluation of underlying subject matter

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4
Q

Objective of assurance engagement

A

Enhance credibility of underlying subject matter

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5
Q

Assurance engagements required to comply with (2)

A
  • International framework for assurance engagements

- International standard on assurance engagements (ISAE) 3000

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6
Q

Engagement only classified as assurance if has all following five criteria

CREST

A
  • suitable Criteria
  • written assurance Report
  • sufficient and appropriate audit Evidence
  • appropriate underlying Subject matter
  • Three party relationship
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7
Q

Three party relationship

A

Practitioner, responsible party and intended users

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8
Q

Appropriate underlying subject matter egs (3)

A
  • Financial performance
  • Non-financial performance
  • Behaviour
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9
Q

Suitable criteria

A

Required for consistent evaluation of underlying subject matter. Should be relevant, complete, reliable, neutral and understandable eg international financial reporting standards, code of conduct, applicable laws/ regulations

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10
Q

Sufficient appropriate audit evidence

A

Practitioner has attitude of professional scepticism about whether the subject matter is free from material misstatement considering materiality, engagement risk and quantity and quality of available evidence

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11
Q

Written assurance report

A

Practitioner forms conclusion based on evidence obtained.

Modified conclusion can be issued if limitation in scope/ material misstatement

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12
Q

Reasonable assurance

A

Opinion expressed in positive form - reasonably certain the financial statements are free from material misstatement

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13
Q

Limited assurance

A

Level of risk is higher. Opinion expressed in negative form. No evidence that the financial statements are materially misstated

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14
Q

Key process stages of assurance engagement

A
  • Acceptance and continuance
  • Planning (including risk assessment)
  • Systems and control analysis
  • Collection of evidence
  • Completion
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15
Q

Acceptance and continuance

A

ISAE 3000 requires compliance with fundamental ethical principles (independence). Consider professional and commercial risks.

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16
Q

Acceptance and continuance - four outcomes of preliminary risk assessment

A
  • Accept duty of care and include agreement by third party in engagement letter
  • Ensure third party confirms no duty of care prior to reporting
  • Include disclaimer of liability to third party in auditor’s report
  • Reject engagement
17
Q

Acceptance and continuance - Engagement letter

A

Contract which clarifies responsibilities, scope of engagement and form of report to be provided or work that will be performed

18
Q

Acceptance and continuance - quality control

A

Quality control procedures must be followed as required by ISQC

19
Q

Completion and reporting

A

Produce reporting which has clear expression of reporting practitioner’s conclusion about underlying subject matter

20
Q

Factors to consider for other engagements (5)

A
  • Parties
  • Subject matter
  • Criteria
  • Procedures
  • Type of report
21
Q

Half-yearly report should be prepared using

A

Accounting policies of latest published annual accounts or new policies if these expected to chance in subsequent financial statements

22
Q

Half yearly review is

A

Limited assurance engagement

23
Q

Auditor obtains evidence for half year review primarily through (2)

A

Enquiry and analytical procedures

24
Q

Half yearly reporting

A

Must state the review is not an audit and the auditor is not expressing an audit opinion

25
Q

Reporting accounting examining and reporting on prospective financial information

A

Very high level of difficulty

26
Q

Specific engagements > forensic audits

A

Investigation of fraud or suspected fraud

27
Q

Specific engagements > Internal controls egs (3)

A
  • SOx engagement
  • Internal audit
  • Service organisations
28
Q

If specified tested performed only on specific controls

A

Agreed upon procedures engagement - no assurance given

29
Q

XBRL tagging engagement

A

Directors of company may want independent review of accuracy of tagging

30
Q

Accounting services associated with listings

A

Prospectus

31
Q

Review procedures for half year review (4)

A
  • Planning
  • Procedures to update the understanding of the entity and its environment
  • Evidence (primarily obtained through enquiry and analytical review)
  • Completion
32
Q

Prospective financial information can be in form of

A

Forecast or projection

33
Q

Prospective information is

A

Subjective in nature

34
Q

Level of assurance in prospective information engagement

A

Moderate level of assurance through negative opinion most common (higher risk) - risk increases as length of period increases also

35
Q

If assumptions are unrealistic or inappropriate

A

Auditor should not accept the engagement/ withdraw if continuing engagement

36
Q

When examining prospective financial information, auditor must consider (5)

A
  • Reasonableness of assumptions
  • Correct application of assumptions
  • Disclosure of assumptions
  • Consistency of accounting principles
  • Obtaining written representations
37
Q

Auditor’s report - prospective financial information (4)

A
  • Statement as to whether assumptions provide reasonable basis for conclusion
  • Opinion on whether properly prepared
  • Statement that actual results likely to differ from prospective info and variation could be material
  • Statement in the case of projection that the prospective financial information has been prepared using assumptions about future events that may not occur
38
Q

Level of assurance provided in an engagement depends on

A

Needs of the users

39
Q

Due-diligence engagement requirements

A

No specific requirements

ICAS - ABS (21 decks)

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