CH3 Professional standards

Question 1

FRC

Answer 1

Financial reporting council

Question 2

Role of FRC?

Answer 2

Promote good financial
reporting in the UK through the setting of accounting standards

and

review of published financial
statements.

Question 3

Two committees of the FRC?

Answer 3

Codes and standards: set standards (audit: ISAs; accounting: IASs & IFRSs), ethics, code of governance
Conduct: review quality of reporting, discipline

Question 4

What are the three significant reviews into audit?

Answer 4

Kingman Review
Competition and Market Authority’s Review
Brydon report

Question 5

Key points of kingman review?

Answer 5

1. Abolition of FRC (not scrutinising the profession enough)
2. Replace with ARGA Audit, reporting and governance authority

Question 6

What can ARGA do?

Answer 6

1. Directly regulate biggest audit firms
2. Impose sanctions in case of corporate failure
3. Require rapid explanations from companies
4. Publish reports about company’s conduct/management

Question 7

Key points/recommendations of Competition and Market Authority’s Review

Answer 7

1. Thought Big Four had too much power
2. Greater oversight of audit committees
3. Split Big Four’s audit and non audit businesses
4. 5 year review of the industry
5. Mandatory joint audits

Question 8

Key points/recommendations of the Brydon Report?

Answer 8

1. Urgent reform to rebuild public trust
2. Separation of audit from accounting professions
3. Redefinition of audit and its purpose
4. Introduction of the word ‘suspicion’ into qualities of audit
5. Increase audit responsibilities beyond just FS
6. Greater engagement with s/h
7. Change the language of the opinion given.
8. Greater clarity around role of audit committee
9. Improve auditor transparency

Question 9

What four categories of information are required by IFRS S1 and IFRS S2?

Answer 9

Governance
Strategy
Risk management
Metrics and targets

Question 10

What topics do IFRS S1 and IFRS S2 cover?

Answer 10

IFRS S1: general sustainability
IFRS S2: climate

Question 11

What does governance involve in relation to IFRS S1 and 2?

Answer 11

How does the company manage risks and ops?

Question 12

What does strategy involve in relation to IFRS S1 and 2?

Answer 12

Identification of risks and ops, impact, resilience, how risks addressed, implications on value chain

Question 13

What does risk management involve in relation to IFRS S1 and 2?

Answer 13

How comp assesses likelihood and impact, scenario planning

Question 14

What does metrics and targets involve in relation to IFRS S1 and 2?

Answer 14

Identify targets, what is monitored, how progress is assessed

Question 15

What are the reporting criteria for IFRS S1 and 2?

Answer 15

1. Materiality considerations
2. Risks and ops
3. Requires direct and indirect reporting
4. Forward and backwards looking
5. Industry consistent
6. Link implications back to FS