CPA Australia Advanced Audit and Assurance flashcards
CPA Australia Advanced Audit and Assurance · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Audit risk model
- Audit risk equals inherent risk times control risk times detection risk. The auditor controls detection risk through the nature, timing and extent of substantive procedures performed.
- Detection risk
- The risk that the auditor's procedures fail to detect a material misstatement. It is reduced by more effective testing, not by changing the client's inherent or control risk.
- Performance materiality
- An amount set below overall materiality to reduce to an appropriately low level the probability that uncorrected and undetected misstatements exceed overall materiality.
- Professional scepticism
- An attitude of questioning and critical assessment of evidence. It requires the auditor to challenge management assertions and corroborate representations with independent external sources where possible.
- Self-review threat
- Arises when the firm evaluates its own previous work or judgements. It is created when the firm prepares records or systems that it later audits.
- Qualified opinion
- Issued when the auditor concludes misstatements or scope limitations are material but not pervasive. The opinion paragraph states the qualification and its basis.
- Adverse opinion
- Issued when misstatements are both material and pervasive to the financial report as a whole. It signals the financial report does not present fairly.
- Disclaimer of opinion
- Issued when the auditor is unable to obtain sufficient appropriate evidence and the possible effects are material and pervasive. No opinion is expressed on the financial report.
- Key Audit Matters
- Matters of most significance in the audit, selected from those communicated to those charged with governance. Required for listed entities and disclosed in the auditor's report.
- Emphasis of Matter
- A paragraph in the auditor's report drawing attention to a matter already properly presented or disclosed. It does not modify the audit opinion.
- Going concern material uncertainty
- If a material uncertainty exists and disclosure is adequate, the auditor includes a separate section headed Material Uncertainty Related to Going Concern without modifying the opinion.
- Subsequent events window
- The auditor's responsibility for subsequent events extends from the reporting date to the date of the auditor's report. Adjusting events reflect conditions existing at the reporting date.
- Limited assurance conclusion
- Expressed in negative form, typically as nothing having come to the practitioner's attention. Evidence sufficient for limited assurance is lower than for reasonable assurance.
- Reasonable assurance
- A high but not absolute level of assurance, expressed positively in the conclusion. Absolute assurance is unattainable because of sampling and judgement limits.
- Fraud risk presumption
- The auditor must presume risks of fraud in revenue recognition exist and rebut the presumption with documented evidence where appropriate, and must test journal entries.
- Management representation letter
- Written representations obtained near the date of the auditor's report. They support but never replace other sufficient appropriate audit evidence.
- Engagement quality review
- An objective evaluation of significant judgements and conclusions before the report is issued. Required for listed entities and engagements with significant risks.
- Fee dependence threshold
- Where recurring fees from one client exceed 15% of total firm fees for two consecutive years, the firm discloses to governance and arranges an engagement quality review.
- Contingent fee prohibition
- Fees calculated on the outcome of an assurance engagement create an unmanageable self-interest threat and are prohibited for assurance work.
- Independence of mind
- The state of mind enabling the expression of a conclusion without being affected by influences that compromise professional judgement, allowing integrity and objectivity.
- Group engagement partner
- Responsible for the group audit opinion. Must be satisfied with component auditor competence and independence and be involved in significant risk assessment.
- Component auditor
- An auditor performing work on financial information of a component for the group audit. The group engagement team directs and reviews the work.
- Other information
- Information in a document containing the audited financial report, such as an annual report narrative. The auditor reads it for material inconsistency with the financial report.
- Type 1 service report
- Reports on the suitability of the design of controls at a service organisation at a specified date. It does not cover operating effectiveness over a period.
- Type 2 service report
- Reports on the suitability of design and operating effectiveness of controls at a service organisation over a specified period. Used to support reduced control risk.
- Related party completeness
- The auditor must obtain written representations that all related party relationships and transactions have been identified and adequately disclosed in the financial report.
- Audit documentation requirement
- Documentation must record the basis for significant judgements, including materiality rationale, significant risks and how the evidence supports the conclusion reached.
- Audit committee communication
- The auditor communicates the planned scope and timing, significant findings, and independence matters to those charged with governance under ASA 260.
- Client acceptance assessment
- Before accepting an engagement the firm evaluates management integrity, competence of the accounting function and the firm's ability to meet ethical standards.
- Materiality benchmark
- Common benchmarks include profit before tax at five to ten percent, total revenue at half to one percent, and total assets at one to two percent.
- Prospective financial information assurance
- The practitioner reports on whether the assumptions provide a reasonable basis for the projection. Actual results are likely to differ from projected figures.
- Confidentiality obligation
- Client information may be disclosed only with consent, when required by law, or when permitted by law. The duty continues after the engagement ends.