AAWhat is the difference between two questions from study guide (INT)

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I think a better understanding of statutorx audits would be gained by reference to isa 250

a) Describe the regulatory environment within which statutory audits take place.
Ans; its about how is the environment in which audit takes place. the implications and the legal requirements .. you can see the word Statutory audit so it totally means about external audit as its with f8. so you might discuss agency theory and stakeholders aswell.


b) Discuss the reasons and mechanisms for the regulation of auditors.
Ans; this questions means why do auditors need to follow regulations. its like why should auditors follow rules and stuff like ISA's and IFAC stuff. You can also drop in some parts of statutory audit as its required by LAW.


I hope you understand them. Thank You.

a) Describe the regulatory environment within which statutory audits take place. [1]
The regulatory environment of statutory audit is the sources of laws against which the practitioner seeks compliance of the financial statements. The regulatory environment of statutory audit may vary from jurisdiction to jurisdiction. For example in the United Kingdom the regulatory environment of statutory audit includes the following sources of laws:
a. Companies Act 2006.
b. Financial reporting standards. (FRS)
c. International financial reporting standards. (IFRS) as adopted by the European Union for group financial statements.
b) Discuss the reasons and mechanisms for the regulation of auditors. [2]
Reasons for the regulation of auditors:
a. To protect public interests: The primary reason for the regulation of auditors is to protect public interests. Auditors undertake various types of engagements those affect public interests particularly statutory audit in which they provide a high level of assurance about the integrity of financial statements. The shareholders including a wide range of stake holders make decisions based on the audited financial statements and the auditors opinion in the audit report although auditors report in a statutory audit is addressed to the members of the company. It is not surprising that auditors will not collude with directors of a company and give a partial opinion in the audit report as a consequence the public interests will be impaired and even will bring an economic disaster. Such as the Enron and the Lehman Brothers scandals.
b. To maintain dignity of the profession: Accountancy and auditing profession has evolved through the past centuries and now it is one of the important and credible professions in the society. If there is no regulations and accountability mechanism for auditors the profession will lose its dignity and credibility.
c. To ensure independence and professional competence: To perform an statutory audit and other assurance engagements and other engagements by a professional accountant it is important to ensure that they possess sufficient competence and also they are independent of the company they are auditing since independence is an important concept in auditing.
Mechanisms:
The mechanism for the regulation of auditors will vary from jurisdiction to jurisdiction but usually includes:
a. Code of ethics issued by the accountancy body such as ACCA that an auditor must comply with.
b. Disciplinary system by the accountancy body.
c. National law such as The Companies Act that necessitates certain qualification to act as an auditor.
d. Auditing standards.
e. Peer review: is an examination and review of the systems and procedures adopted by a member of the professional body to ensure the quality of services comply with technical standards.

Hope this will be helpful, any misconception are requested to be discussed, Thank you.

well i'm afraid but this will create more implications :D lol