S1 - audit framework Flashcards
what is the audit context
principal provides capital and hires agent to manage it
Manager is accountable to owners
Information asymmetry
Conflicts of interest
Information risk for principal
what is auditing
systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events
Ascertain the degree of correspondence between those assertions and established criteria
Give a true and fair view
what are assurance services
engagement in which practitioner expresses a conclusion
Designed to enhance the degree of confidence of he intended users other than the responsible party
About the outcome of the evaluation or measurement of a subject matter against criteria
what does Audit engagement aim to evaluate
financial statements are in accordance with criteria
The effectiveness and appropriateness of internal control systems
The possibility of fraud occurring
going concern
what are the fundamental concepts
audit risk
Materiality
Evidence
Management assertions
what is materiality
influence economic decisions of users taken on the basis of the FS
Depends on size and nature
what is evidence for auditors
underlying accounting data
Any other corroborating information available to auditor
Concerned with relevance and reliability
where are management assertions looked for
Transactions
Account balances - inventory
Presentation and disclosure
what is pervasive
misstatement is evident throughout whole FS and not one specific element
Equity
Assets
Liabilities
Expenses
Revenues
what are the audit opinions
unmodified - managements assertions are usually found to conform to the financial reporting framework
Qualified - issued for either a material scope limitation or departure from framework
Disclaimer - issued for lack of sufficient appropriate evidence to form an opinion on the overall FS
Adverse - issued when the overall financial statements do not present fairly in accordance with framework
