Reasonable Assurance - answer✔Positive opinion, intrusive, high audit risk as providing more definite
opinion
Limited Assurance - answer✔Negative opinion, less intrusive low audit risk
Required Assurance by Regulators - answer✔Statutory audit, bank audits, pension scheme audits,
charity audits, solicitor audits
Voluntary Assurance - answer✔Environmental audit, Due diligence, Internal audit, Fraud investigations,
Internal control reports
Companies Act 2006 requires auditors be a member of what? - answer✔Recognised Supervisory Body
(e.g ICAEW)
What are RSB responsibilities? - answer✔Ensure individuals hold appropriate qualification in order to
conduct audit, and that those individuals and firms are monitored regularly
What does the Financial Reporting Council do? - answer✔Monitors accounting profession, issues audit
standards which it does through its Codes and Standards Committee which has adopted international
standards on auditing, and issuing Ethical Standards
Ethical Standards relate to what about the auditors? - answer✔Integrity, objectivity
ISA 200 - answer✔Obtain assurance about whether F/S is free from misstatement (F&E), report on F/S
and communicate as required by ISAs
What does ISA stand for - answer✔International Standards on Auditing
How does the auditor meet objectives of obtaining evidence to support FS are free of material
misstatement? - answer✔Comply with ethical requirements, plan and perform with professional
scepticism, exercise professional judgement, obtain sufficient and appropriate audit evidence
Stages of Audit - answer✔Obtain engagement, plan, perform procedure, review and completion, report
Who benefits from assurance? - answer✔Users (SH e.g whether to invest), 3rd parties (bank e.g whether
to give loan), directors (reduce management bias/ deterrent)
Audit Exemption - answer✔Must have 2/3 of following:
What are the 7 limitations of assurance meaning it can never be absolute? - answer✔The fact testing is
used and the process of building FS isn't overseen. The fact sampling is used and not every item is
tested. The fact the account systems are relied on by auditors leading to reliance on inherent
limitations. The fact some staff may collude and hide fraud. The fact most audit evidence is persuasive
rather than conclusive. The fact some items in subject matter are estimates. The fact judgements have
to be made.
How do assurance providers close the expectation gap? - answer✔Issuing engagement letters, regularly
reviewing the format and content of reports
What are the 5 acceptance procedures for an engagement? - answer✔Ensure professionally qualified to
act. Ensure existing resources are adequate. Obtain references. Communicate with present auditors,
Consider integrity of those managing the company.
What should the auditor do if the client does not give permission to contact old auditor or VICE VERSA? -
answer✔Normally decline appointment
What should the auditor do if this is the client's first audit? - answer✔Make own decision
What should the auditor do if the old auditor does not give all relevant info prior to audit? -
answer✔Give old auditor due notice then decide on basis of knowledge obtained whether to accept or
reject appointment.
What 4 procedures should be carried out after accepting an engagement? - answer✔Ensure outgoing
auditors' removal has been conducted in accordance with national legislation. Ensure new auditors'
appointment is valid. Submit engagement letter. Do money laundering checks.
When is it mandatory to check ID? (2 scenarios) - answer✔When an ongoing relationship is envisaged.
Where a one-off transaction is greater than 15,000
Copies of ID checks should be kept for how long? - answer✔5 years after relationship ended
How would you ID check companies? - answer✔Certificate of incorporation, registered address,
confirmation statement for directors and shareholders, previous FS
How would you ID check individuals? - answer✔Photo, full name, address, passport/utility bill
ISA 210 - answer✔Auditor and client agree on the terms of engagement
When should auditors send an engagement letter? - answer✔Soon after their appointment as auditors
and before commencement of first audit assignment.
What items MUST be included in engagement letter? - answer✔MCSOAAR
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