Auditing Standards and Assurance

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Questions and Answers

Which accounting standard is most relevant to insurance companies?

PFRS 9

IAS 39

PFRS 17 (correct)

PFRS 15

What is the purpose of financial statements?

To make assertions about a company's performance

To evaluate an auditor's objectivity

To communicate an entity's economic resources or obligations (correct)

To provide an audit report

Who are the intended users of financial statements?

Only shareholders

Only analysts

Investors and creditors

All of the above (correct)

Which ISA deals with the use of an auditor's expert?

ISA 620 Signup and view all the answers

Which industry would be categorized as specialized?

Banking and insurance Signup and view all the answers

What additional resources might an audit firm provide to assist team members assigned to a specialized industry client?

Briefing notes and internal technical guidance Signup and view all the answers

Under what circumstances should an auditor express a disclaimer of opinion on financial statements?

When they identify a material misstatement Signup and view all the answers

What is an example of applying specialized accounting standards to the oil extraction industry?

Valuing apple trees in accordance with IAS 2 Signup and view all the answers

Which of the following statements is correct about specialized industries?

These industries are specialized because they have specific financial reporting standards applicable to them. Signup and view all the answers

What is the level of assurance provided by an audit opinion?

Reasonable assurance is a moderate and high level of assurance. Signup and view all the answers

Which of the following is a consideration for smaller audit firms when taking on an audit client in a specialized industry?

Their need to carefully consider their competence to take on an audit client in a specialized industry. Signup and view all the answers

What is an important consideration when auditing the financial statements of banks?

The compliance of the banks with the reportorial requirements of the BSP. Signup and view all the answers

Which of the following statements is true about audit firms?

Audit firms, regardless of size, may choose to specialize themselves in the audit of clients in a particular market or sector. Signup and view all the answers

What is the relevant accounting standard for insurance companies?

PFRS 16 Signup and view all the answers

What is one of the relevant accounting standards for companies in the oil and gas industries?

PAS 41 Signup and view all the answers

What is the final step in the entire audit process?

Audit opinion Signup and view all the answers

Study Notes

Specialized Industries

Specialized industries have specific financial reporting standards applicable to them.

Audit Opinion and Assurance

The audit opinion is not the final step in the entire audit process.
Reasonable assurance is not an absolute level of assurance, but rather a high level of assurance.

Competence in Auditing Specialized Industries

Larger audit firms are likely to meet the competence requirement for almost any type of industry.
Smaller firms may have to carefully consider their competence to take on an audit client in a specialized industry if they have not previously worked with an audit client in the same industry.

Banking and Financial Institutions

The compliance of banks with the reportorial requirements of the BSP must be considered in auditing the financial statements of banks.

Audit Firms and Specialized Industries

Audit firms, regardless of size, may choose to specialize themselves in the audit of clients in a particular market or sector.

Accounting Standards for Industries

PAS 41 is a relevant accounting standard for companies in the oil and gas industries.
PFRS 17 is a relevant accounting standard for insurance companies.

Financial Statements

Financial statements are structured representations of historical financial information, including related disclosures, intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.

Users of Financial Statements

Intended users of financial statements include shareholders, analysts, investors, and others.

Audit Procedures

ISA 620 deals with the use of an auditor's expert and the evaluation of their work.

Specialized Industries

Banking, insurance, airlines, and oil extraction are examples of specialized industries.

Audit Firm Resources

Audit firms may provide briefing notes, internal technical guidance, and other resources to assist team members assigned to a specialized industry client.

Auditor's Opinion

An auditor should express a disclaimer opinion on financial statements when they are unable to obtain sufficient appropriate audit evidence on which to base the opinion, or when the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.