Podcast
Questions and Answers
What is the primary objective of implementing engagement-specific work environment safeguards?
What is the primary objective of implementing engagement-specific work environment safeguards?
Which of the following is NOT a quality characteristic of an auditor?
Which of the following is NOT a quality characteristic of an auditor?
What is the purpose of disclosing the nature of services provided and fees charged to those charged with governance of the client?
What is the purpose of disclosing the nature of services provided and fees charged to those charged with governance of the client?
Which of the following is an example of a compliance policy?
Which of the following is an example of a compliance policy?
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What is the primary objective of the principle of professional behavior?
What is the primary objective of the principle of professional behavior?
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What is the primary objective of an auditor's objectivity?
What is the primary objective of an auditor's objectivity?
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Which of the following is an example of a self-interest threat?
Which of the following is an example of a self-interest threat?
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Which of the following is a risk associated with non-assurance services?
Which of the following is a risk associated with non-assurance services?
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What is the purpose of rotating senior assurance team personnel?
What is the purpose of rotating senior assurance team personnel?
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What is the primary purpose of identifying threats to objectivity?
What is the primary purpose of identifying threats to objectivity?
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What is the primary purpose of identifying and evaluating audit risks?
What is the primary purpose of identifying and evaluating audit risks?
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Which of the following is NOT a consequence of breaching confidentiality?
Which of the following is NOT a consequence of breaching confidentiality?
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Which of the following is an example of an intimidation threat?
Which of the following is an example of an intimidation threat?
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Which of the following is an example of an advocacy threat?
Which of the following is an example of an advocacy threat?
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Which of the following is an example of a familiarity threat?
Which of the following is an example of a familiarity threat?
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What is the primary consequence of non-compliance with relevant laws and regulations?
What is the primary consequence of non-compliance with relevant laws and regulations?
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Under which circumstances is disclosure of client information permitted by law?
Under which circumstances is disclosure of client information permitted by law?
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Which of the following would be a threat to objectivity?
Which of the following would be a threat to objectivity?
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What is the primary objective of a value for money audit?
What is the primary objective of a value for money audit?
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Which of the following is a type of audit risk?
Which of the following is a type of audit risk?
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What is the auditor's duty of confidentiality?
What is the auditor's duty of confidentiality?
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Which of the following is a threat to independence?
Which of the following is a threat to independence?
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What is the primary objective of a financial audit?
What is the primary objective of a financial audit?
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Which of the following is a type of compliance audit?
Which of the following is a type of compliance audit?
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Study Notes
Disclosure Requirements
- Disclosure is required by law
- Disclosure is permitted by law but the auditor has not requested the client's permission
- The auditor suspects that the client has committed money-laundering offences
Threats to Objectivity
- Circumstances that constitute a threat to objectivity:
- An employee of AB & Co owns shares in DEF Ltd but is not part of the audit team
- The best friend of the engagement partner owns a significant indirect financial interest in DEF Ltd
- The audit manager of DEF Ltd owns a small number of shares in DEF Ltd
- The husband of the audit partner owns shares in DEF Ltd
Types of Internal Audit Assignments
- Value for money audit: examines the economy, efficiency, and effectiveness of activities and processes
- Regulatory compliance audit: monitors management's operations and ensures company policy is followed
- Fraud investigation: not an internal audit assignment
- IT audit: not an internal audit assignment
Threats Arising from Non-Audit Services
- Self-review threat: preparing a valuation report on a prospective acquisition target
- Advocacy threat: preparing a valuation report on a prospective acquisition target
- Familiarity threat: not applicable in this scenario
- Self-interest threat: not applicable in this scenario
Auditor's Duty of Confidentiality
- The principle of professional behavior imposes an obligation on all professional accountants to comply with relevant laws and regulations
- Threats to independence and objectivity include:
- Undue dependence on an audit client
- Overdue fees
- Actual or threatened litigation
- Associated firms: influences outside the practice
- Family and other personal relationships
- Beneficial interest in shares and other investments
- Beneficial interest in trust
- Trustee investments
- Voting on audit appointment
- Loans
- Goods and services: hospitality
- Provisions of other non-audit services
Classification of Threats to Objectivity
- Self-Interest threats
- Self-Review threats
- Advocacy threats
- Familiarity threats
- Intimidation Threats
Self-Interest Threats
- Examples of circumstances that create self-interest threats include:
- A member of the assurance team having a direct financial interest in the assurance client
- A firm having undue dependence on total fees from a client
- A member of the assurance team having a significant close business relationship with an assurance client
- A firm being concerned about the possibility of losing a significant client
- A member of the audit team entering into employment negotiations with the audit client
- A firm entering into a contingent fee arrangement relating to an assurance engagement
Engagement-Specific Work Environment Safeguards
- Examples of engagement-specific safeguards in the work environment include:
- Having a PAPP who was not involved with the non-assurance service review the non-assurance work performed or otherwise advise as necessary
- Having a PAPP who was not a member of the assurance team review the assurance work performed or otherwise advise as necessary
- Consulting an independent third party, such as a committee of independent directors, a professional regulatory body or another PAPP
- Discussing ethical issues with those charged with governance of the client
- Disclosing to those charged with governance of the client the nature of services provided and extent of fees charged
- Involving another firm to perform or re-perform part of the engagement
- Rotating senior assurance team personnel
The Qualities of an Auditor
- The nine qualities which the Auditing Practices Board believes should characterize the auditor:
- Accountability
- Integrity
- Objectivity and Independence
- Competence
- Rigour
- Judgement
- Clear, complete and effective communication
- Association
- Providing Value
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Description
This quiz tests your knowledge of auditing principles and practices, including disclosure requirements and threats to objectivity.
