ACCA - Audit and Assurance (AA) || errorless answers
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Objective of an external audit correct answers The objective of an audit of financial statements is
to enable the auditor to express an opinion on whether the financial statements are prepared, in
all material respects, in accordance with applicable financial reporting framework. An audit of
financial statements is an example of an assurance engagement.
Advantages of a non-statutory audit correct answers 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.
Accountability correct answers 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.
Stewardship correct answers Refers to the duties and obligations of a person who manages
another persons property.
Agents correct answers 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.
Assurance engagement correct answers 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.
,Elements of an assurance engagement correct answers A three party relationship. The three
parties are the intended user, the responsible party and the practitioner.
A subject matter, where the data to be evaluated has been prepared by the responsible party. It
can take many forms, including the financial performance, non-financial performance, process
and behaviour.
Suitable criteria, where the subject matter is evaluated or measured against criteria in order to
reach an opinion.
Evidence, where sufficient appropriate evidence needs to be gathered to support the required
level of assurance.
An assurance report, where a written report containing the practitioners opinion is issued to the
intended user in the form appropriate to reasonable assurance engagement or a limited assurance
engagement.
Intended users correct answers The individual or organisation, or group thereof that the
practitioner expects will use the assurance repot.
Reasonable party correct answers The party responsible for the underlying subject matter.
Practitioner correct answers The individual conducting the engagement which will usually be the
engagement partner or other members of the engagement team, or as applicable, the firm.
Objective of a reasonable assurance engagement correct answers Is a reduction in assurance
engagement risk to an acceptably low level in the circumstances of engagement as the basis for
the insurance practitioners conclusion. The conclusion would usually be expressed in a positive
forum.
Objective of a review engagement correct answers Is obtain limited assurance about whether the
subject matter information is free from material misstatement.
,An attestation engagement correct answers 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.
A direct engagement correct answers 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.
Internal audit function correct answers Will perform assurance and consulting activities designed
to evaluate and improve the effectiveness of the entities governance, risk management and
internal control processes.
True correct answers Information is factual and conforms with reality. In addition, the
information conforms with required standards and law. The financial statements have been
correctly extracted from the books and records.
Fair correct answers Information is free from discrimination and bias and is in compliance with
expected standards and rules. The accounts should reflect the commercial substance of the
companies underlying transactions.
Reasonable assurance correct answers An audit gives the reader this assurance on the truth and
fairness of the financial statements, which is high, but not absolute, level of assurance. The
auditors report does not guarantee that the financial statements are correct, but that they are true
and fair with in a reasonable margin of error.
Materiality correct answers An expression of the relative significance or importance of a
particular matter in the context of the financial statements as a whole. The matter is material if
it's a mission or misstatement would reasonably be expected to influence the economic decisions
of use is taken on the basis of the financial statements. Materiality depends on the size of the
item or error judged in the particular circumstances of its omission or misstatement.
Corporate governance correct answers Is the system by which companies are directed and
controlled.
, Chair correct answers The chair and the chief executive cannot be the same individual. There is a
time limit on the chairs position, and cannot remain in post for beyond nine years. They must be
independent, and cannot be a former Chief Executive of the same company except in exceptional
circumstances.
Non-executive directors correct answers Are directors who do not have day-to-day operational
responsibility for the company. They are not employees of the company or affiliated with it in
any way.
They can be compromised by the following: Employment with the company or group in the last
five years.
Material business relationships with the company in the past three years.
Remuneration beyond the basic fee for the role.
Close family ties with any of the companies advisors, directors or senior employees.
Representing a significant shareholder.
Serving longer than nine years on the board.
Remuneration committee correct answers Must be established, made up of at least 3 independent
non-executive directors, but in smaller companies it may be 2.
Executive directors cannot sit on this committee.
The chair of the board cannot chair on this committee, but they can be a member of it if they
were independent on appointment.
It is responsible for:
Setting remuneration for the chair, executive directors and senior management.
Setting the remuneration policy for executive directors. Reviewing workforce remuneration and
policies.
Nomination committee correct answers Should be established to lead the process for making
nominations for board appointments. This committee should be made up of a majority of
independent non-executive directors. All directors are then subject to annual re-election by
shareholders.
