Week 2 - Reintroduction to Audit & Assurance and Accepting Engagements Flashcards
PIEs = ?
public interest entities
who are PIEs?
- big PLCs
- large private companies
- banks & credit institutions
what constitutes large private companies?
> 750 employees
£750m turnover
audit competition?
spearheaded by the CMA (competition & market authority)
97% of the 350 largest companies are audited by big 4
CMA plan to challenge this through a range of initiatives
FRCs findings regarding sustainability/climate change?
FRC published findings that businesses weren’t considering climate change in their business operations
users are becoming increasingly interested in businesses’ sustainability disclosures
must entities disclose sustainability related risks & opportunities?
yes
under IFRS S1 & IFRS S2
what standard requires entities’ disclosure of sustainability related risks & opportunities?
IFRS S1 & IFRS S2
lowballing?
gives rise to self interest threat
self interest threat stems from, to gain a profit, entities may have to cut corners
this harms audit quality & an EQR will be required
ISA220?
requires the auditors to decide whether or not to accept/continue the engagement
what info may outgoing auditors provide?
- client fraud
- client provided lack of info
- client had creative accounting treatments
- poor management
other name for shareholders of company?
members
audit preconditions?
- correct FR framework
- ensure management understand their responsibilities
management responsibilities?
- prepare FS w/ correct FR framework
- adequate internal controls
- provide auditor w/ access to docs
contents of an engagement letter?
main contents
- objective/scope of audit
- responsibilities
- auditors’ right to access docs
- form/content of audit report
additional contents
- basis of fees
- practicalities
- need for written reps
- audit timetable
duties & rights when an auditor is removed?
duty = prepare statement of circumstances to the company’s shareholders
right = prepare written reps for shareholders & right to speak at general meetings
must plc’s require a statement of circumstances from auditors to shareholders when they’re removed?
yes
stricter rules for plc’s
how are losses on long term contracts recognised?
immediately recognised in the FS
how are revenues on long term contracts recognised?
as they’re earned
e.g., in alignment with % completion
ISA240?
requires auditors to report fraud risks
must auditors report their strategic report?
under companies act 2006, yes they do
