Chapter 1: Assurance and auditing: an overview
Audit is one level of assurance that can be offered. Under the assurance framework, assurance can be at two levels: reasonable (sometimes referred to as audit) and limited (sometimes referred to as review).
For the objectives of the assurance engagement, both A and B may be considered suitable criteria.
Systematic process refers to audits being properly planned and structured, following a logical sequence.
Representing their client in matters identified by regulators is not a fundamental principle underlying an audit.
Timeliness is not an attribute identified in the Framework for the Preparation and Presentation of Financial Statements.
Management is responsible for the preparation of the financial report, including disclosures made in the accompanying notes.
One of the major incentives for audit is to correct potential biases in reporting by management.
The aim of undertaking an assurance engagement is to increase the level of assurance for users of the engagement.
Auditors currently use a business risk approach that requires the auditor to understand items that affect the business and may flow through into the financial report.
Auditors initially followed a statement of financial position approach then changed to transactions cycle approach then changed to a financial risk approach before finally adopting a business risk approach.
As following Australian auditing standards is mandatory for auditors, it is reasonable for users to believe that auditors have done so.
The expectation gap has been attributed to a number of different causes, including misunderstanding of the audit function by non-auditors.
The auditor is expected to comply with the requirements contained in the ASAs in all but rare and exceptional circumstances, and GSs provide guidance only on procedural, entity or industry-specific issues.
Under the Corporations Act 2001, directors are required to prepare the financial report and auditors are required to report an opinion as to whether the financial report is in accordance with the law, including compliance with accounting standards, and gives a true and fair view.
The activities of forensic auditors are most commonly associated with fraud.
Internal auditors often undertake performance or operational audits of the economy, efficiency and effectiveness of the entity.
Chapter 2: The structure of the profession
High fees are not a requirement for a profession.
Attributes of a profession include systematic theory, professional authority, community sanction, regulative codes and culture. 2.2
To have sufficient auditing experience an auditor must have completed at least 3000 hours of work in auditing during the five years immediately prior to the date of their application, including at least 750 hours spent supervising audits of companies. (b) C
Resignation from an audit is not grounds for disciplinary action against an auditor. 2.3
Membership of the International Federation of Accountants is open to accountancy bodies.
Members of the Forum of Firms must conform to the Forum of Firms Quality Standards, subject themselves to global peer review, and perform audits of financial reports that may be used across national borders. 2.4
CPA Australia is the largest accounting body in Australia. (b) D
Audit firms may practise as sole traders, partnerships or authorised audit companies. 2.5
A system of quality control should provide reasonable assurance that a firm’s personnel comply with all professional standards applicable to its audit and assurance services practice.
The purpose of professional development is to ensure that auditors maintain and update their knowledge. 2.6
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