Module 7 - Introduction To Assurance

Question 1

What is an assurance engagement?

Answer 1

Where 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 about the subject matter information

Question 2

What is the mnemonic ‘CUTER’ used for?

Answer 2

Classifying an assurance engagement

Question 3

What does CUTER stand for?

Answer 3

suitable Criteria

an appropriate Underlying subject

a Three-party relationship

sufficient and appropriate Evidence

an assurance Report

Question 4

Failure to demonstrate the five elements of CUTER would result in what?

Answer 4

The engagement not being classified as an assurance engagement

Question 5

What are the two levels of assurance?

Answer 5

Reasonable assurance

Limited assurance

Question 6

When a practitioner has to decide whether or not to take on a client, the risks that must be considered can be categorised into two categories:

Answer 6

Commercial (financial and repetitional)

Professional (ethical and legal)

Question 7

The main acceptance procedures a practitioner should perform when gathering info about a client are to:

Answer 7

Identify users and the nature of the engagement

Assess legal and financial stability

Integrity of those in charge - management

Ability to undertake the engagement (eg ethically)

Client identification procedures

Agree basis for performance of the assurance engagement

Question 8

For external audits engagements only, what must the practitioner do when gathering client info

Answer 8

Communicate with the previous auditor

Question 9

What is an example of an assurance audit?

Answer 9

A statutory financial statement

Question 10

Stages of an audit

Answer 10

Acceptance

Planning

Systems and Controls Analysis

Substantive Testing

Completion

(RUNNING THROUGHOUT:

Risk Assessment and

Engagement and Client Management)

Question 11

What is issued by the international federation of accountants (‘IFAC’)

Answer 11

The International Framework for Assurance Engagements

Question 12

How does reasonable assurance work?

Answer 12

The practitioner reduces engagement risk to an acceptably low level to give an opinion on the subject matter

Question 13

In reasonable assurance, how is the opinion expressed?

Answer 13

A positive form

Question 14

How would the practitioner conclude (in a positive case) with reasonable assurance

Answer 14

That they are reasonably certain the subject matter is free from material misstatement

Question 15

Is reasonable assurance 100% accurate

Answer 15

No

But it is high (it is not an absolute level of assurance

Question 16

Is the level of risk higher with limited assurance?

Answer 16

Yes

Question 17

What would the practitioner conclude in limited assurance?

Answer 17

That there is no evidence that the subject matter is materially misstated (less rigorous than reasonable assurance)

Question 18

In what form is the opinion expressed with limited assurance?

Answer 18

The negative form

Question 19

Acceptance decision, what is it?

Answer 19

This relates to the situation where the practitioner is taking on a new client that it did not provide the assurance service for in the prior year

Question 20

Audit - definition

Answer 20

An examination of a company’s financial statements by an independent expert that results in the expert providing an opinion on whether the financial statements give a true and fair view to the shareholders

Question 21

What does the audit process look like?

Answer 21

Question 22

Audit process stages: (following on from acceptance / continuance decision)

Answer 22

Planning stage

Systems and controls analysis

Substantive testing

Completion

Risk assessment

Engagement and client management

Question 23

When terms are agreed between client and practitioner, where are the terms documented?

Answer 23

In an engagement letter - this acts as a contract