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Auditing 101 > Week 2 - Why It Matters > Flashcards

Week 2 - Why It Matters Flashcards

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1
Q

Possible causes for audit failure

A

unintenational human error
Auditor fraud
influence caused by financial interest
Caused by personal auditor-client relationship

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2
Q

Definition of independence - flint 1988

A

Unprejudiced
Unbiased
Uninfluenced

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3
Q

Independence

A

Of mind

Of appearance

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4
Q

Independence of mind

A

I am independent - work ethic, judgement

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5
Q

Independence of appearance

A

Others can see im independent

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6
Q

Programming independence

A

Auditors have freedom to develop own programme, within overall bounds of engagement

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7
Q

Investigative independence

A

Auditors have the freedom to examine info thst auditors themselves deem to be relevant

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8
Q

Reporting independence

A

Protects the auditors ability to choose to reveal to the public any info they believe should be disclosed

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9
Q

Conflicts of interest between auditor and client

A

Truthful audit report may not be seen as in the inteeest of management/shareholders/ both

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10
Q

Conflict between auditors profesh duty and self-interest

A

Auditors have to Comply with management view even if not profesh acceptable to retain audit

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11
Q

Conflict between managers and shareholders

A

Managers may mislead shareholders even if only in the short term

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12
Q

Conflict between client organisation and third parties

A

Company may bribe the third parties for their money even if not for their best interests

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13
Q

Published codes of ethics

A

to ensure the quality and independence of audit

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14
Q

General principles of IFAC codes

A 
Integrity 
Objectivity 
Professisional competence and due care 
Confidentially 
Professional behaviour
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15
Q

IFAC code conceptual framework - Requires accountants to

A

THREATS:
Identify,
Evaluate,
Address & either eliminate/ reduce

Adopt a principal-based approach

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16
Q

Potential threats to objectivity

A 
Self interest
Self review
Familiarity 
Advocacy 
Intimidation

17
Q

Why ethics and independence may differ in different countries

A 
History and origins
Development of financial markets
Cultural factors
Auditor liability and litigation
Audit market
Audit regulation
18
Q

This is sarbanes-Oxley act

A

Passed by US congregation in June 2002
Creation of PCAOB
Audit committees
Restriction of non-audit services
New financial reporting and auditing procedures
International repercussions 
Created in response to the failure of enron

19
Q

PCAOB

A

Public company accounting oversight board

20
Q

The public company accounting oversight board

A

Two sets auditing standers
Monitors/inspects audit firms
Can impose disciplinary sanctions
Auditors have to register with ^ 

21
Q

IFAC

A

International Federation of accountants

22
Q

International Federation of accountant

A

Auditing

Ethics 

23
Q

A clarified societal role for auditors

A

Increased audit quality
Enhanced transparency
Better accoutnability

24
Q

A strong independence regime

A

Mandatory Rotation of audit firms
Prohibition of certain non-audit services
Cap on the provision of non-audit services

25
Q

A more dynamic and competitive EU audit market

A

A single market for statutory audit
More choice
Enhanced supervision of the audit sector

26
Q

PIEs

A

Public interest entities
Include all companies listed on an EU regulated market and in addition unlisted banking and insurance companies and groups

27
Q

Rotation

A

Mandatory audit firm rotation every 10 years

28
Q

Small companies

A

Turnover not to sxceed 10.2 million
Balance sheet total not exceed $5.1 million
Average number of employees not greater than 50

29
Q

Directors responsibilities

A 
Preparation of accounts 
Accounting policies 
Accounting records
Safeguarding of assets
Prevention of fraud and error
30
Q

Auditors resps.

A

Form and reports opinion on companies accounts
Consistency of directors report and corporate governance statement
Compliance with certain aspects of combined codes
Information required by law or listing rules not disclosed

31
Q

RSBs

A

Recognised supervisory bodies

  • admissions & expulsions
  • monitoring
  • disciplinary matters
  • complaints procedures
32
Q

RQBs

A

Recognised qualifying body

  • entry
  • examination
  • training
33
Q

FRC

+ 2 subcommittees?

A

Financial reporting council
2 subcommittees
- conduct
- codes and standards

34
Q

Conduct committee - 3 subcommittees

A

Corporate reporting review
Audit quality review
Case management

35
Q

Codes and standards 3 subcommittees

A

Audit and assurance council
Corporate reporting council
Acturial council - analyses financial risk

Auditing 101 (8 decks)

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