Chapter 7 - External Audit

Question 1

Which documents and records are auditors entitled to have access to?

Answer 1

All

Question 2

What are the three categories of companies that can claim excepmtion from audit?

Answer 2

1. Small companies
2. Dormant companies
3. Subsidiaries

Question 3

Is an audit intended to p[provide reassurance as to future prospects of the company?

Answer 3

No

Question 4

What type of individual or firm cannot be appointed as a company’s auditor

Answer 4

An officer or employee of the company or an officer or employee of a connected undertaking, any person or firm that has a business relationship with the comapny

Question 5

There are a number of non-audit services that auditors are prohibited from providing to a PIE (Public Interest Entities) name 5 of them.

Answer 5

1. Tax Services
2. Any part in management or decision making
3. Book keeping and preparation of accounting records
4. Payroll Services
5. Design or implementation of internal control of risk management processes
6. Valuation services
7. Legal services
8. Internal audit
9. Services linked to financial, capital structures, investment strategies
10. Promoting, dealing or underwriting in shares of the audit entity
11. HR Services

Question 6

What is the ratio of permitted audit: non-audit service fees for public interest entities?

Answer 6

70% over a rolling three year basis

Question 7

Can anyone be appointed as a company auditor?

Answer 7

No, must be a registered auditor or audit firm and not be prohibited from being appointed.

Question 8

Can the liability of the auditor be limited?

Answer 8

Yes, but requires consent of the members

Question 9

How many consecutive years can an auditor be appointed to be a PIE (Public Interest Entities)?

Answer 9

Ten years plus an additional 10 years if a tender has been carried out

Question 10

What does audit partner rotation guard against?

Answer 10

Threat to auditor objectivity and independence

Question 11

Do all companies need to change their audit firm regularly?

Answer 11

No, only Public Interest Entities

Question 12

When does an auditor of a PIE (Public Interest Entities) need to make a statement if they cease to hold office as auditor?

Answer 12

Always

Question 13

Who are the relevant audit authorities?

Answer 13

The auditor’s recognised supervisory body and in the case of a PIE the FRC

Question 14

Who is the audit report prepared for?

Answer 14

The members

Question 15

Is the audit process expected to uncover all errors or fraud?

Answer 15

No - only material errors and omissions