ACCA Audit And Assurance (AA) - OpenTuition
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March-June 2020 AA ExamsWatch our free ACCA AA lectures1Audit and Assurance (AA)SYLLABUS3AUDIT FRAMEWORK AND REGULATION51.2.3.4.What is Assurance?Corporate GovernanceAuditors’ Rights, Appointment, Removal, Resignation and RegulationProfessional Ethics5111519THE INDEPENDENT AUDITOR'S REPORT255.6.2535The Auditor’s ReportAudit Opinions: Unmodified/ModifiedPLANNING AND RISK ASSESSMENT (I)437.8.9.434753The Stages of an Audit – AppointmentThe Stages of an Audit – After AppointmentAudit RiskAUDIT EVIDENCE (I)5910.11.5963Audit EvidenceAudit SamplingINTERNAL CONTROL6712.13.14.15.67737781Internal ControlAccounting SystemsComputer System ControlsComputer Assisted Audit TechniquesAUDIT EVIDENCE (II)16.17.18.19.20.21.22.23.The Final Audit – the Assertions RevisitedTrade ReceivablesTrade PayablesAccruals and PrepaymentsInventoryBank and CashNon-Current AssetsUsing the Work of Others8383858991939799101PLANNING AND RISK ASSESSMENT (II)10524.25.105109Audit Documentation and Quality ControlFraud and ErrorREVIEW AND REPORTING11126.27.28.29.111113115117Subsequent EventsContingent Assets and LiabilitiesWritten RepresentationsThe Auditor’s Report - RevisitedOnly on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures2Access FREE ACCAAudit and Assurance (AA)online resources on OpenTuition:ACCA AA Lectures (complete course)To fully benefit from these notes you should watch our free AA lecturesACCA AA Practice QuestionsEvery time you have finished studying a chapter of our AA lecture notes,you should come on-line and take a quick testACCA AA FlashcardsPractice key terms and concepts using our AA flashcards!ACCA AA Revision LecturesWatch AA revision lectures working through the past ACCA examquestionsACCA AA Revision Mock ExamCheck how well prepared you are for the AA Exam, and take ourinteractive, computer based Revision AA Exam.ACCA AA ForumsGet help from other studentsAsk AA TutorPost questions to a ACCA tutorvisit http://opentuition.com/acca/aa/Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures3SYLLABUS1. Overall aimTo develop knowledge and understanding of the process of carrying out the assurance engagementand its application in the context of the professional regulatory framework.2. Main capabilitiesOn successful completion of this paper, candidates should be able to:A.Explain the concept of audit and assurance and the functions of audit, corporate governance,including ethics and professional conduct, describing the scope and distinguishing between thefunctions of internal and external audit.B.Demonstrate how the auditor obtains and accepts audit engagements obtains anunderstanding of the entity and its environment, assesses the risk of material misstatement(whether arising from fraud or other irregularities) and plans an audit of financial statements.C.Describe and evaluate internal controls, techniques and audit tests, including IT systems toidentify and communicate control risks and their potential consequences, making appropriaterecommendations.D.Identify and describe the work and evidence obtained by the auditor and others required tomeet the objectives of audit engagements and the application of the International Standards onAuditingE.Explain how consideration of subsequent events and the going concern principle can inform theconclusions from audit work and are reflected in different types of auditor’s report, writtenrepresentations and the final review and report.3. Approach to examining the syllabusThe syllabus is assessed by a three-hour computer-based examination, consisting of a mix of objectivetest and constructed response ('written') questions. The bulk of the written questions will bediscursive and scenario-based, but some questions involving simple computational elements will beset from time to time.Section A Case questions (30%)3 case-based questions each consisting of 5 x 2 mark objective test questionsSection B Written questions (70%)1 x 30 mark question2 x 20 mark questionsQuestions in Section A may be drawn from any syllabus area.Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures4Section B will predominantly examine one or more of syllabus areas B, C and D although topics fromother syllabus areas may also be included.Note that there are no 'stand-alone’ objective test questions in the exam. All questions in each caserelate to the information in the case. However, because all the questions in a case must beindependent (so that getting one wrong does not jeopardise your chances at the next one) theyretain the characteristics of stand-alone questions. Therefore, it is still worth attempting the manystand-alone questions that are available on this site.4. Accounting standardsThe accounting knowledge assumed for AA is that examined at the foundation level, ie FinancialAccounting (FFA).Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures5AUDIT FRAMEWORK AND REGULATIONChapter 1WHAT IS ASSURANCE?1. Audit and assuranceIt is often not possible to check things for yourself, whether quality, accuracy, performance orexistence.You might not have the skills or the time, or you might be in the wrong location. Therefore you mustrely on someone else to give you assurance. This means you have to decide:๏What standards should be applied?๏What represents ‘good’, ‘acceptable’ or ‘unacceptable?๏How much checking should be done? All checking and assurance has an associated cost.Audit is one form of assurance.An audit is defined as: the independent examination of and expression of opinion on the financialstatements of an entity by a duly appointed auditor in pursuit of that appointment.The important words here are ‘independent’ and ‘opinion’.Independence is essential and underlies the value of auditing.Opinion really means that one auditor could look at a set of financial statements and disagree withthe opinion of another auditor.Judgment is essential to all auditing, there are no certainties and there are no certifications ofcorrectness or accuracy.Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures62. Elements of an assurance engagementThe following are the five elements of an assurance engagement:(1)A three party relationship involving a practitioner, a responsible party, and intended users.