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Objective of an external audit correct answers The objective of an audit of financial statements is
to enable the auditor to express an opinion on whether the financial statements are prepared, in
all material respects, in accordance with applicable financial reporting framework. An audit of
financial statements is an example of an assurance engagement.
Advantages of a non-statutory audit correct answers 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.
Accountability correct answers 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.
Stewardship correct answers Refers to the duties and obligations of a person who manages
another persons property.
Agents correct answers 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.
Assurance engagement correct answers 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.
,Elements of an assurance engagement correct answers A three party relationship. The three
parties are the intended user, the responsible party and the practitioner.
A subject matter, where the data to be evaluated has been prepared by the responsible party. It
can take many forms, including the financial performance, non-financial performance, process
and behaviour.
Suitable criteria, where the subject matter is evaluated or measured against criteria in order to
reach an opinion.
Evidence, where sufficient appropriate evidence needs to be gathered to support the required
level of assurance.
An assurance report, where a written report containing the practitioners opinion is issued to the
intended user in the form appropriate to reasonable assurance engagement or a limited assurance
engagement.
Intended users correct answers The individual or organisation, or group thereof that the
practitioner expects will use the assurance repot.
Reasonable party correct answers The party responsible for the underlying subject matter.
Practitioner correct answers The individual conducting the engagement which will usually be the
engagement partner or other members of the engagement team, or as applicable, the firm.
Objective of a reasonable assurance engagement correct answers Is a reduction in assurance
engagement risk to an acceptably low level in the circumstances of engagement as the basis for
the insurance practitioners conclusion. The conclusion would usually be expressed in a positive
forum.
Objective of a review engagement correct answers Is obtain limited assurance about whether the
subject matter information is free from material misstatement.
,An attestation engagement correct answers 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.
A direct engagement correct answers 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.
Internal audit function correct answers Will perform assurance and consulting activities designed
to evaluate and improve the effectiveness of the entities governance, risk management and
internal control processes.
True correct answers Information is factual and conforms with reality. In addition, the
information conforms with required standards and law. The financial statements have been
correctly extracted from the books and records.
Fair correct answers Information is free from discrimination and bias and is in compliance with
expected standards and rules. The accounts should reflect the commercial substance of the
companies underlying transactions.
Reasonable assurance correct answers An audit gives the reader this assurance on the truth and
fairness of the financial statements, which is high, but not absolute, level of assurance. The
auditors report does not guarantee that the financial statements are correct, but that they are true
and fair with in a reasonable margin of error.
Materiality correct answers An expression of the relative significance or importance of a
particular matter in the context of the financial statements as a whole. The matter is material if
it's a mission or misstatement would reasonably be expected to influence the economic decisions
of use is taken on the basis of the financial statements. Materiality depends on the size of the
item or error judged in the particular circumstances of its omission or misstatement.
Corporate governance correct answers Is the system by which companies are directed and
controlled.
, Chair correct answers The chair and the chief executive cannot be the same individual. There is a
time limit on the chairs position, and cannot remain in post for beyond nine years. They must be
independent, and cannot be a former Chief Executive of the same company except in exceptional
circumstances.
Non-executive directors correct answers Are directors who do not have day-to-day operational
responsibility for the company. They are not employees of the company or affiliated with it in
any way.
They can be compromised by the following: Employment with the company or group in the last
five years.
Material business relationships with the company in the past three years.
Remuneration beyond the basic fee for the role.
Close family ties with any of the companies advisors, directors or senior employees.
Representing a significant shareholder.
Serving longer than nine years on the board.
Remuneration committee correct answers Must be established, made up of at least 3 independent
non-executive directors, but in smaller companies it may be 2.
Executive directors cannot sit on this committee.
The chair of the board cannot chair on this committee, but they can be a member of it if they
were independent on appointment.
It is responsible for:
Setting remuneration for the chair, executive directors and senior management.
Setting the remuneration policy for executive directors. Reviewing workforce remuneration and
policies.
Nomination committee correct answers Should be established to lead the process for making
nominations for board appointments. This committee should be made up of a majority of
independent non-executive directors. All directors are then subject to annual re-election by
shareholders.
