ACCA P7 (INT) Advanced Audit & Assurance - Study Text - 2010 (Emile Woolf Publishing)
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ACCA
P7 INT Study Text
Advanced Audit and
Assurance
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ACCA
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ACCA
Paper
P7
(INT)
Advanced audit
and assurance
(International)
Publishing
Publishing
Welcome to Emile Woolf‘s study text for
Paper P7 Advanced Audit and Assurance (International)
which is:
Written by tutors
Comprehensive but concise
In simple English
Used around the world by Emile Woolf Colleges including
China, Russia and the UK
ii
Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP
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Acknowledgements
Thesyllabusandstudyguide
arereproducedbykindpermissionoftheAssociationof
CharteredCertifiedAccountants.
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© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides iii
Paper P7 (INT)
Advanced audit and assurance
c
Contents
Page
Syllabus and study guide 1
Chapter 1: The meaning of audit and assurance 17
Chapter 2: The regulatory environment 23
Chapter 3: Rules of professional conduct 39
Chapter 4: Professional responsibility and liability 61
Chapter 5: Practice management 77
Chapter 6: The audit approach 103
Chapter 7: Planning 125
Chapter 8: Audit evidence 155
Chapter 9: Evaluation and review 215
Chapter 10: Group audits 235
Chapter 11: Audit-related services 251
Chapter 12: Assurance services 267
Chapter 13: Internal audit and outsourcing 291
Chapter 14: Reporting 303
Chapter 15: Current issues I 345
Chapter 16: Current issues II 361
Practice questions 375
Answers to practice questions 397
Index 471
Paper P7: Advanced audit and assurance (International)
iv Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP
© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 1
Paper P7 (INT)
Advanced audit and assurance
S
Syllabus and study guide
Aim
To analyse, evaluate and conclude on the assurance engagement and other audit
and assurance issues in the context of best practice and current developments.
Main capabilities
On successful completion of this examination candidates should be able to:
A Recognise the legal and regulatory environment and its impact on audit and
assurance practice
B Demonstrate the ability to work effectively on an assurance or other service
engagement within a professional and ethical framework
C Assess and recommend appropriate quality control policies and procedures in
practice management and recognising the auditor’s position in relation to the
acceptance and retention of professional appointments
D Identify and formulate the work required to meet the objectives of audit and
non-audit assignments and apply the International Standards on Auditing
E Evaluate findings and the results of work performed and draft suitable reports
on assignments
F Understand the current issues and developments relating to the provision of
audit-related and assurance service
Paper P7: Advanced audit and assurance (International)
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Rationale
The Advanced Audit and Assurance syllabus is essentially divided into six areas.
The syllabus starts with the legal and regulatory environment including money
laundering, and procedures in practice management, including quality control and
the acceptance and retention of professional engagements. This then leads into
professional and ethical considerations, including the Code of Ethics and
professional liability.
The syllabus then covers various assignments, including an audit of financial
statements, audit-related services, and other assurance assignments, as well as the
reporting of these assignments.
The final section covers current issues and developments relating to the provision of
audit-related and assurance services.
Syllabus
A Regulatory Environment
1 International regulatory frameworks for audit and assurance services
2 Money laundering
3 Laws and regulations
B Professional and Ethical Considerations
1 Code of Ethics for Professional Accountants
2 Fraud and error
3 Professional liability
C Practice Management
1 Quality control
2 Advertising, publicity, obtaining professional work and fees
3 Tendering
4 Professional appointments
D Assignments
1 The audit of historical financial information including;
(i) Planning, materiality and assessing the risk of misstatement
(ii) Evidence
(iii) Evaluation and review
2 Group audits
3 Audit-related services
4 Assurance services
Syllabus and study guide
© EWP Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides 3
5 Prospective financial information
6 Forensic audits
7 Internal audit
8 Outsourcing
E Reporting
1 Auditor’s reports
2 Reports to management
3 Other reports
F Current Issues and Developments
1 Professional, ethical and corporate governance
2 Information technology
3 Transnational audits
4 Social and environmental auditing
5 Other current issues
Approach to examining the syllabus
The examination is a three hour paper constructed in two sections. Questions in
both sections will be almost entirely discursive. However, candidates will be
expected, for example, to be able to assess materiality and calculate relevant ratios
where appropriate.
Section A questions will be based on ‘case study’ type questions. That is not to say
that they will be particularly long, rather that they will provide a setting within a
range of topics, issues and requirements can be addressed. Different types of
question will be encountered in Section B and will tend to be more focussed on
specific topics, for example ‘auditor’s reports’, ‘quality control’ and topics of ISAs
which are not examinable in Paper F8, Audit and Assurance. (This does not preclude
these topics from appearing in Section A). Current issues will be examined across a
number of questions.
Number
ofmarks
SectionA 2compulsoryquestions50‐70
SectionB Choiceof2from3questions30‐50
––––––––
100
––––––––
Paper P7: Advanced audit and assurance (International)
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Study guide
Thisstudyguideprovidesmoredetailedguidanceonthesyllabus.Youshoulduse
thisasthebasisofyourstudies.
A Regulatory environment
1 International regulatory frameworks for audit and assurance services
(a) Explain the need for laws, regulations, standards and other guidance
relating to audit, assurance and related services.
(b) Outline and explain the need for the legal and professional framework
including:
(i) the international standard-setting process
(ii) the authority of national and international standards
(iii) public oversight and principles of corporate governance
(iv) the role of audit committees.
(c) Discuss the effectiveness of the different ways in which the auditing
profession and audit markets are regulated.
2 Money laundering
(a) Define ‘money laundering’.
(b) Explain how international efforts seek to combat money laundering.
(c) Explain the scope of criminal offences of money laundering and how
professional accountants may be protected from criminal and civil
liability.
(d) Explain the need for ethical guidance in this area.
(e) Describe how accountants meet their obligations to help prevent and
detect money laundering including record keeping and reporting of
suspicion to the appropriate regulatory body.
(f) Explain the importance of customer due diligence (CDD).
(g) Recognise potentially suspicious transactions and assess their impact on
reporting duties.
(h) Describe, with reasons, the basic elements of an anti-money laundering
program.
3 Laws and regulations
(a) Compare and contrast the respective responsibilities of management
and auditors concerning compliance with laws and regulations in an
audit of financial statements.
(b) Describe the auditors considerations of compliance with laws and
regulations and plan audit procedures when possible non-compliance is
discovered.
(c) Discuss how and to whom non-compliance should be reported.
(d) Recognise when withdrawal from an engagement is necessary.