Week 1 - Introduction to Audit

Lisa Tatham
Flashcards by , created over 3 years ago

Degree Audit Flashcards on Week 1 - Introduction to Audit, created by Lisa Tatham on 03/07/2016.

Lisa Tatham
Created by Lisa Tatham over 3 years ago
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Question Answer
What is an assurance engagement When an assurance practitioner expresses a conclusion designed to enhance the confidence of intended users other than the responsible party (resp for preparing the reports) about the outcome of the evaluation or measurement of a subject matter against critera
What are the 6 most common assurance services? Financial report audits Complience audit Performance audit Comprehnsive audit Internal audit CSR assurance
What are the 3 levels of assurance? Resonable assurance Limited assurance No assurance
What are the two types of audit opinions? Unmodified (aka unqalified or clean) and modified
What is an unmodified/unqualified opinion? The financial report is true & fair, presents fairly the position of the co and the information complies with AAS & Corporations Act
What is a modified opinion? Modifications that dont affect the auditors opinion -emphasis of the matter (mofications that affect the auditors opinion) Qualified opinion Adverse opinion Disclaimer of opinion
What 5 attributes should finanical reports have and who is responsible for prerparing this information? Relevent, reliable, comparable, understandable and true & fair. The responsibilty lies with those charged with governance to prepare financial statements
What responsibilities do auditors have? Professional skepticism, professional judgement & due care
What is Professional skepticism?? Maintaining independece from entity and having a questioning mind to thoroughly investigate the information presented
What is Professional judgement? Use of judgement based on level of expertise, knowledge and training obtained by the auditor
What is due care? Being diligent, applying standards & documenting each stage of the audit process
Who demands audit & assurance services? Investors (current and potential for buy hold & sell decisions), suppliers (to see if the entity can pay them back) and customers (to see if the entity is going concern if they rely on the goods). Also lenders, employees, governments and the general public
Why do people demand audit & assurance services? (4) Remoteness (dont have access themselves) Complexity (users dont have knowledge to make the decsions) Competing incentives Reliablilty (info needs to be reliable)
What 3 hypothesis explain the demand for audit/assurance services? Agency theory (seperation between ownership & management, information hypothesis ( users need reliable information to aid in decision making) & insurance hypothesis (to 'insure" against potential losses)
Who are the 8 regulalators in relation to audit FRC, AUASB ISAS, APESB, ASIC, ASX, ALDB & Professional bodies (CPA, ICAA & NIA)
What does the FRC (Financial Reporting Council) do? Overseas the process used for standard setting & monitors and reports on auditor indpependence
What does the AUASB (Auditing & Assurance Standards Board) do? Formulating audit standards and bring in line with international standards. Issues ASRE, ASAE, GD standards & statements
What does the International Auditing & Assurance Board do? Develops international standards on auditing (ISAs). Operates under the International federation of accountants (IFAC)
What does the APESB ( Accounting Professional & Ethical Standards Board) do? Established as an independent body by CPA & ICAA to issue prefessional and ethical standards. APEs are mandatory for members of CPA AU, ICAA & NIA
What does ASIC do? Governing body that administers the ASIC Act and much of the Corporations Act and also plays a role in overseeing the audit function
What does the ASX do? Provides attitional obligations for entities wishing to list on the exchange. Formulated in 1987 after the merging of 6 state based exchanges
What does CALDB (Companies, Auditors & Liqudators Disciplany Board) do? Responds to ASIC & Apra re breaches of the Corp Act or ASIC Act and may suspend/give warnings for undertaking to improve conduct auditors
What are rofessional bodies (CPA, ICAA & NIA)? Include professionals in public practive, imdustry, academia & gov. Requires further study and min work experience perios to join as members
What regulation is concerned with auditing The Corporations Act & Clerp 9
What is an audit expectation gap? Difference between expecations of asuranceproviders and financial report users usually caused by unrealistc expectations in relation to the auditor providing complete assurance, gauranteeing future viability, complete accuract and the auditor finding all frauds
How can the expectation gap be minimised? Auditors performing duties approratly Peer Review Revewing & updating standards Educating the public Enganced reporting/explanation of audit processes Greater attention to the risk of fraud occouring