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BUS165 - Foundations of Assurance > Revision Notes > Flashcards

Revision Notes Flashcards

1
Q

5 fundamental ethical principles in audit?

A
  • integrity
  • objectivity
  • confidentiality
  • professional competence & due care
  • professional behaviour
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2
Q

threats to ethical principles?

A
  • self interest
  • self review
  • intimidation
  • familiarity
  • advocacy
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3
Q

safeguards to ethical threats?

A
  • training
  • quality control procedures (EQCR)
  • change engagement partner
  • exams & CPD
  • professional scepticism
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4
Q

professional scepticism = ?

A

questioning mind

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5
Q

what 3 elements determine the significance of threats to ethics?

A
  • amounts (larger amount = larger threat)
  • seniority (more senior = greater threat)
  • subjectivity (more subjective = more risk)
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6
Q

when using work of experts, do we fully rely on them?

A

no

at the end of the day, our opinion takes precedence

therefore reperformance /performance evaluation may be necessary

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7
Q

what must we consider when using work of experts?

A
  • competence
  • objectivity
  • evaluate their work (assumptions, policies used etc)
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8
Q

what are the 2 categories of audit opinions?

what are the 4 types of audit opinions?

A

2 categories = modified and unmodified

4 categories = unqualified, qualified, adverse, disclaimer

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9
Q

which audit opinions are modified and which are unmodified?

A

modified = qualified, adverse, disclaimer

unmodified = unqualified

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10
Q

modified opinion = ?

A

occurs when there’s an error in FS

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11
Q

unmodified opinion = ?

A

FS are free from error

clean opinion

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12
Q

unqualified opinion = ?

A

best audit opinion (for client)

clean opinion

FS are presented fairly

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13
Q

qualified opinion = ?

A

FS are presented fairly EXCEPT FOR…

misstatement is material but not pervasive

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14
Q

adverse opinion = ?

A

FS are NOT presented fairly

misstatement is material and pervasive

misstatement changes the whole look of the FS

bad opinion

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15
Q

disclaimer of opinion = ?

A

no opinion is expressed

e.g., auditor lacks independence, scope limitation, etc.

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16
Q

workpapers = ?

A

documentation of the procedures & findings of the auditor

supports the auditor’s opinion

17
Q

purpose of workpapers?

A

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

18
Q

what must workpapers contain?

A
  • work performed
  • evidence obtained
  • significant matters
  • conclusions drawn
19
Q

workpaper contents?

A
  • 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
20
Q

synonym for audit workpapers?

A

audit documentation

21
Q

what are the thresholds for materiality?

A
  • 0.5-1% of revenue
  • 5-10% of profit before tax
  • 1-2% of total assets
22
Q

pervasive = ?

A

when a misstatement is evident throughout the whole FS - not isolated

spread throughout so thoroughly as to be seen/felt everywhere

23
Q

audit report = ?

A

to express an opinion clearly through a written report

24
Q

FS gives a true & fair view = ?

A

FS are prepared in accordance with reporting framework

25
Q

adequately prepared FS must include…?

A
  • accounting policies are disclosed
  • estimates are reasonable
  • terminology is appropriate
  • information is relevant
  • adequate disclosures
26
Q

if there’s material uncertainty related to going concern…?

A

disclosure must be made

27
Q

what are the types of additional disclosures in FS?

A

emphasis of matter paragraph / other matter paragraphs

28
Q

emphasis of matter paragraph?

A

paragraph in FS used to direct attention to an important matter in the FS

29
Q

other information = ?

A

financial/non-financial information, OTHER THAN THE INFO IN FS, that’s is subject to an audit

30
Q

what should auditor do if a material inconsistency is identified?

A
  • 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

BUS165 - Foundations of Assurance (14 decks)

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