Module 7 Flashcards
What is an assurance engagement?
In which a practitioner aims to obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of the intended users
- audit is only once form of engagement
What defines and describes an assurance engagement?
The international framework for assurance engagements
issued by the international federation of accountants IFAC
The framework that an engagement is an assurance engagement when it has what elements?
Criteria Underlying subject mater Three party relationship Evidence Report
CUTER
If an engagement is all of the above it can be defined as an assurance engagement
What is a three party relationship?
Practitioner, responsible party, intended users
What is an appropriate underlying subject matter?
May be financial performance, non financial, physical, systems and processes or behaviour
Point in time or period of time
What is suitable criteria?
Benchmarks used to evaluate or measure underlying subject matter
May be formal, IFRS, or less formal such as code of conduct
What is sufficient, appropriate evidence?
Evidence to enable an assessment of the subject matter against the criteria
Considers materiality, engagement risk and the quantity and quality of evidence
What is an assurance report?
Report that contains a aonclusion that conveys assurance obtained
What is the essential element that defines an assurance engagement?
Expression of an opinion that provides a level of assurance
Why should practitioners decide if they want to take on a client for an assurance engagement?
Engagements can introduce risks to the practitioner firm that may outweigh the firms revenue
What will the firms decision be made on?
- Commercial considerations
2. Considerations of regulations and standards (Professional requirements)
What are the two types of risks of assurance engagements?
Commercial
Professional
What are the four implications of commercial and professional risks?
Commercial:
Financial
Reputational
Professional:
Ethical
Legal
What are financial and reputations implications?
Commercial risks
Financial: risk of financial loss
Reputational: risk of damage to the public perception and brand
What are ethical and legal implications?
Professional risks
Ethical: risk that the firms fails to conduct the engagement in a way that is professional and ethical
Legal: risk that the firm could face criminal or civil proceedings
What is the acceptance decision?
Relates to the situation where the practitioner is taking on a new client that it did not provide assurance service for in the prior year
Acceptance procedures are?
Performed to assess risks to the firm, required by law, regs and standards
What are the features of the acceptance checklist?
Client identification Ability Basis for performance Integrity Nature and users Stability - communicate with previous auditors if new client
What is the basis for performance?
Agreed through
Establishing preconditions for an audit
Confirming common understanding
What is an audit?
An examination of a company’s financial statements by an independent expert that results in the expert providing an opinion on whether they give a true and fair view to shareholders
What are the elements of the audit process?
Acceptance Planning Systems and controls analysis Substantive testing Completion Risk assessment - ongoing Engagement and client management - ongoing
What are the ongoing elements of the audit process?
Risk assessment
Engagement and client management
The steps and processes that much be completed in every audit engagement are prescribed by who?
The international standards on auditing ISAs
What is client acceptance?
Whether they want to take on the client in the first place
What is continuance?
Whether to continue with client they performed an audit of in the previous year
What months are the stages of the audit process performed?
Oct - Planning Nov - Interim (systems and controls review) Year end Feb - Final (substantive testing) March - Completion Audit report
