Revision Notes Flashcards
5 fundamental ethical principles in audit?
- integrity
- objectivity
- confidentiality
- professional competence & due care
- professional behaviour
threats to ethical principles?
- self interest
- self review
- intimidation
- familiarity
- advocacy
safeguards to ethical threats?
- training
- quality control procedures (EQCR)
- change engagement partner
- exams & CPD
- professional scepticism
professional scepticism = ?
questioning mind
what 3 elements determine the significance of threats to ethics?
- amounts (larger amount = larger threat)
- seniority (more senior = greater threat)
- subjectivity (more subjective = more risk)
when using work of experts, do we fully rely on them?
no
at the end of the day, our opinion takes precedence
therefore reperformance /performance evaluation may be necessary
what must we consider when using work of experts?
- competence
- objectivity
- evaluate their work (assumptions, policies used etc)
what are the 2 categories of audit opinions?
what are the 4 types of audit opinions?
2 categories = modified and unmodified
4 categories = unqualified, qualified, adverse, disclaimer
which audit opinions are modified and which are unmodified?
modified = qualified, adverse, disclaimer
unmodified = unqualified
modified opinion = ?
occurs when there’s an error in FS
unmodified opinion = ?
FS are free from error
clean opinion
unqualified opinion = ?
best audit opinion (for client)
clean opinion
FS are presented fairly
qualified opinion = ?
FS are presented fairly EXCEPT FOR…
misstatement is material but not pervasive
adverse opinion = ?
FS are NOT presented fairly
misstatement is material and pervasive
misstatement changes the whole look of the FS
bad opinion
disclaimer of opinion = ?
no opinion is expressed
e.g., auditor lacks independence, scope limitation, etc.
workpapers = ?
documentation of the procedures & findings of the auditor
supports the auditor’s opinion
purpose of workpapers?
gives proof of work done
can be used in court to support auditor and give proof of work
can be stored electronically or on paper
what must workpapers contain?
- work performed
- evidence obtained
- significant matters
- conclusions drawn
workpaper contents?
- client name
- y/e date
- file reference
- name of preparer & date
- name of reviewer & date
- conclusions drawn
- errors
- source of information
- subject
- objective of test
- sample size
- work performed
synonym for audit workpapers?
audit documentation
what are the thresholds for materiality?
- 0.5-1% of revenue
- 5-10% of profit before tax
- 1-2% of total assets
pervasive = ?
when a misstatement is evident throughout the whole FS - not isolated
spread throughout so thoroughly as to be seen/felt everywhere
audit report = ?
to express an opinion clearly through a written report
FS gives a true & fair view = ?
FS are prepared in accordance with reporting framework
adequately prepared FS must include…?
- accounting policies are disclosed
- estimates are reasonable
- terminology is appropriate
- information is relevant
- adequate disclosures
if there’s material uncertainty related to going concern…?
disclosure must be made
what are the types of additional disclosures in FS?
emphasis of matter paragraph / other matter paragraphs
emphasis of matter paragraph?
paragraph in FS used to direct attention to an important matter in the FS
other information = ?
financial/non-financial information, OTHER THAN THE INFO IN FS, that’s is subject to an audit
what should auditor do if a material inconsistency is identified?
- ask management to correct it
- can resign from engagement if not corrected
- if can’t resign, auditor must describe material incon sistency in audit report
