Unit 5 Auditing and Internal control

Question 1

FRQ

Answer 1

Financial Reporting Quality

Question 2

Financial Reporting Process

Answer 2

1. Management: Preparation of financial statements
2. Board of Directors: Approval of statements
3. Auditors: Assurance of financial statements

Question 3

Management role FRQ

Answer 3

Preparing financial statements
Making subjective judgments about measurements of assets, liabilities, revenues, and expenses
Impact on financial ratios and stock price

Question 4

Elements of an annual report 1-4

Answer 4

1. Summary performance data for the year and comparisons for the past few years
2. Chairperson’s report
3. CEO report - Review of operations
4. Corporate Governance statement *listed companies

Question 5

Set of financial statements

Answer 5

Balance sheet
Income statement
Statement of changes in equity
Cash flow statement
Notes

Question 6

Corporation Act 2001

Answer 6

The principal legislation business entities in Australia

Regulating matters such as the formation and operation of companies, duties to officers, takeovers, and fundraising.

Question 7

Hierarchy of a Corporation

Answer 7

Key players include management, board of directors, external auditors

Question 8

Agency Theory

Answer 8

Principal and Agent Relationship

Question 9

Agent

Answer 9

The person who is to do something and be compensated

Question 10

Principle

Answer 10

The person who wants it done

Question 11

External auditors

Answer 11

Must be independent, provide true and fair view, in accordance with Corporation Act 2001, complies with GAAP and other professional mandatory reporting requirements

Question 12

Types of Audit Opinions

Answer 12

1. Unmodified opinion
2. Qualified opinion
3. Adverse opinion
4. Disclaimer opinion

Question 13

GAAP

Answer 13

Rules, standards and usual practices that companies are expected to follow when preparing financial statements Components - Accounting standards: AASB (Australian Accounting Standards Board)- The framework (Preparation and presentation of financial statements) Additional rules ASX listed requirements, Corporation law

Question 14

ASIC

Answer 14

Australian Securities and Investments Commission

Regulates registered companies, financial markets, and providers of financial services and credit services

Question 15

ASX

Answer 15

Australian Securities Exchange
An integrated exchange offering listings, trading, clearing, settlement, technical and information services, technology, data and other post-trade services (a market operator)

Question 16

AASB

Answer 16

Australian Accounting Standards Boardl; its mission > Develop, issue and maintain principles-based Australian accounting and external reporting standards and guidance that meet user needs and enhance external reporting consistency and quality

Question 17

APES110

Answer 17

Code of Ethics, The professional obligations and ethical requirements imposed on members of the accounting profession are based on the five fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour in the Code.

Question 18

Internal Control

Answer 18

1. Effectiveness and efficiency of operation including safeguarding assets against loss 2. Reliability of internal and external financial and non-financial reporting 3. Compliance with applicable laws and regulations

Question 19

Threats to auditor’s

independence

Answer 19

Self-interest, Self-review, Advocacy, Familiarity, Intimidation