ACCA AAA
ACCA Advanced Audit and Assurance (AAA) Flashcards
What are the five elements of an assurance engagement?
What is professional scepticism?
An assurance report concludes ‘Based on our work described in this report
What five areas are covered by the main principles of corporate governance according to best practice?
What is meant by a ‘comply or explain’ approach to corporate governance?
What does the principle of ‘accountability’ mean?
What is the fundamental principle of ‘professional behaviour’?
What information would usually be included in a tender for an audit?
Why should an audit firm approached by a new prospective audit client communicate with the existing auditor?
What are the fundamental principles of ACCA’s ‘Code of Ethics and Conduct’?
What are the categories of threats to compliance with the fundamental principles of professional ethics?
What is ‘independence’?
What is meant by the conceptual framework approach to independence?
What is ‘money laundering’?
What types of offence fall within the scope of money laundering?
What is ‘tipping off’?
What is ‘NOCLAR’?
What are the main effects that NOCLAR may have on financial statements?
To whom can the auditor report NOCLAR?
What are the three criteria for determining whether an auditor is responsible for negligent misstatements in audited financial statements?
What conditions must be met for an auditor to owe a duty of care to a third party?
What measures can auditors take to restrict their exposure to liability?
What is a ‘misstatement’ in a financial statement.
What are the auditor’s responsibilities for the evaluation of misstatements identified during the audit?
What is a ‘significant deficiency in internal control’?
What factors may determine whether a deficiency (or combination of deficiencies) in internal control is a significant deficiency?
What is a ‘system of quality management’?
What are the EIGHT elements of a firm’s system of quality management according to ISQM 1?
What does an ‘Engagement Quality Review’ of any client involve?
What is materiality?
What is performance materiality used for?
What is performance materiality?
What are the components of business risk?
What are the components of audit risk and which of these components should the auditor manage?
What is non-sampling risk and how can it be minimised?
What is cut-off?
What assertions are relevant to a liability?
What are the evidence gathering procedures identified in ISA 500 Audit Evidence?
What is ‘sufficient appropriate’ audit evidence?
What audit risks arise from the distinction between a provision and contingent liabilities?
Why must financial statements be adjusted for ‘adjusting events’ after the reporting date?
What is the ‘recoverable amount’ of an asset (or cash-generating unit).
How should leases be treated in accordance with IFRS 16?
What audit evidence is necessary for the audit of a defined benefit scheme?
What type of computer-assisted audit technique could be used in analytical procedures.
What is the purpose of test data?
Who is a ‘management’s expert’?
When is a performance obligation satisfied over time in accordance with IFRS 15?
Who is an ‘auditor’s expert’?
What factors should the external auditor consider when assessing whether to rely on the work of internal audit?
What is ‘direct assistance’?
Can a management representation alone ever provide sufficient audit evidence relating to a matter that is material to the financial statements?
What is the difference between a Type 1 and Type 2 assurance report on the controls of a service organisation?
Why should the auditor obtain written representations?
What finance function activities may be outsourced?
What written representation might be included in a representation letter relating to events after the reporting date?
What is a related party transaction?
What are the principal auditing issue arising from related party relationships?
What types of transactions that appear to be outside normal business terms may identify relate party transactions?
What disclosures in the financial statements do related party transactions require?
In the context of the audit of group financial statements, what is a component?
What is component materiality and how does it compare with group materiality?
How is goodwill calculated on initial acquisition of a subsidiary?
What audit considerations may arise when a group acquires a new subsidiary during the year?
What is a ‘comfort letter’?
What is a ‘transnational audit’?
What is the difference between an adjusting event and a non-adjusting event?
What is the difference between ‘events after the reporting period’ (IAS 10) and ‘subsequent events’ (ISA 560)?
What is the auditor’s responsibility for subsequent events?
What are the four types of audit opinion?
In which paragraph in the auditor’s report will the auditor reference to compliance with International Standards on Auditing?
An auditor concludes that management’s use of the going concern basis of accounting is appropriate but material uncertainty exists.
