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

24 sample cards from the Audit and Assurance deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What are the assertions about account balances at period end (e.g. assets/liabilities)?

   Existence, Rights and obligations, Completeness, Accuracy/valuation and allocation (plus Classification and Presentation).

2. Which substantive procedures primarily test the EXISTENCE of inventory and the VALUATION of receivables?

   Existence of inventory: attendance at the physical inventory count. Valuation of receivables: review of after-date cash receipts, ageing analysis and assessment of the allowance for doubtful debts (recoverability).

3. What is the principal substantive procedure to confirm the COMPLETENESS of trade payables/liabilities?

   A search for unrecorded liabilities: reviewing after-date payments and unprocessed invoices/goods received notes, and reconciling to suppliers' statements — completeness is the key risk for liabilities (understatement).

4. Define 'substantive analytical procedures' and give an example.

   Evaluations of financial information through analysis of plausible relationships among data, including comparison with expectations. Example: building an expectation of payroll cost by multiplying average staff numbers by average pay and comparing to recorded cost, investigating differences.

5. Under ISA (UK) 620, what must the auditor evaluate before relying on an auditor's expert?

   The expert's competence, capabilities and objectivity; obtain an understanding of the field of expertise; agree the scope of work; and evaluate the adequacy of the expert's work (including assumptions, methods and source data) as audit evidence.

6. Does using the work of an expert reduce the auditor's responsibility for the opinion?

   No. If the auditor concludes the expert's work is adequate, the auditor takes full responsibility for the opinion. Reference to an expert in an unmodified report is not normally made; if referenced to explain a modification, it must state it does not reduce the auditor's responsibility.

7. Under ISA (UK) 610, what factors determine whether the external auditor can use the work of internal audit?

   The internal audit function's level of objectivity/organisational status, its level of competence, and whether it applies a systematic and disciplined approach (including quality control). The external auditor must also evaluate and re-perform some of the specific work used.

8. Distinguish external audit from internal audit by primary objective and reporting line.

   External audit: independent statutory opinion on financial statements for external users; appointed by/reports to members or an external body. Internal audit: appraisal of risk management, control and governance for management/those charged with governance; an internal function reporting to the audit committee/board.

9. State the purpose of audit documentation under ISA (UK) 230 and the 'experienced auditor' test.

   Documentation provides evidence of the basis for the opinion and that the audit was planned and performed per ISAs. The test: an experienced auditor, with no prior connection, should understand the nature, timing and extent of procedures, results, evidence obtained, and significant matters and conclusions reached.

10. Within what period must the final audit file be assembled, and for how long retained, under ISQM/ISA (UK) 230?

    The administrative assembly of the final audit file should be completed on a timely basis, ordinarily not more than 60 days after the date of the auditor's report. Retention is ordinarily for a minimum of 5 years from the date of the report.

11. What are the basic elements of an unmodified (clean) auditor's report under ISA (UK) 700?

    Title; addressee; Opinion section; Basis for Opinion; (Material uncertainty re going concern if applicable); Key Audit Matters; respective responsibilities of management/those charged with governance and of the auditor; other reporting responsibilities; signature; auditor's address; and date.

12. Name the three types of modified audit opinion and when each is given.

    Qualified ('except for') — material but not pervasive misstatement or inability to obtain evidence; Adverse — material AND pervasive misstatement; Disclaimer of opinion — material AND pervasive inability to obtain sufficient appropriate evidence (scope limitation).

13. Complete the matrix: nature of matter (material-not-pervasive vs material-and-pervasive) against the type of opinion.

    Misstatement, material but not pervasive = Qualified; material and pervasive = Adverse. Inability to obtain evidence, material but not pervasive = Qualified; material and pervasive = Disclaimer of opinion.

14. What is an 'Emphasis of Matter' paragraph and how does it differ from a modified opinion?

    An Emphasis of Matter paragraph draws users' attention to a matter appropriately presented/disclosed in the statements that is fundamental to understanding. It does NOT modify the opinion — the opinion remains unmodified; it merely highlights, e.g. a significant uncertainty over litigation.

15. Distinguish an 'Emphasis of Matter' from an 'Other Matter' paragraph.

    Emphasis of Matter refers to a matter presented or disclosed IN the financial statements. Other Matter refers to a matter NOT presented in the statements but relevant to users' understanding of the audit, the auditor's responsibilities, or the report (e.g. prior period figures audited by another auditor).

16. What are 'Key Audit Matters' (ISA (UK) 701) and where are they reported?

    Those matters that, in the auditor's professional judgement, were of most significance in the audit of the current period's financial statements. They are selected from matters communicated to those charged with governance and described in a separate KAM section of the auditor's report (required for listed/public interest entities).

17. How does the auditor report on 'going concern' under ISA (UK) 570?

    The auditor evaluates management's use of the going concern basis. If a material uncertainty exists that is adequately disclosed, an unmodified opinion is given with a 'Material Uncertainty Related to Going Concern' section. If inadequately disclosed, the opinion is modified (qualified/adverse); if the basis is inappropriate, an adverse opinion is given.

18. Define 'Value for Money' (VFM) and its three components (the '3 Es').

    VFM is achieving the optimal use of resources. The 3 Es: Economy (minimising the cost of resources — spending less), Efficiency (output per unit of input — spending well), and Effectiveness (extent to which objectives are achieved — spending wisely). Some add Equity (fair distribution).

19. What does a VFM/'use of resources' conclusion in public audit cover, and what form does it take?

    It covers whether the body has proper arrangements for securing economy, efficiency and effectiveness in its use of resources — assessed against criteria such as financial sustainability, governance, and improving economy/efficiency/effectiveness. It is reported as a narrative commentary (and any significant weaknesses/recommendations), not a true-and-fair opinion.

20. Distinguish a financial statement audit from a VFM (performance) audit.

    A financial statement audit gives an opinion on whether accounts are true and fair (regularity-based, ISA-driven). A VFM/performance audit examines the arrangements for economy, efficiency and effectiveness in using resources and reports conclusions and recommendations — it is forward-looking and improvement-focused, not an opinion on figures.

21. What is a 'public interest report' and what triggers one?

    A report the external auditor of a local public body issues, in the public interest, on a matter coming to attention during the audit that should be brought to public/authority attention (e.g. significant financial mismanagement, unlawful expenditure, or governance failure). The body must consider and respond to it publicly.

22. Name the principal statutory powers of the external auditor of a local authority in England (Local Audit and Accountability Act 2014).

    Power to issue a public interest report; to make written recommendations (statutory recommendations); to issue an advisory notice; to apply to the court for a declaration that an item of account is unlawful; and to give an Auditor's report on objections raised by local electors.

23. What rights do local electors have in relation to a local authority audit, and what must the auditor do?

    Electors have the right to inspect the accounts and supporting documents, to question the auditor about them, and to make objections. The auditor must consider any objection and may respond by issuing a public interest report, making a recommendation, or applying to the court for a declaration that an item is unlawful.

24. What is the auditor's responsibility regarding laws and regulations (ISA (UK) 250) in a public body, including the duty to report?

    The auditor obtains sufficient understanding of the legal/regulatory framework and how the entity complies, performs procedures to identify non-compliance affecting the accounts, and in the public sector has additional responsibilities — including reporting suspected unlawful expenditure, breaches of regularity, and reporting matters to the relevant regulator or the C&AG/NAO where required.

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