CA ANZ Assurance flashcards

35 cards. Read the term and the definition here. The deck at the top of this page is optional.

Assurance engagement

An engagement in which a practitioner expresses a conclusion designed to enhance the confidence of intended users, other than the responsible party, about the evaluation of a subject matter against criteria.

Five elements of assurance

Three-party relationship, appropriate subject matter, suitable criteria, sufficient appropriate evidence, and a written assurance report.

Reasonable versus limited assurance

Reasonable assurance expresses a positive conclusion and requires more evidence; limited assurance expresses a negative conclusion and relies mainly on inquiry and analytical procedures.

Audit risk model

Audit risk equals inherent risk multiplied by control risk multiplied by detection risk; only detection risk is directly controlled by the auditor's choice of procedures.

Suitable criteria

Criteria must be relevant, complete, reliable, neutral and understandable; they may be established by law or standards, or specifically developed for the engagement.

Fundamental ethical principles

Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour, as set out in APES 110.

Five threat categories

Self-interest, self-review, advocacy, familiarity and intimidation threats; the auditor evaluates their significance and addresses them by elimination, safeguards or declining the engagement.

Independence of mind and appearance

Independence of mind is the state of mind enabling an unbiased conclusion; independence of appearance avoids facts a reasonable third party would perceive as compromising objectivity.

Direct financial interest

A direct financial interest in an audit client held by the firm or engagement team member cannot be safeguarded and must be disposed of or the individual removed.

Familiarity threat and rotation

Long association with a client creates familiarity and self-interest threats; partner rotation is required for listed entity audits after a specified period under APES 110.

Auditor liability to third parties

Liability in negligence generally requires a duty of care, breach, and foreseeable reliance by the third party; proportionate liability regimes may limit each defendant's share.

Client acceptance and continuance

Evaluate client integrity, the firm's competence and resources, compliance with ethical requirements, and significant matters from prior or predecessor engagements before accepting.

Predecessor auditor communication

The auditor requests permission to communicate with the predecessor; without permission the auditor considers the effect on acceptance and normally declines the engagement.

Engagement letter

A written agreement covering the objective and scope of the audit, responsibilities of the auditor and management, the reporting framework, and expected report form.

Performance materiality

An amount set below overall materiality to reduce to an appropriately low level the probability that aggregate uncorrected and undetected misstatements exceed overall materiality.

Overall audit strategy

A document setting the scope, timing, direction and reporting objectives of the engagement, which guides the development of the more detailed audit plan.

Risk assessment procedures

Inquiries, analytical procedures, and observation and inspection performed to obtain an understanding of the entity and identify risks of material misstatement.

COSO control components

Control environment, risk assessment process, information system and communication, control activities, and monitoring of controls; the auditor must understand each component.

Significant risk

A risk of material misstatement close to the upper end of the risk spectrum, including risks involving significant judgement, complex transactions, or fraud.

Management override presumption

The auditor presumes a fraud risk from management override of controls and responds by testing journal entries, reviewing estimates, and evaluating significant unusual transactions.

Sufficient appropriate evidence

Sufficiency measures the quantity of evidence; appropriateness measures its relevance and reliability in supporting the auditor's conclusions.

External confirmation

Direct written response from a third party to the auditor; if management refuses permission, the auditor evaluates the reasons and may consider the effect on the opinion.

Final audit file assembly

The auditor assembles the final audit file within 60 days of the report date; afterwards no deletion occurs and additions require documented reasons.

Written management representations

A letter dated no later than the auditor's report date confirming management's responsibilities and completeness of information; it does not substitute for other evidence.

Sampling risk

The risk that the auditor's conclusion based on a sample differs from the conclusion that would be reached if the entire population were tested.

Monetary unit sampling

A probability-proportional-to-size selection method where each monetary unit has a selection chance, effective for overstatement testing and low-error populations.

Projected misstatement

The misstatement found in a sample extrapolated to the population, compared with tolerable misstatement to determine whether the population is acceptable.

Adjusting versus non-adjusting events

Adjusting events provide evidence of conditions existing at reporting date and require adjustment; non-adjusting events arise after that date and require disclosure if material.

Going concern evaluation

The auditor assesses management's going concern assessment, identifies events or conditions casting doubt, and evaluates the adequacy of related disclosures.

Uncorrected misstatements

Misstatements identified during the audit that management has not corrected; the auditor evaluates them individually and in aggregate against materiality.

Modified opinion types

Qualified for material but not pervasive issues, adverse for material and pervasive misstatement, and disclaimer for material and pervasive scope limitation.

Key audit matters

Matters selected from those communicated with those charged with governance that were of most significance in the audit, required in reports for listed entities.

Agreed-upon procedures engagement

A related services engagement in which the practitioner performs agreed procedures and reports factual findings without expressing any assurance.

Review engagement conclusion

Limited assurance expressed negatively, based primarily on inquiry and analytical procedures rather than tests of controls or substantive tests.

Type 1 versus type 2 report

A type 1 report covers suitability of control design at a point in time; a type 2 report covers design and operating effectiveness over a period.