What is an ‘emphasis of matter’ paragraph?
What is an ‘other matter’ paragraph?
What is a key audit matter (KAM)?
During the year your client migrated its principal financial reporting processes
An auditor concludes that management’s use of the going concern basis of accounting
Shortly before the reporting date a fire in the accounts department
During the year your client acquired a subsidiary that is material to the group
What types of engagement may be described as an assurance engagement in accordance with the IESBA’s international framework?
What types of engagement may be described as review engagements?
What types of engagement are described as related services?
In the context of prospective financial information, what is the difference between a ‘forecast’ and a ‘projection’, if any?
What level of assurance can be provided by an examination of prospective financial information?
What is the difference between a ‘statement of cash flows’ and a ‘cash flow forecast (or budget)’?
What are the objectives of an examination to report on prospective financial information (PFI)?
What is a ‘forensic audit’?
What are the main applications of forensic auditing?
What might the purposes of a fraud investigation by a forensic accountant?
What is an ‘integrated report’?
What risks of misstatement in financial statements may arise from the effects of environmental matters?
What evidence would you seek to verify the ‘number of serious accidents in the workplace’
How does the scope of a due diligence (DD) assignment generally compare with an audit of financial statements?
What factors should be considered before accepting a due diligence engagement to report on a proposed acquisition by and audit client?
Why are the procedures undertaken in a due diligence assignment to gather information principally analytical procedures and inquiry?
What is a ‘performance audit’?
What examples of measures of economy, efficiency and effectiveness be relevant to a health service responsible for hospitals?
What are the uses of performance information?
What is the 'applicable financial reporting framework'?
What is a 'component auditor'?
A component auditor is a part of the engagement team for a group audit.
What are 'common controls'?
What is the difference between reasonable assurance and limited assurance?
What makes criteria ‘suitable’ for an assurance engagement?
Why can an auditor never provide absolute assurance on financial statements?
What are the main responsibilities of an audit committee in relation to the external auditor?
Why does the existence of an audit committee of independent non-executive directors reduce audit risk?
What is the role of an audit regulator (e.g. a national audit oversight body) in relation to audit firms?
What is the difference between a principles-based and a rules-based approach to regulating auditor independence?
What matters must be considered before accepting a new audit engagement (ISA 210 / ISQM 1)?
What is ‘lowballing’ and why is it an ethical concern?
What should be included in an engagement letter for a statutory audit?
A prospective client refuses to give permission to contact the existing auditor. What should the firm do?
What are the five categories of threat in the IESBA conceptual framework and give one example of each?
How long may an engagement partner serve on a public interest entity audit, and what cooling-off period applies?
Why are contingent fees prohibited for audit engagements?
An audit team member is offered a substantial hospitality package by the client. How should this be evaluated?
What is the difference between a threat that must be eliminated and one that may be reduced by safeguards?
What ethical difficulties arise when an audit firm audits two competing clients in the same industry?
What are the three stages of money laundering?
What customer due diligence must an audit firm perform under anti-money laundering requirements?
What policies and procedures must a firm have in place to comply with anti-money laundering legislation?
A junior auditor suspects a client is laundering money and wants to ask management about it. Why is this dangerous?
What is the auditor’s responsibility in respect of laws and regulations under ISA 250?
Management refuses to take action on identified non-compliance with laws and regulations. What should the auditor do?
What factors indicate that identified non-compliance requires disclosure to an appropriate authority in the public interest?
What is the ‘expectation gap’ and how can auditors help to narrow it?
How does incorporation as a limited liability partnership affect an audit firm’s exposure?
What is the difference between the auditor’s responsibility and management’s responsibility for fraud?
Why is the risk of not detecting a material misstatement due to fraud higher than for one due to error?
What procedures must always be performed to address the risk of management override of controls?
How does ISQM 1 differ in approach from the old ISQC 1?
Who must evaluate the firm’s system of quality management, how often, and what conclusions are possible?
What is the purpose of root cause analysis in a system of quality management?
What are the eligibility requirements for an engagement quality reviewer under ISQM 2?
