ACCA F8 flashcards – set 1

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See also ACCA F8 Flashcards: Set 2 | Set 3 | Set 4


What two types of risk make up detection risk?

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Sampling risk and non-sampling risk.

What two risks contribute to the risk of material misstatement in the financial statements?

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Inherent risk and control risk

What are the three components of audit risk?

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Inherent risk, control risk and detection risk

When the audit firm changes, the proposed new auditor should contact the retiring auditor. If the client refuses permission for communication to take place, what should the proposed new auditor do?

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Decline the appointment

What are the suggested limits for the percentage of total fees coming from any one client (‘ordinary clients’ and special interest clients)?

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15% for ordinary; 10% for special interest.

What is a familiarity threat?

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Because of a close relationship, members of the assurance firm become too sympathetic to members of the client firm, so that objectivity and scepticism are lost

ACCA suggest that lead audit partners should be rotated no less frequently than how many years?

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ACCA suggest that the lead partner should be changed at least every 5 years.

What six threats can relate to objectivity, integrity and independence?

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* Self-interest
* Self-review
* Familiarity
* Advocacy
* Intimidation
* Management

In relation to corporate governance, what is meant by the ‘agency problem’?

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Shareholders own the company and are its principles.  Directors run the company and are the agents of the shareholders. There can be a problem if directors to not run the company in the best interests of the shareholders (eg eccessive remuneration is arranged for the directors).

Define corporate governance

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Corporate governance: the system by which companies are directed and controlled

Define an audit

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An audit is the independent examination of, and expression of opinion on, the financial statements of an entity.

The UK Corporate Governance Code states that there should be a clear division … between the running of the board and the executive responsibility for the running of the company’s business. To comply with this, what roles should be split?

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The roles of Chief Executive Officer and Chairman should be split.

What sub-committee of the board of directors is responsible for finding new directors?

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The nomination committee

What sub-committee of the board of directors is responsible for determining directors’ pay?

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The remuneration committee

How many non-executive directors should be on a board of directors to comply with the UK Corporate Governance Code?

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NEDS not less than 50% of board; not less than 2 in small companies

What is a NED?

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A NED is a non-executive director

In relation to corporate governance, what does comply or explain mean?

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Listed companies are expected to comply with the corporate governance code or, if they don’t, explain why not.

The purpose of corporate governance is to facilitate effective entrepreneurial and prudent management that can deliver long-term success of the company. What are the five main principles of the UK Corporate Governance Code?

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Leadership
Effectiveness
Accountability
Remuneration
Relations with shareholders

What is a statement of circumstances?

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A statement of circumstances is a statement that auditors are required to make upon resignation or removal as auditors. It will state whether there are any untoward reasons for their removal or resignation – such as non-cooperation by the directors.

Who sets the International Standards on Auditing?

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The International Standards on Auditing are set by International Auditing and Assurance Standards Board (IAASB) – part of the International Federation of Accountants (IFAC)

What are the two general reasons that would lead a practitioner not to issue an unqualified conclusion to an assurance engagement?

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There is a limitation on the scope of the practitioner’s work.
The assertion is not fairly stated, and the subject matter information is materially misstated.

What is another name for a limited assurance engagement?

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A negative assurance

What are the five elements of an assurance engagement?

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  • A three party relationship involving a practitioner, a responsible party, and intended users
  • An appropriate subject matter
  • Suitable criteria
  • Sufficient appropriate evidence
  • A written assurance report in the form appropriate

What are the five fundamental principles of the ACCA’s ethical code?

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  • Integrity
  • Professional competence and due care
  • Confidentiality
  • Professional behaviour
  • Objectivity

What are the two categories of substantive test?

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Analytical procedures and tests of detail


Comments

    • Avatar of gromit says

      @nishta87, Sorry, flashcards are not downloadable. They can only be accessed live form the site.

      As you know OT is free to all users, but we have to cover costs somehow and this can only be done when users visit the site

  1. avatar says

    When I click on “view the answer” for some of these flashcards on a desktop the card is blank and won’t allow me to even view the question again.
    Examples:
    2 reasons not to issue an unqualified opinion

    In relation to corporate governance, what is meant by the ‘agency problem’?

    What are the five fundamental principles of the ACCA’s ethical code?

    Does anyone else have this issue?

    • Avatar of admin says

      flashcards are interactive, they work also on your smartphone.

      if you need to print – print out the course notes – all this stuff is there,

      or prepare your own paper versions – that fit your own needs

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