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1

Opposite of going concern basis

Break up basis
- assets written down to recoverable amount
- liabilities reassessed and changed to short-term

2

Lowballing A/NAS

FRC ethical standards state that audit fees should not be influenced by NAS

3

How long can key staff be kept on an audit for?

7 years, additional 2 if need to maintain audit quality (audit committee agreed)

4

Mgt rep needed for forecast

1) intended use of forecast
2) Completeness of mgt assumptions
3) Mgt acceptance of responsibility for the forecast

5

Forecasts: Limiting liability

1) restrict distribution
2) shouldn't be shown to 3rd party w/o permission (frm accountant)
4) liability cap agreed
5) caveat warning about diff between predicted and actual

6

Reasons for quality control

1) ISAs and standards require it
2) protects firms reputation
3) limits firms liability
4) ensures correct conclusions are drawn
5) maintain standard of audit work in line w/ reg expectation

7

Cold Review

~ conducted after date of audit report on sample of files
~ ensures compliance: firms policies, ISAs, ethical standards, regs
~ identifies improvement areas

8

When to revise engagement terms:

~misunderstood audit object + scope
~ revised terms
~sig change in ownership, mgt, nature/size of biz
~ change in legal requirements, reporting framework or requirements and engagement partner

9

Supervision before engagement

~ assess skills and set out responsibilities
~ brief on nature of client, risks and potential issues
~ explain audit approach and timings
~ introduce team to client staff

10

Supervision during engagement

~ review work to ensure correct audit evidence obtained that supports conclusions
~ check carrying out work as per audit plan
~ provide feedback on work reviewed
~ track progress against audit plan + update
~ answer questions
~ consider consulting upwards

11

When can you disclose confidential info w/o permission

1) required by law e.g. ML, bribery
2) required to report to regulators e.g. on reg breaches
3) in public interest
4) professional duty to disclose e.g. response to ICAEW inquiry/defend self in legal proceedings

12

Evidence collection procedures

A nalytical procedures
E nquire
I nspect
O bserve
U recalcUlate

13

Audit threshold exemptions

1) <50 e'ees
2) revenue <10.2m
3) gross assets <5.1m
~ got to have 2/3