The audit committee should ONLY be made up of independent non executive directors. True or false
True
As per the UK corporate governance code, how many independent non executive directors shou,d be appointed to the audit committee ?
An audit committee should be established with at least three independent non executive directors
How many executive directors and non executive directors should be appointed to the board ?
Corporate governance codes suggest there should be a balance of executive and non executive directors. So equal amounts
True or false. The audit committee usually appoints the external auditors at the AGM
False. The make recommendations about the appointment but ultimately shareholders are responsible for appointing them at the AGM
Advantages of outsourcing an internal audit department
Greater availability of specialist industry skills as required
Elimination of direct training costs
Flexibility regarding staff numbers in response to changing circumstances
What is business risk
The risk that a company faints to meet its objectives and is not an element of audit risk
Is this an objective of planning ?- to ensure that the audit engagement is only accepted if this is permissible by the ACCA code of ethics and conduct ?
No, this should have been done before the planning stage and so is not an objective of planning
A review of an entity’s assessment of going concern I’d done during the interim audit or the final audit ?
The final audit
Which of the following is not a component of an entity’s internal control?
A. The control environment
B. Information system and communication
C. Selection and application of accounting policies
D. Control activities relevant to the audit
Selection and application of accounting policies
Threats to professional skepticism
- Judgment traps and biases, lack of knowledge and expertise
- Deadline pressure, inherited preferences and expectations
- Nature or volume of nonaudit services
- Insufficient resources devoted to the audit, or competition primarily based on audit fees
And safeguards
Professional licensing and continuing education requirements
* Supervision, mentoring, review, and inspection of work and performance
evaluations
* Effective planning and audit programs, including expectation setting
* Performance metrics that reward people for high quality work
True or false ? The chairman is supposed to be an indecent non exec director and should hint have been the CE of the same company he is now a chairman of
True
What are ISA’s used for?
ISA’s are used globally to enhance the quality and consistency of auditing practices around the world and strengthen public confidence in the accounting profession
IFAC
the global accountancy organisation for professional accountants that supports the development, adoption, and implementation of high quality standards.
IAASB
the standard setting board that sets hiqh quality standards for audit, review, quality control, other assurance and related services and encourages the convergence of those standards
How does providing a non assurance service generally create a self interest threat ?
Due to the fee income but the main threat would be self review.
What is the expectation gap?
relates to expectations of shareholders and the general public about the role of the auditor
How is contracting as a NED for seven years not an advantage?
because NED’s should be subject to re election at regular intervals not to exceed three years
When assessing going concern, management should take into account all available information about the future, even though there is inherent uncertainty related to future events or conditions
True
What is the chronological order for the finalisation of an audit?
End of reporting period
Audit fieldwork completed
FS authorised
Subsequent events review completed
Auditor’s report issued
FS issued
How is audit evidence obtained?
By performing risk assessment procedures (tests of details & analytical procedures) and further audit procedures (tests of controls)
What are test of controls?
they evaluate whether internal controls are operative effectively in order to prevent, detect or correct material misstatements
What are substantive procedures?
comprise of tests of details and analytical procedures to detect material misstatements
Examples of management’s experts
legal advisors
property appraisers
consultants
analysts
independent valuers
engineers
tax specialists
geologists
When would you select specific items when performing tests of details?
high value or key items
all items over a certain amount
items to obtain information about such matters as the nature of the entity etc