What must the engagement quality reviewer do before the auditor’s report is dated?
What is the engagement partner’s responsibility for quality management on an individual audit (ISA 220 revised)?
A monitoring inspection finds insufficient evidence on a completed audit whose report is already issued. What should the firm do?
What is the difference between the overall audit strategy and the audit plan?
What matters would you consider in setting the audit approach for a first-year audit of a new client?
Why might the auditor set a lower materiality for particular classes of transactions, balances or disclosures?
What are the ‘inherent risk factors’ introduced by revised ISA 315?
What is the ‘spectrum of inherent risk’ and how does it affect the identification of significant risks?
Which five components of the entity’s system of internal control must the auditor understand under revised ISA 315?
What must the auditor do about IT general controls under revised ISA 315?
Distinguish business risk from the risk of material misstatement, using an example.
Why is a newly launched, rapidly growing revenue stream a risk of material misstatement?
What is the auditor’s objective when auditing an accounting estimate under revised ISA 540?
What three approaches may the auditor use to test an accounting estimate?
What is meant by ‘estimation uncertainty’ and why does it matter for the audit report?
When is an external confirmation likely to be more reliable evidence than an internal document, and what can undermine it?
What should the auditor do if management refuses permission to send an external confirmation request?
What are the audit risks associated with capitalised development costs under IAS 38?
What audit evidence would you seek over a share-based payment charge under IFRS 2?
What are the key audit risks around revenue recognition under IFRS 15?
What audit procedures address the classification of a financial instrument as debt or equity under IAS 32?
What indicators would suggest goodwill is impaired, and what evidence would you seek?
What is the audit risk when a client classifies a disposal group as held for sale under IFRS 5?
What audit issues arise on a sale and leaseback transaction under IFRS 16?
What are the audit risks over a deferred tax asset for unused tax losses?
How should the auditor approach a material provision for restructuring under IAS 37?
What is the difference between audit software and test data?
What are the benefits of using data analytics over the whole population rather than sampling?
What are the limitations and risks of relying on automated tools and techniques?
Why must the auditor evaluate general IT controls before relying on data extracted for analytics?
What must the auditor evaluate before using the work of an auditor’s expert?
Does using an auditor’s expert reduce the auditor’s responsibility for the opinion?
What additional risk arises where the expert used is a management’s expert rather than the auditor’s?
What ethical issue arises if an audit firm is asked to provide the internal audit service to its audit client?
What are the differences in objective and reporting between internal and external audit?
What must the auditor understand when a client uses a service organisation for a material process?
What should the auditor consider before relying on a type 2 report on a service organisation?
What additional audit risk arises when a client outsources its whole finance function?
Under revised ISA 600, on what basis are components now identified?
What responsibility does the group engagement partner retain when component auditors perform work?
Under revised ISA 600, are component auditors part of the engagement team?
What must the group auditor evaluate about a component auditor before involving them?
What should the group auditor communicate to component auditors in the group audit instructions?
What consolidation procedures must the group auditor perform?
What audit risks arise where a group includes an equity-accounted associate over which the group has no access to records?
What matters should the group auditor consider when a subsidiary is disposed of part-way through the year?
What are the required sections of an unmodified auditor’s report on a listed entity, in order?
What is the auditor’s responsibility for ‘other information’ under ISA 720?
The directors refuse to correct a material misstatement in the other information (not the financial statements). What should the auditor do?
What is included in the ‘Basis for Opinion’ section?
What evidence should be obtained over a cash flow forecast supporting the going concern assumption?
Distinguish the reporting outcome where a material uncertainty over going concern is adequately disclosed from where it is not.
The entity is no longer a going concern but the financial statements are prepared on a going concern basis. What opinion is appropriate?
Is a ‘Material Uncertainty Related to Going Concern’ section also reported as a key audit matter?
How does the auditor decide between a qualified and an adverse opinion for a misstatement?
What must the ‘Basis for Qualified Opinion’ paragraph contain for a material misstatement?
