Week 1 - Reintroduction - Chapter 1 Flashcards
what is an assurance engagement?
a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation of a subject matter against a suitable criteria
two types of assurance?
reasonable & limited
or high & moderate
two types of opinions?
positive & negative
benefits of assurance?
- enhanced credibility
- reduced risk of management bias & fraud
- draws attention to deficiencies
who are audits governed by?
ISAs
ISA200?
sets out overall objectives of an auditor when auditing FSs
- to obtain reasonable assurance
- to report on FSs & communicate to TCWG
what determines who is subject to a statutory audit and what is the threshold?
companies act 2006 governs this
to not be subject to an audit, pass 2/3 of the following:
- less than 50 employees
- turnover doesn’t exceed 10.2m
- total assets don’t exceed 5.1m
when do subsidiary companies not require an audit?
if their liabilities are guaranteed by their parent company
do some companies require audits regardless of if they exceed the threshold or not?
yes
- banks
- PLCs
- companies where a shareholder with 10% or more equity asks for an audit
statutory audit characteristics?
- governed by companies act 2006
- procedures include inspection, observation, confirmation, analytical procedures, inquiry, reperformance and recalculation
- reasonable level of assurance
- express opinion on FSs & other matters
- conclusion’s publicly available
other assurance engagement characteristics?
- governed by ISAEs & ISREs
- procedures only include APs, inquiry & management written representations
- less work than an audit
- limited level of assurance
- info normally restricted to in-house
benefits of an audit include…
- independent scrutiny
- promotes accounting discipline
- aids TCWG with more information
- additional assurance may be required by 3rd parties
do auditors need to ensure consistency with director’s report?
yes
