the audit committee and auditors Flashcards
1
Q
purpose of external audit
A
- enhance the degree of confidence of intended users in the financial statements
- financial statements must be true and fair
2
Q
Cadbury report 1992 on external audit
A
’ the audit provides an external and objective check on the way in which the financial statements have been prepared and presented’
3
Q
External audit process
A
- gather and evaluate evidence
- critically examine assertions made by the directors and managers
- assess how these assertions conform to the ‘rules’
- communicate the results in a written report
4
Q
Limitations of auditing
A
- limitations of control systems
- audit judgment
- sampling
- limitations of audit report
- uncertain audit evidence
5
Q
why is there a need for audit?
A
- monitoring mechanism reducing agency risk
- due to the law of the companies act
6
Q
criteria for exemption of audit
A
Two out of the three following:
- Turnover < £10.2m
- Total assets < £5.1m
- Employees < 50
7
Q
benefits of an audit
A
- Economic benefits
- access to capital markets
- lower cost of capital - Securing corporate accountability
- deterrent to insufficiency and fraud
- control and operation improvements
8
Q
Purpose of internal audit
A
- assessment of adequacy and effectiveness of systems (risk , corporate gov and internal control)(assurance)
- Consultancy services in terms of designs and general business advice. (advice)
9
Q
Typical work of an internal audit
A
- value for money reviews
- fraud investigations
- business process and control reviews
- risk and control advice
- confirm compliance with laws, regulations and company policies
10
Q
Provisions covering INEDS
A
UK CG Code (2018) provisions 10 and 12
