Module 7

Question 1

What is an assurance engagement?

Answer 1

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

Question 2

What defines and describes an assurance engagement?

Answer 2

The international framework for assurance engagements

issued by the international federation of accountants IFAC

Question 3

The framework that an engagement is an assurance engagement when it has what elements?

Answer 3

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

Question 4

What is a three party relationship?

Answer 4

Practitioner, responsible party, intended users

Question 5

What is an appropriate underlying subject matter?

Answer 5

May be financial performance, non financial, physical, systems and processes or behaviour

Point in time or period of time

Question 6

What is suitable criteria?

Answer 6

Benchmarks used to evaluate or measure underlying subject matter

May be formal, IFRS, or less formal such as code of conduct

Question 7

What is sufficient, appropriate evidence?

Answer 7

Evidence to enable an assessment of the subject matter against the criteria

Considers materiality, engagement risk and the quantity and quality of evidence

Question 8

What is an assurance report?

Answer 8

Report that contains a aonclusion that conveys assurance obtained

Question 9

What is the essential element that defines an assurance engagement?

Answer 9

Expression of an opinion that provides a level of assurance

Question 10

Why should practitioners decide if they want to take on a client for an assurance engagement?

Answer 10

Engagements can introduce risks to the practitioner firm that may outweigh the firms revenue

Question 11

What will the firms decision be made on?

Answer 11

1. Commercial considerations

2. Considerations of regulations and standards (Professional requirements)

Question 12

What are the two types of risks of assurance engagements?

Answer 12

Commercial

Professional

Question 13

What are the four implications of commercial and professional risks?

Answer 13

Commercial:
Financial
Reputational

Professional:
Ethical
Legal

Question 14

What are financial and reputations implications?

Answer 14

Commercial risks
Financial: risk of financial loss
Reputational: risk of damage to the public perception and brand

Question 15

What are ethical and legal implications?

Answer 15

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

Question 16

What is the acceptance decision?

Answer 16

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

Question 17

Acceptance procedures are?

Answer 17

Performed to assess risks to the firm, required by law, regs and standards

Question 18

What are the features of the acceptance checklist?

Answer 18

Client identification 
Ability 
Basis for performance 
Integrity
Nature and users
Stability
- communicate with previous auditors if new client

Question 19

What is the basis for performance?

Answer 19

Agreed through
Establishing preconditions for an audit
Confirming common understanding

Question 20

What is an audit?

Answer 20

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

Question 21

What are the elements of the audit process?

Answer 21

Acceptance
Planning
Systems and controls analysis
Substantive testing 
Completion
Risk assessment - ongoing 
Engagement and client management - ongoing

Question 22

What are the ongoing elements of the audit process?

Answer 22

Risk assessment

Engagement and client management

Question 23

The steps and processes that much be completed in every audit engagement are prescribed by who?

Answer 23

The international standards on auditing ISAs

Question 24

What is client acceptance?

Answer 24

Whether they want to take on the client in the first place

Question 25

What is continuance?

Answer 25

Whether to continue with client they performed an audit of in the previous year

Question 26

What months are the stages of the audit process performed?

Answer 26

Oct - Planning
Nov - Interim (systems and controls review)
Year end 
Feb - Final (substantive testing)
March - Completion 
Audit report