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Auditing Assurance and Principles > Overview of Audit, Assurance, and Related Engagements > Flashcards

Overview of Audit, Assurance, and Related Engagements Flashcards

1
Q

Three Types of Audit

A

Financial Audit, Compliance Audit, and Operations Audit

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2
Q

Financial Audit

A
  1. Fairly presented
  2. criteria based on PFRS and other financial frameworks
  3. opinion on whether to assert if the FS is fairly presented
  4. External Auditor
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3
Q

Compliance Audit

A
  1. organization compliance with laws, regulations, and contracts
  2. criteria based on laws, regulations, and contracts
  3. degree of compliance with laws, regulations, and contracts
  4. government auditors
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4
Q

Operations Audit

A
  1. organization is operating effectively and efficiently
  2. objectives set by the BOD or management of the organization
  3. recommendations and suggestion on how to improve operations.
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5
Q

Generally Accepted Auditing Standards

A

3 General Standards
1. adequate technical training and proficiency as an auditor
2. independence in mental attitude
due professional care

3 Standards of Fieldwork

  1. adequately planned and properly supervised
  2. sufficient understanding of internal control
  3. sufficient appropriate evidential matter

4 Standards of Reporting

  1. shall state if the FS complied with GAAP
  2. consistency in the application of GAAP
  3. adequacy of informative disclosures
  4. expression of opinion
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6
Q

Standards covered by PFAE

A

a. Philippine Standards on Auditing
b. Philippine Standards on Assurance Engagement
c. Philippine Standards on Review Engagement

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7
Q

Users of PFAE

A
  1. Practitioners
  2. Other parties involved in the engagement
  3. Standards setting bodies (IAASB,AASC)
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8
Q

Assurance Engagement

A

expressing a conclusion designed to enhance the degree of confidence of the intended users about the outcome of the evaluation or measurement of a subject matter against criteria.

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9
Q

Code of Ethics for Professional Accountants

A
  1. Integrity
  2. Objectivity
  3. Professional competence and due care
  4. Confidentiality
  5. Professional Behavior
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10
Q

Subject matter information

A

the outcome of the evaluation or measurement of a subject matter

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11
Q

Assertion based engagement

A

the evaluation or measurement of the subject matter is performed by the responsible party is in the form of assertions that is made available to intended users

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12
Q

Direct reporting engagement

A

the evaluation or measurement of the subject matter is performed directly by the practitioner and the subject matter information is provided to intended users in the assurance report

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13
Q

Reasonable assurance engagement

A

positive assurance - audit
absolute or high level
reduction of assurance risk to an acceptable low level in the circumstances of the engagement

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14
Q

Limited assurance engagement

A

negative assurance - review
moderate
reduction of assurance risk to an acceptable level in the circumstances of the engagement
risk is greater than reasonable assurance engagement

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15
Q

Engagements not Assurance Engagements

A

Engagements that does not have assurance or opinions

  1. Agreed-upon procedures
  2. Compilations
  3. Tax returns
  4. consultation or advisory
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16
Q

Engagements that meets the definition of assurance engagement but is not required by the framework

A
  1. testifying in legal proceedings

2. professional opinions

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17
Q

Reports on Non-Assurance Engagement

A
  1. implying compliance with Framework, PSA, PSRE, PSAE
  2. Words such as assurance, audit, or review
  3. statement that can be reasonably mistaken as a conclusion
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18
Q

Engagement Acceptance

A
  1. a practitioner must have independence, competence, and other ethical requirements.
  2. the engagement must have all the characteristics:
    a. appropriate subject matter
    b. suitable and available criteria
    c. access to sufficient appropriate evidenced.
    d. conclusion is drawn in a written report
    e. rational purpose
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19
Q

Other consideration in engagement acceptance

A
  1. if there is a significant scope limitation it is unlikely the engagement has a rational purpose
  2. there may be additional requirements in the specific standards.
  3. an accepted assurance engagement cannot change to a non assurance, or a limited to reasonable engagement without reasonable justification
  4. a potential engagement cannot be accepted as assurance engagement, it is possible to identify a different engagement that will meet the needs of intended users.
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20
Q

Elements of Assurance Engagement

A
  1. three-party relationship
  2. appropriate subject matter
  3. suitable criteria
  4. sufficient and appropriate evidence
  5. Assurance report
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21
Q

Three party relationship

A

Practitioner - auditor or the party to perform the assurance engagement
Responsible party - auditee or the party responsible for the subject matter or the subject matter information
Intended users - a person for whom the practitioner prepares the assurance report

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22
Q

True or False?

the responsible party and the intended party may be from different or the same entity

A

True

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23
Q

True or False?

the responsible party may or may not be the party who engages the practitioner

A

True

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24
Q

True or False?

the responsible party can be the only intended user

A

False, the responsible party can be one of the intended users but not the only one.

