Topic 2 Flashcards
what is the regulation structure
IFAC-> IFAC Code of ethics
-> IAASB (Intrntnal auditing and assurance bord)
IAASB-> ISA (International standard’s on Audit)
- ISQC ( International standard on Quality contrl)
what is IFAC
6 points
1) The International Federation of Accountants (IFAC) is the global organization for the accountancy profession.
2) A grouping of accountancy bodies ACA/ACCA/CIMA/AAT/CIPFA.
3) No legal standing in members countries.
4) IFAC promotes international regulation of the accountancy profession. By ensuring minimum requirements for accountancy qualifications, post qualification experience and guidance on accounting and assurance for accountants around the world, there will be greater public confidence in the profession as a whole.
5) Global body with the objective to strengthen the profession on a worldwide basis. includes people from
6) IFAC initiates, co-ordinates and guides efforts to achieve international technical, ethical and educational statements for the accountancy profession.
who is IAASB
brief def
International audit and assurance standards board
It is their responsibility to develop and promote International Standards on Auditing (ISAs).
In the EU all audits must be carried out in accordance with ISA for accounting periods beginning on or after 1st Jan 2005
What is International standards on auditing (ISA)
5 points on it
International Standards on Auditing (ISAs) are (IAASB) and provide GUIDANCE on the performance of an audit that the auditor must follow to ensure each audit is performed consistently and to a required standard of quality.
ISA are written in the context of an audit of financial statements by an independent auditor and only apply to the audit of historical financial information. However, it can also be applied to the audit of other historical financial information
The ISAs contain basic principles and essential procedures together with related guidance in the form of explanatory material to aid the auditor on how to follow the requirements.
The basic principles and essential procedures of an ISA are to be applied in all cases.
If in exceptional cases the auditor deems it necessary to depart from an ISA to achieve the overall aim of the audit, then this departure must be justified.
what are the rights of auditors during appointment
In order to carry out their duties, auditors are given certain rights:
✓ access to accounting records at all times
✓ receive information and explanations from the officers of the company as necessary;
✓ receive notice of, attend and speak at general meetings of shareholders;
✓ Receive copies of any written resolutions of the company
what are the rights of auditors during resignation
To request a General Meeting/Extraordinary GM of the company to explain the circumstances of the resignation.
To require the company to circulate the notice of circumstances relating to the resignation.
what are the duties of auditors
2
The external auditor’s primary duty is to audit the financial statements and provide an opinion on whether the financial statements give a true and fair view (or are fairly presented in all material respects).
They may have additional reporting responsibilities required by local national law, such as confirming that the financial statements are properly prepared in accordance with those laws.
regarding the appointment of an auditor, Who decides this
In most jurisdictions:
✓ The shareholders of the company
✓ Directors can appoint the FIRST auditor and fill a ‘Casual vacancy’, but needs shareholders’ approval at next AGM
✓ Secretary of state (Government) if no auditors have been appointed and need to be appointed.
✓ Appointment runs from end of AGM until the end of the next AGM
Where no AGM- automatic annual reappointment unless a shareholder objects
regarding the resignation of an auditor, how is this completed
3points
✓ simple majority at a general meeting of the company
✓ The law requires special notice to be given
✓ The auditor issues written notice of the resignation and a statement of circumstances to the members and regulatory authority e.g. ACCA/FCA
–>Even if there was no circumstances this should still need to be communicated to the shareholders
✓ Auditors can require the directors to call and extraordinary general meeting to discuss the situation
✓ The auditor can circulate representations stating why they should not be removed if applicable.
✓ The auditor can speak at the meetings on any matters which concerns them as the auditors
regarding the removal of an auditor, how is this completed
✓ The auditor will need to have notice of the removal of auditor
✓ Organize a meeting within a timely manner
✓ Auditors can make representations to why they should stay in office
✓ The auditor can speak at the meetings on any matters which concerns them as the auditors
Must notify the regulatory body
which individual can act as an auditor
✓ A member of a recognised supervisory body e.g. ACCA
✓ Allowed by the rules of the body to be an auditor
✓ someone directly authorised by the state (government)
Sole practitioners
Partners in a partnership
Members of a limited liability partnership
Directors of an audit company.
which firm can act as an auditor
✓ Controlled by members of a suitably authorised supervisory board
OR
✓ A firm directly authorised by the state
which individual can NOT act as an auditor and excluded by LAW
The law in most countries excludes those who manage or work for the company, and those who have business or personal connections with them from auditing that company.
In Britain:
✓ An officer (Director or secretary) of the company
- -> An employee of the company
- -> A business partner or employee of the above
which individual can NOT act as an auditor and excluded by ETHICS
✓ Due to lack of objectivity or independence for e.g.
- -> close business relationships
- -> personal relationships
- -> long association with the client
- -> fee dependency
- -> non-audit service provided
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