CA (Chartered Accountancy) Intermediate: Auditing and Financial Management Syllabus

Intermediate: Auditing and Financial Management syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Intermediate: Auditing and Financial Management in CA (Chartered Accountancy), not a summary of it.

1. 1

   Audit Foundations

   4 topics

   • Nature, Objective and Scope of Audit
     • Inherent limitations and audit assertions
   • Audit Strategy, Planning and Programme
   • Audit Documentation and Evidence
   • Risk Assessment and Internal Control
     • Materiality and internal control evaluation
2. 2

   Audit Execution and Reporting

   4 topics

   • Audit Sampling and Analytical Procedures
   • Audit of Items of Financial Statements
   • Company Audit and Auditor's Appointment
   • Audit Report and CARO
     • Types of opinion and emphasis of matter
3. 3

   Financial Management Foundations

   4 topics

   • Scope and Objectives of Financial Management
     • Time value of money and risk-return
   • Cost of Capital and Capital Structure
     • Leverages and financing decisions
   • Capital Budgeting
     • NPV, IRR and payback methods
   • Working Capital Management
     • Management of cash, receivables and inventory
4. 4

   Strategic Management

   4 topics

   • Introduction to Strategic Management
   • Strategic Analysis - External and Internal Environment
     • PESTLE and SWOT analysis
   • Strategic Choices and Formulation
     • Corporate, business and functional level strategy
   • Strategy Implementation and Evaluation

Intermediate: Auditing and Financial Management flashcards for CA (Chartered Accountancy)

18 of 51 cards from the Intermediate: Auditing and Financial Management deck — real questions with worked answers.

1. Define 'audit' as per SA 200.

   An audit is an independent examination of financial information of any entity, whether profit-oriented or not, with a view to expressing an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. It provides reasonable (not absolute) assurance.

2. What is the overall objective of the auditor under SA 200?

   (1) To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement (whether due to fraud or error), enabling the auditor to express an opinion; and (2) to report on the financial statements and communicate as required by the SAs, in accordance with the auditor's findings.

3. What is the difference between 'reasonable assurance' and 'absolute assurance' in an audit?

   Reasonable assurance is a high but not absolute level of assurance; it is obtained when the auditor reduces audit risk to an acceptably low level. Absolute assurance is unattainable due to inherent limitations of an audit, so an auditor can never guarantee that the financial statements are free from all misstatement.

4. List the main inherent limitations of an audit.

   (1) Nature of financial reporting (judgement, estimates); (2) nature of audit procedures (reliance on management, possibility of collusion/concealment of fraud); (3) timeliness and cost-benefit balance (work done within a reasonable time at reasonable cost); and (4) other limitations such as fraud (especially management fraud), related party transactions, and non-compliance with laws.

5. What are the categories of assertions used by the auditor, and give examples of each?

   (1) Assertions about classes of transactions and events: occurrence, completeness, accuracy, cut-off, classification. (2) Assertions about account balances at period-end: existence, rights and obligations, completeness, valuation and allocation. (3) Assertions about presentation and disclosure: occurrence and rights/obligations, completeness, classification and understandability, accuracy and valuation.

6. Distinguish between 'audit strategy' and 'audit plan' (SA 300).

   The overall audit strategy sets the scope, timing and direction of the audit and guides the development of the audit plan (the big picture). The audit plan is more detailed and includes the nature, timing and extent of planned risk assessment procedures and further audit procedures at the assertion level. The strategy is broader; the plan flows from it.

7. What is an 'audit programme'?

   An audit programme is a detailed written plan containing a series of verification procedures (step-by-step instructions) to be applied to particular accounts and items, specifying the nature, timing and extent of audit procedures, and serving as a set of instructions to assistants and a means of controlling and recording the work done.

8. Define 'audit documentation' and state its primary purposes (SA 230).

   Audit documentation (working papers) is the record of audit procedures performed, relevant audit evidence obtained, and conclusions reached. Primary purposes: providing evidence of the auditor's basis for the opinion and evidence that the audit was planned and performed in accordance with SAs and legal requirements.

9. Within what time should the final audit file be assembled, and for how long should it be retained, per SA 230?

   The audit file should be assembled on a timely basis, ordinarily not more than 60 days after the date of the auditor's report. The documentation should be retained for a period sufficient to meet the firm's needs and legal requirements, ordinarily not shorter than 7 years from the date of the auditor's report.

10. Define 'sufficient appropriate audit evidence' (SA 500).

    Sufficiency is the measure of the quantity of audit evidence (affected by assessed risks and quality of evidence). Appropriateness is the measure of the quality of audit evidence, i.e., its relevance and reliability in providing support for the auditor's conclusions. Both are required to reduce audit risk to an acceptably low level.

11. List the audit procedures for obtaining audit evidence under SA 500.

    Inspection (of records/documents or tangible assets), observation, external confirmation, recalculation, reperformance, analytical procedures, and inquiry.

12. State the audit risk model formula and define its components.

    $$AR = IR \times CR \times DR$$ where $AR$ = audit risk, $IR$ = inherent risk, $CR$ = control risk, and $DR$ = detection risk. The product of inherent and control risk is the 'risk of material misstatement' (RoMM).

13. What is 'detection risk' and what is its relationship with the risk of material misstatement?

    Detection risk is the risk that the auditor's procedures will not detect a misstatement that exists and could be material. It has an inverse relationship with the risk of material misstatement (RoMM): the higher the assessed RoMM, the lower the acceptable detection risk, requiring more persuasive/extensive audit evidence.

14. What are the five components of internal control as per SA 315?

    (1) The control environment; (2) the entity's risk assessment process; (3) the information system and communication relevant to financial reporting; (4) control activities; and (5) monitoring of controls.

15. Define 'materiality' and explain its relationship with audit risk.

    Materiality is the magnitude of an omission or misstatement that, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. There is an inverse relationship between materiality and audit risk: the higher the materiality level, the lower the audit risk, and vice versa.

16. What is 'performance materiality' (SA 320)?

    Performance materiality is the amount(s) set by the auditor at less than materiality for the financial statements as a whole, to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.

17. Define 'audit sampling' and distinguish statistical from non-statistical sampling (SA 530).

    Audit sampling is the application of audit procedures to less than 100% of items within a population such that all sampling units have a chance of selection, to draw conclusions about the entire population. Statistical sampling uses random selection and probability theory to measure sampling risk; non-statistical sampling relies on the auditor's judgement and does not measure sampling risk statistically.

18. Differentiate between 'sampling risk' and 'non-sampling risk'.

    Sampling risk is the risk that the auditor's conclusion based on a sample differs from the conclusion had the entire population been tested. Non-sampling risk is the risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk (e.g., use of inappropriate procedures or misinterpretation of evidence).

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