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25
Q

Appropriate Subject Matter

A

identifiable and capable of consistent evaluation against criteria or can be subjected to procedures

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26
Q

Characteristics of a Suitable Criteria

A 
relevance
completeness
reliability
neutrality
understandability
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27
Q

what are the criteria?

A

the benchmark used to evaluate or measure the subject matter

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28
Q

Formal Criteria

A

established framework or standard

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29
Q

Less formal criteria

A

internally developed code of conduct or an agreed level of performance

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30
Q

Audit evidence

A

information obtained in which the conclusion is based

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31
Q

sufficiency (Elements of engagement)

A

the measure of the quantity of the evidence

32
Q

appropriateness

A

the measure of the quality of the evidence

33
Q

reliability of evidence

A

influenced by its source and nature

34
Q

Assurance report

A

written report consisting of the conclusion that conveys the assurance obtained about the subject matter

35
Q

Who is the standard-setting body of the Philippines in auditing?

A

Auditing and Assurance Standards Council

36
Q

Composition of AASC according to RA. 9298

A 
15 regular members with 1 chairman and 1 representative of the following:
BOA 1 
SEC 1
COA 1
ACPAPP 1
PICPA: 
Public Practice 7
Commerce and Industry 1 
Academe 1 
Government 1

term of 3 years, renewable for another term

37
Q

Composition of AASC according to the website

A 
18 regular members with 1 chairman and 1 representative of the following:
BOA 1 
SEC 1
BSP 1
COA 1
ACPAPP 1
PICPA: 
Public Practice 9
Commerce and Industry 1 
Academe 1 
Government 1

term of 3 years, renewable for another term

38
Q

Pronouncements by AASC

A

PSA, PSRE, PSAE, PSRS, PSQC, PAPS, PREPS, PAEPS

39
Q

The objective of PSQC 1

A

Provides reasonable assurance:

  1. compliance with professional standards and regulatory and legal requirements
  2. issuance of appropriate reports
40
Q

Elements of System Quality Control

A
  1. Leadership responsibilities for quality within the firm
  2. relevant ethical requirements
  3. acceptance and continuance of client relationships and specific engagements.
  4. human resources
  5. engagement performance
  6. monitoring
41
Q

Leadership responsibilities for quality within the firm

A

provides guidance on promoting an internal culture of quality

42
Q

relevant ethical requirements (PSQC 1)

A

compliance with code of ethics

43
Q

acceptance and continuance of client relationship and specific engagement (PSQC 1)

A

guidance on whether the firm is able to accept or continue client relationships

44
Q

human resources (PSQC 1)

A

managing the firm’s human resources

45
Q

Engagement Performance (PSQC 1)

A

engagements are performed appropriately

46
Q

monitoring

A

ensuring the firm’s quality control system is relevant, adequate and operating effectively

47
Q

PSA 220

A

Quality control for Audits of Historical Financial Statement

48
Q

PSQC 1

A

Quality control for firms that perform audits and review of FS and other Assurance and Review Engagement

49
Q

Leadership responsibilities for quality on audits

A

the engagement partner shall take responsibility for the overall quality of each audit engagement to which they are assigned

50
Q

Independence (PSA 220)

A

the engagement partner shall form a conclusion on compliance with independence requirement and shall:
a. identify and evaluate circumstances and
relationships that create a threat to independence
b. evaluate information on breaches in the firm’s
independence policies and procedures to determine if they pose a threat to the independence of audit engagement
c. take appropriate action

51
Q

Acceptance and Continuance of Client Relationships and Audit Engagements (PSA 220)

A
  1. the engagement partner shall be satisfied that appropriate procedures have been followed and conclusions reached are appropriate
  2. should information that could have caused the firm to decline the engagement, it shall be communicated to the firm and necessary actions must be taken
52
Q

Assignment of engagement teams (PSA 220)

A

the engagement partner and any auditor’s expert not part of the engagement team shall have appropriate competence and capabilities

53
Q

Engagement direction, supervision, and performance (PSA 220)

