Topic 1- responsibilities and standards Flashcards
What are the elements of an Assurance engagement?
CREST
criteria - audits use ISA, IFRS and Uk companies act
report - audit opinion: gives reasonable assurance expressed positively
audit conclusion- gives limited assurance expressed negatively
evidence - involves collecting more evidence to give higher level of assurance
subject matter - format of document will be bespoke
three party relationship
Assurance vs Audit
Assurance gives limited assurance whereas audit gives reasonable assurance
procedures in assurance are typically limited to analytical procedures and enquiries whereas audits involve tests of detail and tests of control
the objective of assurance is to reduce risk to an acceptable level whereas in audit it is to reduce it to a low level
what are the benefits of assurance?
Increased credibility over subject matter
may find deficiencies in subject matter
will make later audits/ assurance
engagements easier
submitting work for scrutiny will make directors look better
will help business ie get a loan or something
what are the audit threshholds?
exempt from audit if not a plc/bank/insurance company and the following criteria met:
no more than 50 employess
revenue no more than 10.2 mil
gross assets no more than 5.1 mil
What are the general responsibilities of the directors?
maintain accounting records
prepare financial statements
safeguard assets
comply with sarbanes Oxley legislation
what are the general responsibilities of auditors?
follow companies act 2006
set out terms
follow ethical standards
perform quality management procedures
what are the audit and internal control responsibilities of directors?
prepare financial statements
design internal controls which will prevent detect and correct errors and omissions
what are the audit and internal control responsibilities of auditors?
express opinion on the financial statements
detect material erros
test the internal controls which adequately address risks
communicate weaknesses in internal controls to those charged with governance
what are the fraud responsibilities of directors ?
prevent detect and correct any instance of fraud
what are the fraud responsibilities of auditors?
detect material frauds in FS
not responsible for prevention
obtain written representation from directors acknowledging their responsibilities
communicate any instacnes of fraud with:
1. management
2. those charged with governance
3. regulatory authorities
what are the laws responsibilities of directors?
identify all relevant laws and regulations and comply with them
what are the laws responsibilities of auditors?
consider any instances of non-compliance and whether they cause errors and omissions in FS
e.g provisions, impairments, fines, going concern issues
obtain sufficient and appropriate evidence CA06. other laws and regulations (h&S) enquiry of management and review correspondence files
communicate issues with:
those with governance
shareholders
third parties
what are the related parties responsibilities of directors?
identify all related parties and transactions
what are the related parties responsibilities of auditors?
audit disclosures relating to related parties
what are the going concern responsibilities of directors?
make and assessment whether company is going concern
prepare forecasts to provide evidence to support the going concern assumption
