Flashcards
Ethics and Acceptance
Cards in this deck (27)
- 1List the 5 fundamental principles- Objectivity
- professional behaviour
- professional competence and due care
- integrity
- confidentiality - 2Which of the five fundamental principles is.. members should comply with relevant laws and regulations and avoid any action that discredits the professionprofessional behaviour
- 3Which of the five fundamental principles is.. members should be straightforward and honest in all professional and business relationshipsintegrity
- 4Which of the five fundamental principles is.. members should not allow bias, conflicts of interest to override professional or business judgementsobjectivity
- 5Which of the five fundamental principles is.. members should maintain professional knowledge and skill at a level to ensure a client/ employer receives competent professional services based on current developments in practice, legislation and techniquesProfessional competence and due care
- 6Which of the five fundamental principles is.. members should respect confidentiality of information acquired as a result of professional and business relationshipsConfidentiality
- 7List the 5 threats to the fundamental principles- self review
- advocacy
- intimidation
- self interests
- familiarity - 8Explain familiaritybeing to sympathetic or trusting of a client due to a long/ close relationship
- 9Explain self interesta financial or other interest that will inappropriately influence the judgement or behaviour of the assurance provider
- 10Explain advocacypromoting the position of the client
- 11Explain intimidationactual or perceived pressures from the client
- 12What is an action/ measure that eliminates a threat or reduces a threat to a reduced acceptable levelsafeguard
- 13Safeguards are divided into two broad categories what are they- Safeguards created by the profession, legislation or regulation
- Safeguards created by the work environment - 14List three circumstances when the auditor has a duty to disclose information to a specific authority?- breaches specific laws
- if a court order is obtained
- if it is required by a professional body - 15List three circumstances where an auditor has the RIGHT to disclose information?- if the client gives their permission
- to protect a member or a firms interests i.e in court
- if it is in the pulic interest - 16List some things the audit team must do to reduce the risk of conflicts of interest- advise clients to seek independent advice
- separate engagement teams
- sign confidential agreements - 17Auditors should only accept a new audit engagement or continue an existing one if the preconditions reuired by ISA 210 are met, which require:- the appropriate financial reporting framework to be applied
- obtain agreement of management that it acknowledges and understands its responsibilities - 18An engagement letter issent before the audit specifying the nature of the contract between the audit firm and the client. Minimising the risk of any misunderstanding
- 19How often should the engagement letter be reviewed?Every year
- 20State three reasons why the engagement letter may need to be changed?- changes to statutory duties due to new legislation
- change to professional duties, due to new ISAs
- change to 'other services' as requested by client - 21What is the contents of an engagement letter (5)- the objective and scope of audit
- the responsibilities of the auditor
- the responsibilities of the management
- the identification of an applicable financial reporting framework
- reference to the expected form and content of any reports to be issued - 22Role of audit committee- improve quality of financial reporting
- create climate of discipline and control
- enable NEDs to contribute to independent judgement
- Help FD by providing a forum in which he can raise issues concerned
- provide a channel of communication for external auditor
- increase public confidence in FS
- Strengthen independence of internal audit
- Allow external auditor to assert independence in the event of a dispute with management - 23Before an auditor accepts appointment they must ensure:- they are independent
- are competent
- have sufficient resources
- obtain references
- make a risk assessment
- communicate with present auditor - 24What is the maximum % of a firms income can come from one client before it is considered a self interest threat15%
- 25What are outstanding fees perceived to bea loan to the client which is strictly prohibited
- 26Audit partners should be swapped every how many years and the reason whyevery 5 years because the partners independence is threatened with familiarity
- 27What are the corporate governance requirements for a listed company- Ensuring that the chairman and the CEO are different people.
– Appointing NEDs to the board . The number of NEDs should be the same as the number of executive directors less the chairman.
– Ensuring that at least one NED has relevant financial experience.
– Appointing the NEDs to the audit committee, remuneration committee and possibly an appointments committee. The chairman will also have a seat on these committees.
– Establishing an internal audit department to review internal control systems and make reports to the audit committee.
– Ensure that an appropriate system of internal control and the directors recognise their responsibilities for establishing and maintaining this system.
– Establishing procedures to maintain contact with institutional shareholders and any other major shareholders.
– Checking that the annual financial report contains information on corporate governance required by the stock exchange (e.g. a report on how directors monitor the internal control systems).
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- University Audit Flashcards on Ethics and Acceptance, created by deandrayton on 23/04/2014.
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- deandrayton
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