A

take responsibility for the direction, supervision, and performance are in compliance with professional standards and applicable legal and regulatory requirements and the audit’s report being appropriate in the circumstances

54
Q

reviews

A

the engagement partner shall take responsibility for reviews being performed is in accordance with the firm’s review policies and procedures and shall be satisfied that sufficient appropriate audit evidence has been obtained

55
Q

Consultation (PSA 220)

A

the engagement partner shall be responsible for:

a. appropriate consultations on difficult or contentious matters taken by the engagement team
b. be satisfied that the engagement team have undertaken appropriate consultation during the course of the engagement
c. be satisfied that the nature and scope of conclusions resulting from such consultations are agreed with the party consulted
d. determine that conclusions resulting from such consultations have been implemented

56
Q

Engagement Quality Control Review

A

audits of financial statements of listed entities and other audit engagements for which engagement quality control review is required

57
Q

duties of an engagement partner on an EQCR

A
  1. Determine that an engagement quality control reviewer has been appointed
  2. discuss significant matters that arise during audit engagement with the reviewer
  3. not date the auditor’s report until the completion of quality control review
58
Q

What happens if there is a difference of opinion within the engagement team, with those consulted, or between engagement partner and engagement quality control reviewer?

A

the engagement team shall follow the firm’s policies and procedures for dealing with and resolving differences of opinion

59
Q

Monitoring (Engagement Quality Control Review)

A

a monitoring process designed to provide reasonable assurance that the firm’s policies and procedures are relevant, adequate, and operating effectively.

60
Q

Documentation by the auditor

A

included in the audit reports are:

  1. issues identified with respect to relevant ethical requirements and how are they resolved
  2. conclusion on compliance with independence requirements that happy to the audit engagement
  3. conclusion reached regarding the acceptance and continuance of client relationship and audit engagement
  4. nature and scope of, and conclusions resulting from consultations undertaken during the audit engagement
61
Q

Documentation by the engagement quality control reviewer ( 3 inclusions)

A
  1. procedures required by firm policies that have been performed
  2. the engagement quality control review has been completed on or before the auditor’s report date
  3. the reviewer is unaware of any unresolved matter
62
Q

PSAE 3400

A

The Examination of Prospective Financial Information

63
Q

The objective of the engagement

PSAE 3400

A
  1. management’s best estimate assumptions are not unreasonable and in the case of hypothetical assumptions, are consistent with the purpose of the information
  2. PFI is prepared properly on the basis of the assumption
  3. PFI is properly presented and all material assumptions are adequately disclosed as to whether they are the best estimate assumption or hypothetical assumption
  4. PFI is prepared on a consistent basis with the historical financial statements using appropriate accounting principles.
64
Q

Prospective financial information

A

financial information based on assumptions about events that may occur in the future and possible action by an entity

65
Q

forecast

A

PFI prepared on the basis of assumptions as to future events which managements expect to take place and actions expected to be taken by the management

66
Q

Projection

A

PFI prepared on the basis of a hypothetical assumption or a mixture of best estimate and hypothetical assumptions

67
Q

Who is responsible for the preparation and presentation of PFI?

A

management

68
Q

what is the role of the auditor according to PSAE 3400?

A

the auditor is tasked to examine the PFI to enhance its credibility

69
Q

Auditor’s opinion

PSAE 3400

A

Express an opinion as to whether PFI is properly prepared on the basis of assumption and is presented in accordance with GAAP

70
Q

PSRE 2400

A

Engagement to Review Financial Statements

71
Q

The objective of PSRE 2400

A
  1. enable the auditor to state whether anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with GAAP
72
Q

what type of assurance is PSRE 2400?

A

limited assurance or moderate assurance ( negative assurance)

73
Q

Review Procedures ( PSRE 2400)

A

Inquiry and analytical procedures

74
Q

PSRS 4400

A

Engagements to Perform Agreed Upon Procedures

75
Q

Objective off PSRS 4400

A
  1. for the auditor to carry out procedures of an audit nature
  2. simply provides a report of the factual findings, no assurance is expressed
  3. users of the reports assess themselves and draw their own conclusion
  4. the report is restricted to those parties that have agreed to the procedures
76
Q

PSRS 4410

A

Engagements to Compile Financial Information

77
Q

The objective of PSRS 4410

A
  1. to use accounting expertise to collect, classify and summarize financial information
  2. reduce detailed data to a manageable and understandable form
  3. it is not designed and does not enable accountants to express any assurance on the financial information

Auditing Assurance and Principles (2 decks)

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