Class 1 - Audit and Independent Auditor

Question 1

ISA 200

Answer 1

Deals with the independent auditor’s overall responsibilities when conducting an audit of financial statements with the ISAs.

Sets the overall objectives of the independent auditor.

Explains the nature and scope of an audit designed to enable the independent auditor to meet those objectives.

Explains the scope, authority and structure of ISAs and includes requirements establishing the general responsibilities of the independent auditor applicable in all audits, inclusing the obligation to comply with the ISAs.

Question 2

Purpose of an audit

Answer 2

Enhance degree of confidence of intender users of the financial statements.

To form an independent opinion on the audited company’s financial statements (if they are prepared, in accordance of the applicable financial reporting framework)

The audit does not relive the managers of their responsabilities

Question 3

Reasonable assurance

Answer 3

High level of assurance

obtained when there is sufficient and appropriate audit evidence that reduces audit risk to a acceptably low level

Question 4

Absolute Assurance

Answer 4

never possible to obtain that financial statements are free from material misstatements due to fraud or error

audit risk is never zero

Question 5

Inherent limitations of an audit

Answer 5

nature of the financial reporting

nature of audit procedures

need of an audit for a reasonable range of time at a reasonable cost

Question 6

Misstatements

Answer 6

Difference betweent the presentation, amount, disclosure or classification of a reported financial statement item and the classification, amount, presentation or disclosure required by the applicable financial reporting frameworks

Can arise from fraud or error

Question 7

Materiality

Answer 7

Misstatements or omissions are considered material if in aggregate or individually could reasonably influence the economic decisions of financial statements users.

Question 8

Independence

Answer 8

Independence of mind

allows one to express a conclusion without being influenced compromising the professional judgment

Allow to act with integrity, objectivity and professional skepticism

Question 9

Responsabilities of the auditor

Answer 9

EMAS
Ethical requirements
Maintain a professional skepticism
Apply professional judgement
Sufficient and appropriate audit evidence and audit risk

not responsable to detect misstatements that are not material to the financial statements as a whole

Question 10

Ethical requirements (responsibilities)

Answer 10

fundamental principles:

objectivity
integraty
professional competence and due care
confidentially
prefissonal behavior

Question 11

Maintain professional skepticism (responsibilities)

Answer 11

Questioning mind, being alert to conditions which may indicate misstatements due to error or fraud and critical assessment of audit evidence.

Relies on effective comunication and consultotatio - ask partners if needed

It is about quality and not quantity (dont ask a lot, ask the right questions, dont simply accept the first answer)

Question 12

Professional skepticism (elements)

Answer 12

AMA
Attribute - auditor must have the knowledge, skills and competencies needed to perform their responsabilities

Mindset - being impartial and diligent. Not assume that management are honest or dishonest but recognize the possibility of fraud, misstatements, misrepresentation

Application - apply the minset with professional knowledge to perform a robust risk assessment. Plan the audit according to the risk identified. Gather and evaluate audit evidence

Question 13

Apply Professional Judgement (Responsibilities)

Answer 13

Application of relevant training, knowledge and experience, within the context provided by auditing, accounting and ethical standards, in making informed decisions about the courses of action in the audit

Question 14

Audit Evidence (Responsibilities)

Answer 14

Information used by the auditor in arriving at the conclusions at which the auditor base its opinion.

Includes information from the financial statements and other sources

Sufficiency - is the measure of the quantity of audit evidence. It is affected by the risk assessment
The higher the risk the more audit evidence required
the higher the quality the less audit evidence required

Appropriateness - is the measure of quality of audit evidence. The relevance and reliability to support conclusions.
it is influenced by the source, nature and dependent of the circunstances which is obtained.

Question 15

Audit Risk (Responsabilities)

Answer 15

Is the risk of the auditor expressing an inappropriate opinion when the financial statements are materially misstatements

Question 16

Responsibilities of the managers

Answer 16

preparation of financial statements in accordance with the applicable financial reporting framework

promote internal control that promotes financial statements free of material misststaments dueto error or omisison

Provide the auditor the access to all information used to build the financial statements and any other information and give acess to any person that the auditor sees as important

Question 17

Independent Audit report

Answer 17

Opinion on whether the financial statements are prepared in accordance with the applicable financial reporting framework