Topic 1 - Intro to Audit

Question 1

Elements to Assurance Engagement

Answer 1

• Three Party Involvement:
  Practitioner - Reviews, Opinion
  Intended User - Shareholders
  Responsible party - Preparer
• Appropriate Subject matter - Examined by practitioner
  *Suitable Criteria - Evaluated against, standards, guidance, laws
  *Evidence - Sufficient and appropriate - required.
  *Written Report - Assurance, conclusion, Opinion.

Question 2

Objective of and Audit

Answer 2

Express an opinion
- True (accurate) and Fair (unbiased)
- Prepared within specific legislation
- Materially correct

Question 3

Advantages and Disadvantages

Answer 3

*Advantages:
High quality info
Independent scrutiny
Reduces risk
Enhances credibility

*Disadvantages
Does not test all transactions
FS includes subjective figures
Relies on internal controls
Evidence persuasive not conclusive.

Question 4

Types of Assurance

Answer 4

*Reasonable/Positive

High level of confidence
“In our opinion” True and Fair
Governed by Law
Report to member/shareholders
Statutory

*Limited/Negative

Moderate level of confidence
“nothing has come to our attention”
Decided by parties
To the engaged party
Cashflow, business plans, reviews

Question 5

Expectation Gap

Answer 5

*Do not test all transactions
*No responsible to detect fraud - only the FS is free from material misstatement.
*Do not prepare FS

Question 6

Review Engagements

Answer 6

Objective - Inquire and use analytical procedures to conclude if anything would suggest if the FS are not prepared in all material respects

Accountability - those charged with governance - management

Agency - principle employs another party to perfume tasks on their behalf.

Stewardship - Duty of care, Fiduciary duty - Directors to Shareholders