ACCA P7 (INT) Advanced Audit & Assurance - Study Text

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Syllabus and study guide

3 Transnational audits

(a) Define ‘transnational audits’ and explain the role of the Transnational

Audit Committee (TAC) of IFAC.

(b) Discuss how transnational audits may differ from other audits of

historical financial information (e.g. in terms of applicable financial

reporting and auditing standards, listing requirements and corporate

governance requirements).

international auditing standards.

(d) Distinguish, for example, between ‘global auditing firms’ and second

tier firms.

(e) Discuss the impact of globalisation on audit firms and their clients.

(f) Explain the advantages and problems of current trends (e.g. to merge, to

divest consultancy services).

4 Social and environmental auditing

(a) Discuss the increasing importance of policies that govern the

relationship of an organisation to its employees, society and the

environment.

(b) Describe the difficulties in measuring and reporting on economic,

environmental and social performance and give examples of

performance measures and sustainability indicators.

environmental matters and how they impact on entities and their

financial statements (e.g. impairment of assets, provisions and

contingent liabilities).

(d) Describe substantive procedures to detect potential misstatements in

respect of socio-environmental matters.

(e) Discuss the form and content of an independent verification statement

(e.g. on an environmental management system (EMS) and a report to

society).

5 Other current issues

(a) Discuss how the potential problems associated with the audit of small

enterprises may be overcome.

(b) Explain how International Standards on Auditing affect smaller firms.

impact on the accounting profession.

(d) Discuss the impact of developments in public company oversight on

external auditors.

(e) Explain current developments in auditing standards including the need

for new and revised standards and evaluate their impact on the conduct

of audits.

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(f) Discuss other current legal, ethical, other professional and practical

matters that affect accountants, auditors, their employers and the

profession.

Paper P7 (INT)

Advanced audit and assurance

CHAPTER

The meaning of audit

and assurance

Contents

1 The meaning of assurance

2 The meaning of audit and audit-related services

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The meaning of assurance

 Introduction

 Assurance

 Examples of non-audit assurance engagements

1 The meaning of assurance

1.1 Introduction

This study text is an advanced text on auditing and assurance services. It assumes

that you have already studied the basics, although some revision of basic topics is

included. The main aims of this text are to build on the knowledge you gained from

your studies of audit and assurance, and:

 extend your basic awareness of professional codes and fundamental principles,

so that you develop a detailed understanding of rules of professional conduct

 introduce practice management

 extend the application of procedures involved in planning, conducting and

reporting on audit assignments and non-audit assignments, and deal with group

audits and audit-related services

 provide a critical evaluation of procedures and reports

 outline current issues and developments in assurance.

1.2 Assurance

In an assurance engagement, an assurance firm:

 is engaged by one party

 to give an opinion

 on a piece of information that has been prepared by another party.

The opinion is an expression of assurance, or comfort, about the information that has

been reviewed.

A statutory audit is one form of assurance engagement. The shareholders of a

company do not accept without question that the information provided in the

financial statements by the management of the company is sufficiently accurate and

reliable. The statutory audit provides assurance about the quality of the

information. This makes the financial statements more reliable for the user.

Because of the amount of work carried out, a statutory audit provides a high level

of assurance. Other assurance engagements may provide a lower level of assurance,

or comfort, to the person receiving the opinion. The level of assurance given by

other assurance engagements will depend on various factors that are discussed in a

later chapter.

Chapter 1: The meaning of audit and assurance

1.3 Examples of non-audit assurance engagements

Examples of ‘non-audit’ assurance engagements might include reports on such

matters as:

 corporate social responsibility

 environmental policy

 employment policies

 non-financial performance indicators.

Assurance engagements have become more significant in recent years because the

range of information provided by a company’s directors in reports to the

shareholders and other stakeholders has increased. Auditors can provide assurance

by giving an opinion about the information in these reports.

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The meaning of audit and audit-related services

 Audit

 Audit-related services

2 The meaning of audit and audit-related services

2.1 Audit

ISA 200 states that the purpose of an audit (a form of assurance engagement) is to

enhance the degree of confidence of intended users in the financial statements. This

is achieved by the auditor expressing an opinion on whether the financial

statements of an entity are prepared, in all material respects, in accordance with an

applicable financial reporting framework. A financial reporting framework may be

provided, for example, by country-specific legislation plus international financial

reporting standards.

The audit opinion typically makes reference to whether the financial statements give

a ‘true and fair view’ or ‘present fairly’.

Audits are long-established formalised processes, closely regulated by law and

professional practice. Audits were developed because of the separation between the

ownership of companies (by the shareholders) and stewardship (by the directors).

In order to protect the shareholders from incorrect or misleading information by the

directors, an audit is designed to provide a high level of assurance to the users of

the financial statements.

2.2 Audit-related services

Audit-related services are engagements undertaken by an accountant or firm of

accountants, to perform such assignments as:

 reviews of data

 agreed-upon procedures

 compilations.

Review

A review provides a moderate level of assurance that the information under review

is free from any material misstatement. The accountant’s opinion is usually

expressed in the form of negative assurance, which is an opinion that there is

nothing obviously wrong in the information. For example, the opinion might be:

‘Nothing has come to our attention to suggest that the information is materially

misstated’.

Chapter 1: The meaning of audit and assurance

The higher level of assurance provided by an audit enhances the credibility

provided by the assurance process. However, an audit is more time-consuming (and

therefore more costly) than a review.

Agreed-upon procedures

Agreed-upon procedures are an engagement where the party (client) hiring the

accountant specifies the procedures that should be followed by the accountant in

performing the engagement.

Compilation

With a compilation, the accountant is engaged to prepare information for the client,

rather than audit or check the information prepared by someone else. For example,

a firm of accountants may be asked by a client to prepare a tax computation. No

assurance is provided in a compilation engagement.

Paper P7: Advanced audit and assurance (International)

Paper P7 (INT)

Advanced audit and assurance

CHAPTER

The regulatory environment

Contents

1 The need for regulation of audit and assurance

services

2 Professional standards

3 Corporate governance

4 Money laundering

5 Compliance with law and regulations in an audit

of financial statements: ISA 250

Paper P7: Advanced audit and assurance (International)

The need for regulation of audit and assurance services

 The public interest

 Ethical regulation

 Legal regulation

 Professional regulation

1 The need for regulation of audit and assurance

services

1.1 The public interest

The key reason why audit and assurance services should be regulated is the public

interest. Assurance providers give an impartial, professional view on issues that

matter to users of financial and other information. It is important that this view can

be trusted. Therefore, assurance providers need to operate:

 within ethical boundaries

 to consistent standards.

You know from your previous studies that assurance providers are regulated by:

 the law of the land in which they operate

 the ethical standards of the land and the professional body to which they belong

 the professional standards adopted by their country (for example, ISAs (UK and

Ireland) in the UK.

1.2 Ethical regulation

Assurance providers are given ethical guidance by:

 Professional bodies, for example, ACCA

 Law

 IFAC

You should be familiar with most of the ethical guidance relevant to this syllabus,

which is revised in Chapter 3.

1.3 Legal regulation

Most countries have legal requirements associated with some assurance providers,

particularly audits.

ACCA P7 (INT) Advanced Audit &amp; Assurance - Study Text - 2010 (Emile Woolf Publishing)

Подождите немного. Документ загружается.

ACCA P7 (INT) Advanced Audit & Assurance - Study Text - 2010 (Emile Woolf Publishing)