Week 1 Flashcards
What is an assurance engagement?
- Practitioner expresses a conclusion
- Enhances confidence of intended users
- Outcome evaluated against criteria
What is the objective of a reasonable assurance engagement?
- Reduce assurance engagement risk to low level
- Basis for positive expression of practitioner’s conclusion
What is the objective of a limited assurance engagement?
- Reduce assurance engagement risk to acceptable level
- Risk greater than reasonable assurance engagement
- Basis for negative expression of practitioner’s conclusion
What engagements do not meet the assurance definition?
- Agreed-upon procedures engagements
- Compilations of financial or other information
- Preparation of tax returns without assurance
- Consulting or advisory engagements
When does a practitioner accept an assurance engagement?
- Preliminary knowledge indicates ethical requirements met
- Engagement has appropriate subject matter
- Suitable criteria available to intended users
- Access to sufficient appropriate evidence
- Written report with practitioner’s conclusion
- Rational purpose for the engagement
What is inappropriate use of the practitioner’s name?
- Associated with a subject matter by reporting on it
- Consenting to use of name in professional connection
What are financial statements prepared in accordance with?
- Accounting standards generally accepted in the Philippines
- International Accounting Standards
- Other authoritative financial reporting frameworks
What is the origin of the word ‘audit’?
- Derived from Latin “AUDIRE” meaning to hear
- Initially appointed to check accounts and hear explanations
- Changed focus with joint stock companies to verify accounting records
What are the comparative levels of assurance in auditing and related services?
- Audit: High, but not absolute assurance
- Review: Moderate assurance
- Agreed-upon procedures: No assurance
- Compilation: No assurance
What is the objective of an audit engagement?
- Provide high level of assurance
- Express positively that information is free of material misstatement
What is a statutory audit?
- Audit required by law
What is a periodical/annual audit?
- Examination at the end of the financial year
- Common in small organizations
What is an interim audit?
- Examination during the accounting year
- Conducted quarterly or semi-annually
What is a partial audit?
Audit of only part of the accounting system
Example: Auditing only the payment side of the cash book
What is a balance sheet audit?
- Verification of items in the balance sheet
What is a cost audit?
- Verification of cost accounting records
- Detects errors and frauds in cost accounting
What is a management audit?
- Examination of organizational structure and operations
- Assesses efficiency and achievement of management objectives
What is the objective of a review engagement?
- Provide moderate assurance
- Expressed as negative assurance
What is the objective of an agreed-upon procedures engagement?
- Carry out agreed procedures
- Report on factual findings without expressing assurance
What is the objective of a compilation engagement?
- Use accounting expertise to summarize financial information
- No assurance expressed
What are the procedures in a compilation engagement?
- Obtain general knowledge of the business
- Familiarize with industry accounting principles
- Summarize financial information
What is the main objective of an audit of financial statements?
- Express opinion on whether financial statements are fairly presented
- Enhance confidence in financial statements
What are incidental objectives of auditing?
- Detection and prevention of errors and frauds
What are types of errors in auditing?
- Errors of Omission
- Errors of Commission
- Compensating Errors
- Errors of Principle
- Clerical Errors
What are types of fraud in auditing?
- Misappropriation of Cash
- Misappropriation of Goods
- Manipulation of Accounts (Windows Dressing)
