Questions I Got wrong Flashcards
List the main advantages of auditing standards for external auditors (4)
Standardize the approach taken by auditors
Promote audit quality
Compliance with the standards protects auditors in legal claims
Provides framework and guidance for the audit approach
What are you required to report on by exception according to companies act 2006 (6)
WHETHER
Misstatements have been identified in directors report
Adequate accounting records kept
Returns adequate for the audit have been received from branches not visited
Fs agree to the accounting records
Disclosures re directors remuneration have been made
All information and explanations have been received
What are the two ways of giving an modified audit report without a modified opinion
Emphasis of matter paragraph
Material uncertainty relating to going concern disclosure - can issue a T and F opinion but with a material uncertainty relating to going concern paragraph referring to the management disclosure note
What happens if there is a lack of disclosure relating to going concern uncertainty, what happens if the disclosure is poorly worded
Pervasive misstatement - adverse opinion
Material misstatement - qualified opinion
Five benefits of using data analytics software
It enhanced the quality of assurance work and improves understanding of the entity
Allows assurance work to be performed more efficiently freeing up staff time to work on higher risk areas
Up to 100% of transactions can be examined, minimizing risk
The timing of the engagement can be changed because more work can be performed during the accounting period
It facilitates:
Analysis of relationships between different account classes
Identification of outlying transactions
Identification of items which are at risk of misstatement or fraudulent comparison to of ratios to industry benchmarks
What must management do to be informed management
Must make all decisions requiring exercise of judgement
Has prepared the underlying accounting records
Firm does not initiate transactions
Firm does not make decisions
Services provided are mechanical in nature
Responsibilities as an audit senior to junior members (6)
Allocate work to juniors
Brief juniors to ensure they understand
Track progress of the engagement to ensure sufficient time available
Answer questions from juniors to ensure they understand intructions
Review of the work of juniors to ensure work is properly performed
Assign work to team members according to experience
Consequences if you have incorrectly issued unmodified report
Litigation
Regulatory investigation
Fines
Disciplinary action
Future increase in PII premium
Reputational damage
Collapse of firm in extreme cases
Quality control procedures
Direction
Supervision
Review
Consultation
Hot file review if listed or high risk
What attributes give effective communication to management in the management letter (6)
Timely and in writing
Extent and form
Management comments
Previous years points if not addressed
Disclaimer - so third parties don’t rely on info
Authoritative - asserted and committed
What must a written rep confirm
Responsibility to prepare the financial statements
They have provided all relevant information
All transactions are recorded
Procedures for going concern testing
Analyze and discuss cash flow forecast
Analyse and discuss interim F/S
Read board minutes
Enquire about litigation claims
Assess company’s ability to raise finance
Review subsequent events
Confirm borrowing facilities
Internal controls for collection boxes
Sequentially numbered boxes
Register to track location of boxes
Sealed with tamper tape
Regular collection and recording
Dual counting when received
Background checks on collectors
Internal controls for postal receipts
Dual opening of post
Immediate recording of income
Post held securely until opened
