Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

BPP PAR > Module 8 > Flashcards

Module 8 Flashcards

1
Q

Small companies are exempt from audit under the CA 2006 if hey meet two out of three of what criteria?

A

Balance sheet total of not more than £5.1m
Turnover of not more than £10.2m
No more than 50 employees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How to companies qualify as small and what is the two year rule?

A

Small companies will qualify as small if:
If it is the first accounting period and conditions are met
The company met the above conditions for the current and preceding year

Only cease to be classified as small if conditions are not met for two consecutive years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What types of companies are never exempt from audit?

A

Public company (unless dormant)
Banking
E-money issuer
Insurance
MiFID investment firm of UCTIS management company
Corporate body and shares traded on a European reg market
Public sector entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When is an audit required for small charities in England and Wales?

A

Gross income over £1m OR
Gross assets over £3.26m AND gross income over £250,000 OR
Required by charities constitution or due to trustee or donor preference

Independent examination required where audit not recurved unless gross income below £25,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is an independent examination?

A

Less onerous external review that provides limited rather than reasonable assurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Where is an audit required for small charities in Scotland?

A

Gross income £500,000 or more OR
Gross assets over £3.26m OR
Required by constitution or due to trustee or donor preference

Independent examination required where audit not received

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

A company is dormant if?

A

It has had not significant accounting transactions during the period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How can shareholders veto an exemption?

A

More than 10% of company’s shares within one month before the end of the financial year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The directors of a company using an audit exemption must include what in the balance sheet?

A

Additional narrative section

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What must the narrative section in the balance sheet contain for audit exempt companies?

A

Shareholders haven’t required an audit
Entitled to exemption
Responsibilities to maintain proper accounting records
Accounts have been prepared following the special provisions of the CA 2006 for small companies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the primary purpose of an audit?

A

To add credibility to financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the key responsibilities of the auditors as defined by the CA 2006?

A
  1. Must express an opinion
    - whether give a true and fair view
    - consistency of the strategic report and directors report with the f/s and prepared with applicable legal requirements
  2. The opinion is expressed to company’s shareholders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is reasonable assurance?

A

A high but not absolute level of assurance

Sufficient evidence free from frauds or errors that would have an impact on the decisions made

Engagement risk acceptably low level
True and fair view provides this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is limited assurance?

A

Work undertaken is less rigorous
Less reliance can be placed on the opinion
Given in the negative form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is truth and fairness?

A

Accounting concept and auditing principle
Concerned with validity of the message
Means compliant with company law and applicable accounting standards, CA and appropriate judgement

Expressed within audit report

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the expectations gap?

A

The difference between the understanding that the public has about the auditors responsibilities and the actual defined responsibilities

17
Q

How can the expectations gap be reduced?

A

Including explanation of auditors and directors responsibilities within the audit report

Description of the scope of the audit
States that the report is addressed to shareholders only

Competence

18
Q

What are the personal qualities of the auditor within credibility concept?

A

Competence
Independence
Integrity
Ethics

19
Q

What is competence?

A

Must be equipped to perform their duties to an expected standard
Maintain professional knowledge and skill at level required
Important in reducing expectations gap

20
Q

What is integrity?

A

Should be straightforward and honest

21
Q

What are ethics?

A

Set of principles of proper conduct or a system of moral values

22
Q

What is independence?

A

Must be completely free from situations that may make their work less objective
Must be seen to be free

Are free and seen to be free

23
Q

What is the path to becoming a statutory auditor?

A

Qualified
Supervised
Registered

24
Q

What are the five recognised qualifying bodies?

A 
ACCA
AIA
CAI
ICAEW
ICAS
25
Q

What are the three areas of requirement that must be achieved to gain appropriately qualified status set by the CA 2006?

A

Entry requirements
Practical experience
Examinations

26
Q

What do entry requirements consist of?

A

University entry level OR

7 years of practical experience in finance law and accountancy

27
Q

What does practical experience consist of?

A

Must complete 3 years practical training at an authorised training firm
Substantial peer to be in audit and statutory audit work

28
Q

What do examinations consist of?

A

Requires RQB to have a formalised examination structure that tests theoretical and practical knowledge

29
Q

What are he 4 recognised supervisory bodies?

A

ACCA
CAI
ICAEW
ICAS

30
Q

Membership of a RSB is not sufficient to obtain statutory auditor status, alongside this what else must the auditor hold?

A

A practicing certificate

31
Q

To be eligible for a practicing certificate members must apply to the relevant RSB and prove that they what?

A

Have completed at least 2 years post qualifying experience
Confirm compliance with CPD
Have professional indemnity insurance

(Must be renewed each year with an annual fee)

32
Q

To be entitled to sign audit reports, an individual must have what?

A

Statutory auditor status and be part of a registered audit firm

To obtain this they must apply to the authorisation committee of their RSB

33
Q

The authorisation committee should only award statutory auditor status to individuals that can demonstrate what?

A 
Hold an audit qualification 
Are fit and proper
Hold a practicing certificate 
Member of a registered audit firm
Have indemnity insurance
34
Q

For a firm to be granted registered auditor status:

A

Each of the principles (partners/directors) must be either a member of an RSB, statutory auditor, audit affiliate of and RSB
Majority must have an appropriate qualification
Firm has an appointed an audit compliance principle
Fit and proper
Indemnity insurance

35
Q

What is an audit compliance principal?

A

Individual responsible for monitoring that the audit firm has complied with relevant regs

Identity notified in writing to relevant RSB
First point of contact

36
Q

How can we protect the public?

A

Ensure the public is aware of who has statuary audit status

Up to date list
Monitored in regular basis to protect quality

37
Q

Summary of statutory audit requirements

A

Qualified

  • entry req
  • 3 years experience
  • exams
  • RQB

Supervised
- RSB

Registered

  • qualified
  • 2 years post experience
  • CPD
  • Insurance
  • member of firm
  • apply to authorisation committee of RSB
38
Q

The CA 2006 requires each RSB to maintain and enforce rules of assess:

A

Eligibility of persons
Conduct of statutory audit work

These rules include:
Registration and disclosure 
High standards
Monitoring of quality 
Investigation and discipline
Accountability
39
Q

Mandatory audit firm Rotation rules are?

A

Maximum of 10 years that can be extended to 20 provided that an appropriate tender process takes place every ten years
OF PUBLIC INTEREST ENTITIES
June 2016 included

BPP PAR (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions