week two Flashcards
what is an assurance engagement?
an assurance engagement is one in which the practitioner expresses a conclusion designed to increase the confidence of the intended users other than the responsible party
what are some of the key elements of assurance?
3rd party involvement
subject matter
subject criteria
sufficient appropriate evidence
written assurance report
what is the difference between limited and reasonable assurance?
limited assurance is often expressed negatively where has in reasonable, opinions are expressed positively
give me three examples of assurance engagements:
-audit of the financial statement
-review of business plan
-fraud investigation
who are audits regulated by?
-companies act 2006
-international standards on auditing
what are the overall objectives of ISA200?
-to see whether financial statements are free from material misstatements
-financial statements are prepared in accordance to the financial reporting framework.
-to report on the auditors findings
why do we have an audit done?
-shareholders whoa re not involved in the day to day business, management therefore need to give account of their stewardship.
-directors may manipulate financial statements for personal gain
-auditors provide external verification
what are some of the requirements auditors must comply to/
-comply with relevant ethical requirements
-plan and perform audit with professional skepticism
-exercise professional judgement
-obtain evidence that is sufficient and appropriate.
what are the benefits of an audit?
-High quality of information may give investors confidence
-Independent scrutiny may help management]
-Reduce risk of management bias
-Enhances credibility of financial statements
-Deficiencies in the internal control may be highlighted
where are the drawbacks of an audit?
-financial statements include subjective misstatements
-internal controls may be relied upon auditors
-representation from management may be non-reliable.
-evidence is not always conclusive
-does not test all transactions
who can carry out an audit?
member of a recognised supervisory board
someone authorised by the state
who ant carry out an audit?
someone that works or manages the company
anyone that has a business or personal connection to the company
what does the code of ethics require?
independence
competent
keeping all information gained confidential
explain who can appoint and remove auditors
company directors, shareholders or Secretary of State can appoint auditors
auditors can be removed at a simple majority
auditors can also choose to withdraw from an assignment with a written explanation as to why
what are some of the rights of an auditor?
to access the companies financial records
to be heard in general meetings
receive information or written solutions
request a general meeting to discuss the circumstances of appointments or removals
