Chapter 2: Basic Concepts of Auditing

Question 1

Define applicable financial reporting framework (AFRF)

Answer 1

L NPN

L(Legal requirements)
N(Nature of entity)
P(Purpose of financial statements)
N(Nature of financial statements)

Question 2

In true and fair view means?

Answer 2

True means free from errors,

And fair means free from undue bias in prepration and presentation of financial statements.

Question 3

What are preconditions for audit?

Answer 3

PA

Premise agreed by management
AFRF is used by management is acceptable

Question 4

Responsibilities of management and TCWG

Answer 4

DP PAIR

D(Design and implementation)
P(Prepration and presentation of F/S)

P(unrestricted access to persons)
A(Additional info.)
I(Information)
R(Written representation to auditor at end of audit)

Question 5

Overall objectives / responsibilities of auditor / audit

Answer 5

FCA

F(report on Financial statements)
C(Communicate auditors findings)
A(resoanable Assurance)

Question 6

Responsibilities of Stakeholders/Expectation Gap

Answer 6

PITA F

Question 7

Essentials of proper conduct of audit?

Answer 7

Professional Judgement
Professional sketicism
Independence

Question 8

Define professional judejment

Answer 8

CAKE T

C(Cumulative)
A(Audit)
K(Knowledge)
E(Experience)
T(Training)

Question 9

Define professional skepticism

Answer 9

QCA

Q(Questioning mind)
A(Alet to the conditions which indicates posible material misstatement)
C(Critical assessment of audit evidence)

Advantages:
Overlooking
Overgeneralizing
Inappropriate assumptions

Question 10

Define independence

Answer 10

PEF

P (Personal Relationships and family)
E (Employment)
F (Financial Interests)