Week 2

Question 1

What’s Assurance?

Answer 1

Something that removes doubt or increases confidence about something.

Question 2

Name 3 basics of an audit

Answer 2

• 5 elements of an assurance engagement
• (ISAE 3000) - International Standard on Assurance Engagement
• 3 parties are involved

Question 3

What 3 parties are involved in the audit?

Answer 3

• The practitioners - Auditor
• The intended users - Shareholders
• The responsible party - Directors

Question 4

2 types of assurance engagement?

Answer 4

• Reasonable
• Limited

Question 5

What is reasonable assurance?

Answer 5

• The highest level assurance drawing reasonable conclusions and ultimately shows a ‘true and fair view’.

Question 6

What is limited assurance?

Answer 6

• Less detailed work therefore there’s a moderate/low level of assurance.

Question 7

What’s the typical contents of an assurance report?

Answer 7

Title
Addressee
Description of engagement and subject matter
Responsibilities of parties
Restriction: purpose and parties
Professional/audit standards followed
Criteria
Conclusion
Date of report
Name of practitioner

Question 8

What’s a Financial Statement Assertions?

Answer 8

Assumptions embodied in the financial statements.

e.g an asset on the SFP – reader assumes it exists, has value and belongs to the company!

Question 9

What’re the 9 financial statement assertions?

Answer 9

ACCA COVER

• Accuracy
• Completeness - everything included
• Cut-off - correct period
• Allocation - new transactions in correct account
• Classification
• Occurrence
• Valuation
• Existence
• Rights and Obligations - do we control the assets?

Question 10

What’s directional testing?

Answer 10

Principle that every transaction in the accounts has a debit and a corresponding credit entry, which must be tested for both under and overstatement.