ACCA - Audit and Assurance (AA) with
Complete Solutions
A direct engagement - ANSWER-Where the underlying subject matter has been
measured and evaluated by the practitioner, and the practitioner then presents
conclusions on the reported outcome in the insurance report.
Ability to obtain sufficient appropriate audit evidence where both material and pervasive
- ANSWER-Disclaimer of opinion given.
Accountability - ANSWER-The quality or state of being accountable; that is, being
required or expected to justify actions and decisions. It suggests an application or
willingness to accept responsibility for one's actions.
Accounting estimate - ANSWER-An approximation of a monetary amount in the
absence of a precise means of measurement.
Adjusting events include - ANSWER-Settlement the court case, sale of inventory after
year and providing evidence of its net realisable value at year end, fraud or error
showing the accounts are incorrect.
Advantages of a non-statutory audit - ANSWER-It can provide a means of settling
accounts between the partners.
Where audited accounts are available this may make the accounts more acceptable to
taxation authorities.
The sale of the business or the negotiation of loan or overdraft facilities may be
facilitated if the firm is able to produce audited accounts.
An audit on behalf of a sleeping partner is useful since generally such a personal have
you have a means of checking the accounts of the business or confirming the share of
profits due to them.
Advantages of flowcharts - ANSWER-After a little experience they can be prepared
quickly.
As the information is presented in a standard form, they are fairly easy to follow and
review.
They generally ensure that the system is recorded in its entirety, as all document flows
have to be traced from beginning to end.
Any loose ends will be apparent from a cursory examination.
They eliminate the need for extensive narrative and can be of considerable help in
highlighting the salient points of control and any deficiencies in the system.
Advantages of ICQs and ICEQs - ANSWER-If drafted thoroughly they can ensure all
controls are considered.
They are quick to prepare.
,They are easy to use and control.
Because they are drafted in terms of objectives rather than specific controls, ICEQs are
easier to apply to a variety of systems than ICQs.
Answering ICEQs should enable auditors to identify the key controls which they are
most likely to test during controlled testing.
ICEQs can highlight deficiencies where extensive substantive testing will be required.
Advantages of narrative notes - ANSWER-They are relatively simple to record and can
facilitate understanding by all audit team members.
They can be used for any system due to the methods of flexibility.
Editing in future years can be relatively easy if they are computerised.
Adverse opinion - ANSWER-Expressed when the auditor, having obtained sufficient
appropriate audit evidence, concludes that misstatements are both material and
pervasive to the financial statements.
Advocacy threat - ANSWER-Arises in those situations where the audit firm promotes a
position or opinion to the point that subsequent objectivity is compromised.
Agents - ANSWER-Are people who are employed or used to provide a particular
service. In the case of a company, the people being used to provide the service or
managing the business also have the second role of trying to maximise their personal
wealth in their own right.
An attestation engagement - ANSWER-Where underlying subject matter has not been
measured or evaluated by the practitioner, and the practitioner concludes whether or
not the subject matter information is free from material misstatement.
Analytical procedures - ANSWER-Consist of evaluations of financial information through
analysis of plausible relationships among both financial and non-financial data. They
also encompass investigation of identified fluctuations or relationships that are
inconsistent with other relevant information or that differ from expected values by a
significant amount. The relationship between two items of information.
Anomaly - ANSWER-Is a misstatement or deviation that is demonstrably not
representative of misstatements or deviations in a population.
Application controls - ANSWER-Are manual or automated procedures that typically
operate at business process level. These controls can be preventative or detective in
nature and are designed to ensure the integrity of the accounting records.
Assertions - ANSWER-Representations by management, explicit or otherwise, that are
embodied in the financial statements as used by the auditor to consider the different
types of potential misstatements that may occur.
, Assertions about account balances and related disclosures at the period end -
ANSWER-COVECP
Completeness
Obligations and rights
Valuation and allocation
Existence
Classification
Presentation
Assertions about classes of transactions and events related to disclosures - ANSWER-
OCCCAP
Occurrence
Completeness
Cut off
Classification
Accuracy
Presentation
Assurance engagement - ANSWER-A practitioner that aims to obtain sufficient
appropriate evidence in order to express a conclusion designed to enhance the degree
of confidence of the intended users other than the responsible party about the outcome
of the measurement or evaluation of an underlying subject matter against criteria.
Audit committee - ANSWER-A subcommittee of the board of directors, usually
containing a number of independent non-executive directors. The role and function of
this committee should be set out in written terms of reference and extract from the UK
corporate governance code.
Audit documentation - ANSWER-Is the record of audit procedures performed, relevant
audit evidence obtained and conclusions the auditor reached.
Audit evidence - ANSWER-Is all the information used by the auditor in arriving at the
conclusions on which the auditors opinion is based.
Audit plan - ANSWER-Converts the audit strategy into a more detailed plan and
includes the nature, timing and extent of audit procedures to be performed by
engagement team members in order to obtain sufficient appropriate audit evidence to
reduce audit risk to an acceptable level.
Audit risk - ANSWER-The it's good that the auditor expresses an inappropriate audit
opinion when the financial statements are materially misstated.
It will have two major components:
One is dependent on the entity, and is the risk of material misstatement that arises in
the financial statements, this will include inherent risk and control risk.
The other will be dependent on the auditor, and is the risk that auditor will not detect
material misstatements in the financial statements, and this will be detection risk.
