Module 7 Introduction to assurance

Question 1

What are the key elements of an assurance engagement?

Answer 1

CUTER

A three party relationship
An appropriate underlying subject matter
Suitable criteria 
Sufficient, appropriate evidence 
An assurance report

Question 2

What are the two types of assurances?

Answer 2

Reasonable assurance - positive form and concludes that the subject matters are reasonably free from material misstatement, not absolute level of assurance

Limited assurance - Negative form, concludes that there is no evidence that the subject matter is materially misstated

Question 3

What are the two commercial risk for auditors taking on a new client?

Answer 3

Financial risk - Risk of financial loss to the firm

Reputational - risk of damage to the firm’s public perception and brand

Question 4

What are the two professional risk for auditors taking on a new client?

Answer 4

Ethical - the risk that the firm fails (or is seen to fail) to conduct the engagement in a way that is professional and ethical

Legal - the risk that the firm could face criminal or civil legal proceedings

Question 5

What are the stages of the audit process?

Answer 5

1 - Acceptance - (Audit process stages)
2 - Planning - (Audit process stages)
3 - Systems and Controls analysis - (Audit process stages)
4 - Substantive testing - (Audit process stages)
5 - Completion - (Audit process stages)

6 - Risk assessment (ongoing elements)
7 - Engagement and client management (ongoing elements)

Question 6

What is the client acceptance procedure?

Answer 6

Identify the users and nature
Assess the legal and financial stability
Assess the integrity of those charged with governance
Ability to undertake the assurance engagement
Client identification procedures
Basis of performance
Communicate with previous auditor

Question 7

What document includes the terms of engagement for audits?

Answer 7

The engagement letter