ICMA Pakistan Audit & Assurance Syllabus

Audit & 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 & Assurance in ICMA Pakistan, not a summary of it.

1. 1

   Concepts of Audit and Assurance

   3 topics

   • Nature, scope and objectives of audit
   • Types of assurance engagements
   • True and fair view and audit expectation gap
2. 2

   Regulatory and Ethical Framework

   3 topics

   • International Standards on Auditing (ISAs)
   • Code of ethics and independence
   • Professional skepticism and judgment
3. 3

   Audit Planning and Risk Assessment

   3 topics

   • Understanding the entity and its environment
   • Audit risk model
   • Audit strategy and planning
4. 4

   Internal Control

   3 topics

   • Components of internal control
   • Tests of controls
   • Reporting control deficiencies
5. 5

   Audit Evidence and Procedures

   3 topics

   • Sufficient appropriate audit evidence
   • Substantive procedures and audit sampling
   • Audit of specific account balances
6. 6

   Completion and Review

   3 topics

   • Subsequent events and going concern
   • Written representations
   • Overall review of financial statements
7. 7

   Audit Reporting

   3 topics

   • Unmodified audit opinions
   • Modified opinions and emphasis of matter
   • Other information and reporting responsibilities

Audit & Assurance flashcards for ICMA Pakistan

18 of 53 cards from the Audit & Assurance deck — real questions with worked answers.

1. Define an audit of financial statements.

   An audit is an independent examination of, and the expression of an opinion on, the financial statements of an entity by a duly appointed auditor in pursuance of that appointment and in compliance with the relevant statutory and professional requirements.

2. What is the objective of an audit according to ISA 200?

   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 on whether they are prepared, in all material respects, in accordance with an applicable financial reporting framework, and to report on the financial statements and communicate as required by the ISAs.

3. What level of assurance does a statutory audit provide, and why is it not absolute?

   It provides reasonable (high but not absolute) assurance. Absolute assurance is unattainable due to inherent limitations: use of judgment, testing/sampling rather than 100% examination, inherent limitations of internal control, the persuasive (not conclusive) nature of evidence, and the possibility of collusion or management override.

4. What are the two types of assurance engagement and the level of assurance each provides?

   Reasonable assurance engagement (high but not absolute assurance, expressed positively, e.g. an audit) and limited assurance engagement (lower assurance than reasonable, expressed negatively, e.g. a review).

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

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

6. Distinguish positive (reasonable assurance) from negative (limited assurance) form of conclusion.

   Positive form (reasonable assurance) states what the auditor's opinion is, e.g. 'the financial statements give a true and fair view.' Negative form (limited assurance) states that nothing has come to the practitioner's attention to suggest the subject matter is materially misstated.

7. What does 'true and fair view' (or 'present fairly, in all material respects') mean?

   'True' implies the information is factual and conforms with reality and the applicable framework; 'fair' implies the information is free from discrimination and bias and reflects the commercial substance of transactions. Together they mean the financial statements are not materially misstated and faithfully represent the entity's position and performance.

8. What is the audit expectation gap?

   The difference between what users of financial statements believe auditors do (or should do) and what auditors actually do. It typically includes beliefs that auditors guarantee accuracy, detect all fraud, or assure the entity's future viability.

9. How can the audit expectation gap be reduced?

   By educating users, expanding/clarifying the contents of the auditor's report (e.g. explaining responsibilities, scope, and key audit matters), and clearly defining the respective responsibilities of management and the auditor.

10. What are ISAs and who issues them?

    International Standards on Auditing are professional standards governing the audit of historical financial information, issued by the International Auditing and Assurance Standards Board (IAASB) of IFAC.

11. State the auditor's responsibility versus management's responsibility regarding the financial statements.

    Management is responsible for preparing the financial statements (in accordance with the applicable framework) and for internal control. The auditor is responsible for forming and expressing an independent opinion on whether the financial statements are free from material misstatement.

12. What are the five fundamental principles of the IESBA Code of Ethics?

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

13. List the five categories of threats to compliance with the fundamental ethical principles.

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

14. Give an example of a self-review threat to independence.

    When an auditor reviews work or judgments that the same firm previously performed, e.g. auditing financial statements that the firm itself prepared, or auditing a valuation/system the firm designed.

15. What are the four categories of safeguards/responses to ethical threats?

    Safeguards created by the profession, legislation or regulation; and safeguards within the assurance client. Where threats cannot be reduced to an acceptable level, the engagement is declined or the relationship terminated. (Categories: eliminate the circumstances, apply safeguards, or decline/discontinue.)

16. What is auditor independence and its two aspects?

    Independence is the auditor's freedom from influences that compromise professional judgment. It has two aspects: independence of mind (state of mind permitting unbiased judgment) and independence in appearance (avoiding facts and circumstances that a reasonable third party would conclude compromise objectivity).

17. Define professional skepticism.

    An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.

18. Define professional judgment.

    The application of relevant training, knowledge and experience, within the context provided by auditing, accounting and ethical standards, in making informed decisions about the courses of action appropriate in the circumstances of the audit engagement.

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