Seminar questions Flashcards
What does ‘assurance’ mean in the financial reporting context?
An audit provides reasonable assurance about the true and fair nature of the financial reports, and a review provides limited assurance. The audit contains a positive expression of opinion (e.g. ‘in our opinion the financial reports are in accordance with (the Act) including giving a true and fair view…), while the review contains a negative expression of opinion (e.g., ‘we have not become aware of any matter that makes us believe that…the financial reports are not in accordance with (the Act)… including giving a true and fair view..’).
Explain the difference between a financial report audit and an assurance engagement.
An assurance engagement is an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.
A financial report audit is one type of assurance engagement. ISA 200 states that the objective of a financial report audit is for the auditor to express an opinion about whether the financial report is prepared in all material respect in accordance with a financial reporting framework. Therefore, a financial statement audit requires the auditor to use the financial reporting standards and the relevant law (e.g. Companies Act 2001) as the relevant criteria, and assess whether the information provided by the company managers in the financial report is in accordance with those laws and standards.
Compliance and performance auditors are other examples of assurance engagements. In addition, the review or audit of a sustainability report is a type of assurance engagement.
What do you understand by sufficient appropriate evidence?
Sufficiency which relates to the Quantity of audit evidence which the audit practitioner deems adequate for him to form an audit opinion on a reasonable basis.
Appropriateness which relates to the Quality of audit evidence. Quality of audit evidence englobes two key characteristics namely (A) Relevance and (B) Reliability. Relevance covers the association between audit evidence and management assertions in the financial statements whilst Reliability emphasizes on the source and nature of audit evidence.
What do you understand by the terms (i) Professional Judgment and (ii) Professional Scepticism?
(i) Professional judgment is a set of skill obtained through application of relevant training, knowledge and experience within the spectrum of auditing, accounting and ethics.
Such training provides audit professionals with the ability to make an informed decision based on the knowledge and expertise
(ii) Professional scepticism is ‘an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence’
What is the acronym for remembering Assertions about classes of transactions, events and related disclosures?
assertions about classes of transactions, events and related disclosures:
Occurrence
Completeness
Accuracy
Cut Off
Classification
Presentation
“Only Cats Chase And Play Carefully”
What is the acronym for remembering Assertions about accounted balances and related disclosures?
Assertions about accounted balances and related disclosures:
Existence
Rights and Obligations
Completeness
Accuracy, Valuation and Allocation
Classification
Presentation
“Every Raccoon Can Always Play Chess”
what is Sufficient Audit Evidence?
Sufficient Audit Evidence – The corroborating evidence/supporting documentation should be an adequate quantity to represent the population as a whole.
what is Appropriate Audit Evidence?
Appropriate Audit Evidence – Suitable evidence – relevant and reliable evidence that supports the assertion being tested etc.
