Chartered Institute of Public Finance and Accountancy (CIPFA) Audit and Assurance Syllabus

Audit and Assurance syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Audit and Assurance in Chartered Institute of Public Finance and Accountancy (CIPFA), not a summary of it.

1. 1

   The Framework of Audit and Assurance

   3 topics

   • Nature, Purpose and Scope of Assurance Engagements
     • Levels of assurance and engagement types
     • External versus internal audit
     • The expectation gap
   • Regulation and Standards for Public Audit
     • Role of the National Audit Office and Audit Wales/Scotland
     • International Standards on Auditing (ISAs)
     • Local audit framework and appointed auditors
   • Audit Independence and Professional Ethics
2. 2

   Planning and Risk Assessment

   4 topics

   • Understanding the Entity and Its Environment
   • Audit Risk and Materiality
     • The audit risk model
     • Inherent, control and detection risk
     • Setting and revising materiality
   • Internal Control Systems
     • Evaluating control design and operation
     • Tests of controls
     • Reporting control deficiencies
   • Fraud, Error and the Auditor's Responsibilities
3. 3

   Audit Evidence and Procedures

   4 topics

   • Sufficient Appropriate Audit Evidence
   • Substantive Procedures by Balance
     • Testing of income and expenditure
     • Verification of assets and liabilities
     • Audit sampling and analytical procedures
   • Using the Work of Experts and Internal Audit
   • Audit Documentation
4. 4

   Reporting and Value for Money Audit

   3 topics

   • The Auditor's Report and Opinions
     • Unmodified and modified opinions
     • Emphasis of matter and other matter paragraphs
   • Value for Money and Performance Conclusions
     • Economy, efficiency and effectiveness
     • Arrangements for securing value for money
   • Public Interest Reporting and Statutory Powers

Audit and Assurance flashcards for Chartered Institute of Public Finance and Accountancy (CIPFA)

18 of 62 cards from the Audit and Assurance deck — real questions with worked answers.

1. Define an 'assurance engagement' as set out in the IAASB framework.

   An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of intended users (other than the responsible party) about the outcome of the evaluation or measurement of a subject matter against suitable criteria.

2. What are the five elements of an assurance engagement?

   (1) A three-party relationship (practitioner, responsible party, intended users); (2) an appropriate underlying subject matter; (3) suitable criteria; (4) sufficient appropriate evidence; (5) a written assurance report.

3. Distinguish between a 'reasonable assurance' and a 'limited assurance' engagement.

   Reasonable assurance reduces engagement risk to an acceptably low level and gives a positive ('the statements give a true and fair view') opinion. Limited assurance gives lower assurance and a negative-form conclusion ('nothing has come to our attention') based on more restricted procedures.

4. What is the objective of a statutory external audit of financial statements?

   To enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework (i.e. give a true and fair view) and comply with relevant legislation.

5. Explain the concept of 'reasonable assurance' and why an audit is not a guarantee.

   Reasonable assurance is a high but not absolute level of assurance. It is not a guarantee because of inherent limitations: use of judgement and sampling, the inherent limitations of internal control, the persuasive (not conclusive) nature of most evidence, and the possibility of collusion or management override.

6. Which body sets the standards governing public audit in England and what framework does it issue?

   The National Audit Office (NAO), led by the Comptroller and Auditor General (C&AG), sets the Code of Audit Practice. Audits follow International Standards on Auditing (ISAs (UK)) and, for local public bodies, the relevant Code of Audit Practice.

7. Name the four key principles of public life relevant to public audit beyond the financial statement opinion.

   Public audit additionally addresses regularity (compliance with authorities), propriety (standards of conduct), value for money, and the proper conduct of public business — reflecting the wider Nolan principles of public life.

8. What is the role of the Financial Reporting Council (FRC) in UK audit regulation?

   The FRC is the UK's independent regulator responsible for setting auditing (ISAs (UK)), ethical and quality standards, and for monitoring and enforcing the quality of audit work performed by Recognised Supervisory Bodies and audit firms.

9. What is meant by 'regularity' in a public sector audit context?

   Regularity means that expenditure and income have been applied to the purposes intended by Parliament/the relevant authority and conform to the authorities (statutory and other) that govern them.

10. What is 'propriety' in public audit?

    Propriety concerns the standards of conduct, behaviour and corporate governance with which public money is handled — meeting high standards expected of public business and the absence of private gain or improper conduct.

11. Define 'auditor independence' and its two components under the FRC Ethical Standard.

    Independence is freedom from situations and relationships that compromise objectivity. Its two components are independence of mind (not being affected by influences that compromise judgement) and independence in appearance (avoiding facts/circumstances a reasonable third party would conclude compromise objectivity).

12. List the five fundamental principles of the IESBA/ICAEW Code of Ethics.

    Integrity, Objectivity, Professional competence and due care, Confidentiality, and Professional behaviour.

13. Name the five categories of threat to auditor independence and objectivity.

    Self-interest, Self-review, Advocacy, Familiarity, and Intimidation threats.

14. Give an example of a 'self-review' threat and a typical safeguard.

    Example: the audit firm having prepared the financial statements or designed the internal control system it now audits. Safeguard: use separate teams, or decline to provide the non-audit service to an audit client.

15. What is the safeguard against the familiarity threat arising from long association of senior audit staff?

    Rotation of the key audit (engagement) partner — for public interest entities the engagement partner must rotate after a maximum of (generally) 5 years, with a cooling-off period before returning.

16. Under ISA (UK) 315, why must the auditor obtain an understanding of the entity and its environment?

    To identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels, thereby providing a basis for designing and performing further audit procedures.

17. List the risk assessment procedures used to understand the entity under ISA (UK) 315.

    (1) Inquiries of management and others within the entity; (2) analytical procedures; (3) observation and inspection. (Also: information from client acceptance, prior audits and external sources.)

18. State the audit risk model formula.

    $$AR = IR \times CR \times DR$$ where $AR$ = audit risk, $IR$ = inherent risk, $CR$ = control risk and $DR$ = detection risk.

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