Complete Solutions
A direct engagement - ANSWER-Where the underlying subject matter has been
measured and evaluated by the practitioner, and the practitioner then presents
conclusions on the reported outcome in the insurance report.
Ability to obtain sufficient appropriate audit evidence where both material and pervasive
- ANSWER-Disclaimer of opinion given.
Accountability - ANSWER-The quality or state of being accountable; that is, being
required or expected to justify actions and decisions. It suggests an application or
willingness to accept responsibility for one's actions.
Accounting estimate - ANSWER-An approximation of a monetary amount in the
absence of a precise means of measurement.
Adjusting events include - ANSWER-Settlement the court case, sale of inventory after
year and providing evidence of its net realisable value at year end, fraud or error
showing the accounts are incorrect.
Advantages of a non-statutory audit - ANSWER-It can provide a means of settling
accounts between the partners.
Where audited accounts are available this may make the accounts more acceptable to
taxation authorities.
The sale of the business or the negotiation of loan or overdraft facilities may be
facilitated if the firm is able to produce audited accounts.
An audit on behalf of a sleeping partner is useful since generally such a personal have
you have a means of checking the accounts of the business or confirming the share of
profits due to them.
Advantages of flowcharts - ANSWER-After a little experience they can be prepared
quickly.
As the information is presented in a standard form, they are fairly easy to follow and
review.
They generally ensure that the system is recorded in its entirety, as all document flows
have to be traced from beginning to end.
Any loose ends will be apparent from a cursory examination.
They eliminate the need for extensive narrative and can be of considerable help in
highlighting the salient points of control and any deficiencies in the system.
Advantages of ICQs and ICEQs - ANSWER-If drafted thoroughly they can ensure all
controls are considered.
They are quick to prepare.
,They are easy to use and control.
Because they are drafted in terms of objectives rather than specific controls, ICEQs are
easier to apply to a variety of systems than ICQs.
Answering ICEQs should enable auditors to identify the key controls which they are
most likely to test during controlled testing.
ICEQs can highlight deficiencies where extensive substantive testing will be required.
Advantages of narrative notes - ANSWER-They are relatively simple to record and can
facilitate understanding by all audit team members.
They can be used for any system due to the methods of flexibility.
Editing in future years can be relatively easy if they are computerised.
Adverse opinion - ANSWER-Expressed when the auditor, having obtained sufficient
appropriate audit evidence, concludes that misstatements are both material and
pervasive to the financial statements.
Advocacy threat - ANSWER-Arises in those situations where the audit firm promotes a
position or opinion to the point that subsequent objectivity is compromised.
Agents - ANSWER-Are people who are employed or used to provide a particular
service. In the case of a company, the people being used to provide the service or
managing the business also have the second role of trying to maximise their personal
wealth in their own right.
An attestation engagement - ANSWER-Where underlying subject matter has not been
measured or evaluated by the practitioner, and the practitioner concludes whether or
not the subject matter information is free from material misstatement.
Analytical procedures - ANSWER-Consist of evaluations of financial information through
analysis of plausible relationships among both financial and non-financial data. They
also encompass investigation of identified fluctuations or relationships that are
inconsistent with other relevant information or that differ from expected values by a
significant amount. The relationship between two items of information.
Anomaly - ANSWER-Is a misstatement or deviation that is demonstrably not
representative of misstatements or deviations in a population.
Application controls - ANSWER-Are manual or automated procedures that typically
operate at business process level. These controls can be preventative or detective in
nature and are designed to ensure the integrity of the accounting records.
Assertions - ANSWER-Representations by management, explicit or otherwise, that are
embodied in the financial statements as used by the auditor to consider the different
types of potential misstatements that may occur.
, Assertions about account balances and related disclosures at the period end -
ANSWER-COVECP
Completeness
Obligations and rights
Valuation and allocation
Existence
Classification
Presentation
Assertions about classes of transactions and events related to disclosures - ANSWER-
OCCCAP
Occurrence
Completeness
Cut off
Classification
Accuracy
Presentation
Assurance engagement - ANSWER-A practitioner that aims to obtain sufficient
appropriate evidence in order to express a conclusion designed to enhance the degree
of confidence of the intended users other than the responsible party about the outcome
of the measurement or evaluation of an underlying subject matter against criteria.
Audit committee - ANSWER-A subcommittee of the board of directors, usually
containing a number of independent non-executive directors. The role and function of
this committee should be set out in written terms of reference and extract from the UK
corporate governance code.
Audit documentation - ANSWER-Is the record of audit procedures performed, relevant
audit evidence obtained and conclusions the auditor reached.
Audit evidence - ANSWER-Is all the information used by the auditor in arriving at the
conclusions on which the auditors opinion is based.
Audit plan - ANSWER-Converts the audit strategy into a more detailed plan and
includes the nature, timing and extent of audit procedures to be performed by
engagement team members in order to obtain sufficient appropriate audit evidence to
reduce audit risk to an acceptable level.
Audit risk - ANSWER-The it's good that the auditor expresses an inappropriate audit
opinion when the financial statements are materially misstated.
It will have two major components:
One is dependent on the entity, and is the risk of material misstatement that arises in
the financial statements, this will include inherent risk and control risk.
The other will be dependent on the auditor, and is the risk that auditor will not detect
material misstatements in the financial statements, and this will be detection risk.