When must the auditor disclaim rather than qualify an opinion for an inability to obtain evidence?
What are key audit matters and how are they selected?
Can a key audit matter be used instead of modifying the opinion?
What is the difference between an emphasis of matter paragraph and a key audit matter?
What is the level of assurance and the form of conclusion in a review engagement under ISRE 2400?
Why does an agreed-upon procedures engagement under ISRS 4400 provide no assurance?
What procedures are performed on the assumptions underlying prospective financial information?
What caveat must appear in a report on prospective financial information?
When should a practitioner decline an engagement to report on prospective financial information?
What is the difference between forensic accounting, forensic investigation and forensic auditing?
What special evidence considerations apply to a forensic investigation compared with an audit?
What ethical threats arise when an audit firm accepts a forensic engagement to quantify a client’s insurance claim?
What are the objectives of a financial due diligence assignment?
What is the difference between the report on a due diligence engagement and an audit report?
Why is a due diligence engagement for an existing audit client an ethical concern, and what safeguards are available?
What makes sustainability information difficult to assure compared with financial information?
What is ‘greenwashing’ and what is the assurance provider’s concern about it?
What procedures would you perform over reported greenhouse gas emissions?
What criteria problems arise in auditing performance information in the public sector?
What are the three Es and how do they differ?
What risks of manipulation attach to reported public sector performance indicators?
What is the fee dependency limit for a public interest entity audit client, and what is required as the limit is approached?
An audit client asks the firm to prepare the accounting estimates and value its investment properties. What is the ethical issue and the response?
What is the governing principle on non-assurance services for a public interest entity audit client, and which services are prohibited?
A partner’s spouse holds shares in an audit client. What is the position?
A former audit engagement partner joins the audit client as finance director. What threats arise and what is required?
What is the difference between a liability cap and a liability limitation agreement?
What is the difference between a factual, a judgemental and a projected misstatement?
When must the auditor communicate a deficiency in internal control in writing to those charged with governance?
Which engagements require an engagement quality review under ISQM 1?
When may the auditor use audit evidence obtained in previous audits about the operating effectiveness of controls?
How should a risk be phrased in a AAA answer to score the mark?
What is the difference between an ‘audit risk’ requirement and a ‘risk of material misstatement’ requirement in an exam question?
How do you calculate and use materiality when identifying risks in a scenario?
What is the difference between an audit procedure phrased for a risk answer and one that earns marks in an ‘audit evidence/procedures’ requirement?
How should an auditor test the expected credit loss allowance for trade receivables under IFRS 9?
What limits are placed on the use of direct assistance from internal auditors?
Which written representations must be obtained on every audit?
Management refuses to provide a requested written representation. What is the effect?
Why do related party transactions present a heightened risk of material misstatement?
What procedures help identify previously unidentified related parties?
Management asserts that a related party transaction was on arm’s length terms. What should the auditor do?
What is component performance materiality and why is it set below group materiality?
Group management restricts the group auditor’s access to a material component’s records and auditor. What is the consequence?
What is the auditor’s responsibility for facts discovered between the date of the auditor’s report and the date the financial statements are issued?
Management refuses to amend the financial statements for a material subsequent event discovered before the report is signed. What should the auditor do?
What procedures should be performed to identify subsequent events up to the date of the auditor’s report?
What is the significance of the date of the auditor’s report?
What is the minimum period management must consider in assessing going concern, and what if their assessment is shorter?
What are the key risks to an accountant in a compilation engagement (ISRS 4410)?
What distinguishes an attestation (assertion-based) assurance engagement from a direct engagement?
ISSA 5000 – what is it, and what is its examinable status as a current development?
How do environmental matters give rise to risks of material misstatement in the financial statements?
What are the four professional skills assessed in AAA, and where do the marks come from?
How is professional scepticism demonstrated in a written AAA answer?
How is commercial acumen demonstrated in an AAA answer?
How do emerging technologies such as machine learning affect the audit?
What audit risks arise when a client uses blockchain or distributed ledger technology for its transactions?
Card 1 of 249. Question side.