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BUS165 - Foundations of Assurance > Week 2 > Flashcards

Week 2 Flashcards

1
Q

key syllabus areas = ?

A

audit framework & regulation
planning & risk management
internal controls
audit evidence
review & reporting

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2
Q

assurance assignment = ?

A

an assurance engagement is one in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party

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3
Q

key elements on an assurance assignment = ?

A

3rd party involvement
subject matter
suitable criteria
sufficient appropriate evidence
written assurance report

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4
Q

assurance assignment when buying a house = ?

A

practitioner = surveyor
intended user = buyer
responsible party = seller
subject matter = house
suitable criteria = building regulations
sufficient evidence = physical check

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5
Q

practitioner = ?

A

a person actively engaged in doing something

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6
Q

two levels of assurance = ?

A

limited assurance
reasonable assurance

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7
Q

limited assurance = ?

A

moderate/low levels of assurance

conclusion is negative, stating assumptions don’t provide reasonable basis for doubt

e.g., assurance engagement to review a forecast

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8
Q

reasonable assurance = ?

A

high, but not absolute assurance

opinion is positive, statements give a true & fair view

e.g., audit of financial statements

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9
Q

examples of assurance engagements

A

audit of FSs
review of a forecast/business plan
review of internal controls
fraud investigation
due diligence
environmental audit

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10
Q

external audit = ?

A

common type of assurance engagement is the audit of a company’s financial statements

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11
Q

in the UK, audits are governed by…?

A

companies act 2006
international standards on auditing (ISAs)

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12
Q

differences between reasonable & limited assurance?

A

more regulations & standards
procedures are more thorough
evidence needs to be of high quality

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13
Q

objectives of independent auditors

A

obtain reasonable assurance
express audit opinion
report on auditor’s findings

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14
Q

purpose of an audit?

A

auditors provide external verification to ensure no fraud

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15
Q

stewardship = ?

A

job of supervising/taking care of something

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16
Q

an auditor must…

A

comply with regulations

plan & perform audit w/ professional scepticism

exercise professional judgement

obtain audit evidence that is sufficient & appropriate

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17
Q

professional scepticism = ?

A

an attitude that includes a questioning mind, being alert to conditions and a critical assessment

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18
Q

professional judgement = ?

A

application of relevant training, knowledge & experience to make an informed decision regarding appropriate auditing behaviour

19
Q

benefits of an audit?

(H.I.R.E.D)

A

higher quality of information

independent scrutiny helps management

reduces the risk of management bias, error & fraud

enhances FSs credibility

deficiencies in FSs are highlighted

20
Q

limitations of an audit?

(F.I.R.E.D)

A

financial statements include subjective estimations & judgements

internal controls may be relied upon by auditors

representations from management aren’t always reliable

evidence isn’t always conclusive

doesn’t test all transactions - only samples

21
Q

expectations gap regarding audits?

A
  • belief that all transactions are tested
  • belief that auditors detect all fraud
  • belief that auditors prepare FSs
  • belief that clean audit guarantees going concern
  • belief that a SOFP shows the true value of a company (goodwill, reputation)
22
Q

who carry out an audit?

A

member or recognised supervisory body (ICAEW/ACCA)

authorised by the state

organisation must hold audit registration

to sign off an audit, must hold an audit qualification

23
Q

who can’t carry out an audit?

A

anyone that manages or works for the company

anyone with a business or personal connection to the company

24
Q

code of ethics for auditors?

A

independent
competent
keep all information confidential

25
Q

who appoints auditors?

A

shareholders/directors

26
Q

can auditors resign or be removed?

A

yes

27
Q

rights of an auditor?

A

access to the company’s books
right to explanations
attend general meetings

28
Q

duties of auditors?

A

duty to audit FSs & provide opinion

examine whether FSs have been prepared in accordance with laws

29
Q

IFAC = ?

A

international federation of accountants

promotes international regulation of the accounting profession

30
Q

IAASB = ?

A

international audit & assurance standards board (IAASB)

a subsidiary of IFAC

31
Q

material error = ?

A

big, impactful error

32
Q

what do IAASB & IFAC promote?

A

ISA’s

international standards of auditing

33
Q

what is the purpose of ISA’s?

A

provide guidance to auditors, not legal requirements, for the audit of FSs

34
Q

do different countries have different auditing standards?

A

yes

35
Q

if there’s conflict between local regulations and ISA’s, which takes precedence?

A

local regulations

36
Q

the role of professional bodies?

A

promote quality within the profession through
- rigorous qualifications
- support to members

37
Q

how does one obtain membership in an accounting body?

A

complete exams

demonstrate at least 3 years of practical experience

complete ethical assessment

38
Q

how does one maintain a membership in an accounting body?

A

demonstrate continuing CPD
comply with code of ethics

39
Q

can professional bodies take disciplinary action?

A

yes

e.g., fines, reprimands, withdrawal of membership

40
Q

corporate governance = ?

A

framework of rules & practices by which a board of directors ensures accountability, fairness & transparency in a company’s relationship with all stakeholders

41
Q

purpose of good corporate governance?

A

ensures companies are well run

reduces risk of directors abusing their power

42
Q

advantages of good corporate governance?

A

greater transparency
greater accountability
efficiency of operations
less risk of mismanagement

43
Q

what does good corporate governance result in?

A

higher quality audit
greater communication w/ auditors
lower risk of misstatements
stronger control environment

BUS165 - Foundations of Assurance (14 decks)

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