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