(2)Appropriate subject matter.(3)Suitable criteria.(4)Sufficient appropriate evidence.(5)A written assurance report in the form appropriate to a reasonable assurance engagement or alimited assurance engagement.2.1 Three party relationshipA three party relationship involving a practitioner, a responsible party, and intended users:๏Practitioner: for example an auditor. The practitioner is responsible for determining the nature,timing and extent of procedures and is required to pursue anything that leads the practitionerto question whether a material modification should be made to the subject matter information.๏A responsible party: the person responsible for the information and assertions.๏The intended users are the person(s) for whom the practitioner prepares the assurance report.The responsible party can be one of the intended users.2.2 Appropriate subject matterThe subject matter can take many forms, such as:๏Financial performance๏Non-financial performance, for example the key indicators of efficiency and effectiveness.๏Physical characteristics, for example, the capacity of a facility.๏Systems and processes, for example, an entity’s internal control or IT system.๏Behaviour, for example, corporate governance, compliance with regulation.An appropriate subject matter is:๏Identifiable, and capable of consistent evaluation or measurement against the identified criteria;and๏Such that the information about it can be subjected to procedures for gathering sufficientappropriate evidence.Syllabus areas B-E of AA are all concerned with financial statements as the subject matter.Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures72.3 CriteriaCriteria are the benchmarks used to evaluate or measure the subject matter.For example:๏When reporting on financial statements, The International Financial Reporting Standards. This ismost relevant to the AA syllabus.๏When reporting on internal control, the criteria may be an established internal controlframework.๏When reporting on compliance, the criteria may be the applicable law, regulation or contract.Without the frame of reference provided by suitable criteria, any conclusion is open to individualinterpretation and misunderstanding.Suitable criteria exhibit the following characteristics:๏Relevance:relevant criteria contribute to conclusions that assistdecision-making by the intended users.๏Completeness:criteria are sufficiently complete when they include allrelevant factors that could affect the conclusions.๏Reliability:reliable criteria allow reasonably consistent evaluationof the subject matter.๏Neutrality:neutral criteria so that conclusions that are free frombias.๏Understandability:conclusions that are clear, comprehensive, and notsubject to significantly different interpretations.The evaluation or measurement of a subject matter on the basis of the practitioner’s ownexpectations, judgments and individual experience would not constitute suitable criteria.Criteria need to be available to the intended users to allow them to understand how the subjectmatter has been evaluated or measured.Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures82.4 EvidenceThe practitioner plans and performs an assurance engagement with an attitude of professionalscepticism to obtain sufficient appropriate evidence about whether the subject matter informationis free from material misstatement. An attitude of professional scepticism means the practitionerquestions the validity of evidence and is alert to evidence that brings into question the reliability ofdocuments or representations.Scepticism means that you don’t know. It does not mean that the practitioner assumes everyone isdishonest or that figures have been deliberately misrepresented. Nor does it mean that you believe allfigures are statements are correct. It means you are aware that we can all be subject to optimism(perhaps too much), human error, giving quick answers because we are short of time,misunderstanding. It also recognises that sometimes people are deliberately misleading or dishonest.Scepticism means that evidence is required to test statements or assumptions. You could almostsummarise the process of assurance in the phrase ‘collect evidence that supports everything that isbeing claimed’.Sufficiency is the measure of the quantity of evidence. Appropriateness is the measure of the qualityof evidence - its relevance and its reliability.The reliability of evidence is influenced by its source and by its nature, and is dependent on theindividual circumstances under which it is obtained, eg documentary evidence is better then oral,directly obtained evidence better then evidence provided by a client. This is considered further inChapter 10.2.5 Assurance ReportThe practitioner provides a written report containing a conclusion.In a reasonable assurance engagement the practitioner’s conclusion is worded in the positive form,for example: “In our opinion internal control is effective, in all material respects, based on XYZ criteria.”In a limited assurance engagement the conclusion is worded in the negative form, for example,“Based on our work described in this report, nothing has come to our attention that causes us tobelieve that internal control is not effective, in all material respects, based on XYZ criteria.”Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures92.6 Positive and negative assuranceExamples:Positive๏The financial statements show a true and fair view๏The value of amount of inventory lost is xNegative๏We have discovered nothing wrong with the financial statements๏The basis of the forecast is not unreasonable๏There is no evidence of discrimination in the appointment.All statutory audits attempt to provide positive assurance that the financial statements show a trueand fair view (or present fairly, in all material respects). There are some types of assurance assignmentwhere giving positive assurance is not possible. For example, it would be impossible to giveassurances that a budget is correct because it depends on so many assumptions and factors thatcannot be verified with certainty, such as the state of the economy next year, competitors’ plan andsales forecasts.Positive assurance is also known as reasonable assurance a practitioner cannot give a guarantee, egthat the financial statements are free from material misstatement.Negative assurance is also known as limited assurance.A practitioner would not express an unqualified conclusion for either type of assurance engagementwhen:๏There is a limitation on the scope of the practitioner’s work (ie sufficient appropriate evidencecannot be obtained); or๏The assertion is not fairly stated (in all material respects) or the subject matter information ismaterially misstated (ie the assertion is incorrect).WHEN YOU FINISHED THIS CHAPTER YOU SHOULD ATTEMPT THE ONLINE AA MCQ TESTOnly on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures10Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures11Chapter 2CORPORATE GOVERNANCE1. Why corporate governance is neededCorporate governance is the system by which companies are directed and controlled.The problem with bad corporate governance is that although the shareholders own companies, theday-to-day management and direction of companies is given to the Board of Directors. In largecompanies many shareholders are relatively passive and the Board of Directors is given more or lessfree rein to make whatever decisions they wish.Auditing was instituted so at least once a year, when the financial statements (FS) were presented tothe members of the company, the auditors would examine them and give some expression of opinionto the members of the company as to whether the financial statements were true and fair. Withoutthat assurance the members of the company really would have a little idea whether or not theinformation could be relied on. The auditors therefore examine the financial statements and this addscredibility to those statements, the shareholders have a much better idea of the performance of thedirectors and the company.Appoint independentMeasureperformanceAuditorAdds credibilityfinancial statementsPrepare FSAppointShareholdersOwnCompanyDirectorsManageNote that shareholders appoint the independent auditors, they also appoint the directors. Theproblem is that once directors were appointed, shareholders often didn’t take much further interest inwhat the directors were doing and there were annual gaps between financial statements beingissued. This hands-off approach has recently been found entirely inadequate and additionalsafeguards have been instituted to try to ensure that directors act in the best interests of themembers of the company. Directors should act for the shareholders but often acted for themselves –the agency problem. In agency terms, the shareholders are the principals and the directors are theiragents. Agents should act in the best interests of their principals.Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community
March-June 2020 AA ExamsWatch our free ACCA AA lectures122. Principles of corporate governanceThe Organisation of Economic Cooperation Development (OECD) promotes six Principles of acorporate governance framework:๏It should promote transparent and fair markets and support effective supervision andenforcement.๏It should protect shareholders' rights and ensure all are fairly treated (ie including minorityshareholders).๏It should provide for stock markets to contribute to good corporate governance (eg byprohibiting insider trading).๏It should recognise the rights of all stakeholders, not just shareholders.๏It should ensure timely and accurate disclosure of all material matters, including financialposition, performance, ownership and governance.๏It should ensure the strategic guidance of the entity, effective monitoring of management bythe board and the board’s accountability to the entity and their shareholders.3. The UK Corporate Governance CodeThe OECD principles are put into effect in a variety of ways in different countries. The ACCA hasspecified that for AA, the UK Corporate Governance Code published by the Financial ReportingCouncil (FRC) is an example of best practice.The Principles of the Code emphasise the value of good corporate governance to the long-termsuccess of the company.Main principles of the UK Code๏Board Leadership and Company Purpose๏Division of Responsibilities๏Composition, Succession and Evaluation๏Audit, Risk and Internal Control๏RemunerationComply or explainThe Code has no force in law and is enforced on listed companies through the Stock Exchange. Listedcompanies are expected to ‘‘comply or explain’’ and this approach is the trademark of corporategovernance in the UK.Listed companies have to state that they have complied with the code or else explain to shareholderswhy they haven’t. This allows some flexibility and non-compliance might be acceptable in somecircumstances.Board Leadership and Company Purpose๏Every company should be headed by an effective board which is collectively responsible for th
Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community SYLLABUS 1. Overall aim To develop knowledge and understanding of the process of carrying out the assurance engagement and its application in the context of the professional regulatory framework. 2.
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ACCA F9 –Financial Management PROFESSIONAL (5 papers in total) Essentials ACCA P1 –Governance, Risk and Ethics ACCA P2 –Corporate Reporting ACCA P3 –Business Analysis Options (two to be completed) ACCA P4 –Advanced Financial Management ACCA P5 –Advanced Performance Management ACCA P6 –Advan
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Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community March-August 2020 ACCA MA/FMA Exams Watch free MA/FMA lectures 4 4 To find the area under the normal curve between the mean and a point Z standard deviations above the mean, use the table below.
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Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community Accountant in Business (AB) ORGANISATIONS AND THEIR ENVIRONMENT 1. The nature and structure of organisations 3 2. An organisation
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