Combinepdf (14) F8 Audit & Assurance 2021 PDF

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Summary

Assurance EngagementsAn assurance engagement is when a professional examines information for which another party is responsible forExamples : An Auditor examining financial statements prepared by a board of directors to express an opinion as to whether they comply with accounting standards. Assuranc...

Description

TYPICAL THREAT

SAFEGUARD

Holding Shares in a client

None - The interest should either be disposed of, or the team member removed from the engagement

Significant Income from client

Limit the amount to 10% of total fees if listed; 15% of total fees if unlisted

Separate business venture with client

Don't! Although buying things from a client is fine if on normal commercial terms and in the normal course of business

Giving a loan to the client

Don't - none

Getting a loan from a client

Don't unless its a bank (on normal terms)

Lowballing

Don't - use a predetermined method e.g.. hours worked

Hospitality and Benefits

Do not accept unless of insignificant value and for a good reason

Contingent Fees

Audit Fees are not to be determined in this way; other services ok if small

Accounting Services

Don't if listed. Otherwise ensure no management decisions should be made and a different team should provide each service

IT services

Don't get involved if significant part of accounting system. Otherwise ok but be careful to not be seen to be making management decisions

Valuation Services

If the valuation requires a degree of judgement then don’t

Tax Services

If likely to have a material effect on the financial statements, should not be taken on

Corporate Financial Services

ok as long as not making management decisions - it is acceptable to assist client in raising finance or developing corporate strategies

Internal Audit Services

Don't if significant reliance is to be placed on the work of Internal Audit

Former Employee of Client joining Audit Firm

The employee cannot be involved in the audit for two years

Participation in Client Affairs

The auditor cannot be a director, employee or business partner of client. Cannot be part of team if have been one of these in the last 2 years

Family / Personal Relationship

No member of the audit team may have a family member or close personal relation in the client firm

Auditor for a looooong time

If client is listed company engagement partners should act for maximum of 5 yrs with 5 yr break in between rotations. A Key audit partner must have a break of 2 yrs after a period of 7 yrs and senior staff on listed audits should also not act for more than 7 yrs. For non-listed clients it is advised that partners act for no longer than 10 years.

Emphasis of matter

Other matter

What is it?

Draws attention to fundamental issue Draws attention to another issue in the fs users need to know about

Where does it go?

After the opinion paragraph

After the opinion paragraph & eom paragraph

Headed how?

Other matter

Other matter

Key points?

Highlights the matter in the FS by reference to its page or note number

The effect on the auditor's responsibilities

Effect on opinion?

None

None

Example

Uncertainty regarding a contingent liability

Auditor wishes to resign but legally cannot...