ACCA paper p7 advanced audit and assurance

Paper P7 INT & UK Advanced audit and assurance Pocket notes... Advanced audit and assurance paper P7 INT & UKBritish library cataloguing-in-publication data A catalogue record for this

Paper P7 INT & UK Advanced audit and assurance Pocket notes

Advanced audit and assurance paper P7 INT & UK

British library

cataloguing-in-publication

data

A catalogue record for this book is available

from the British Library

Published by:

Kaplan Publishing UK

Unit 2 The Business Centre

Molly Millars Lane

Wokingham

Berkshire

RG41 2QZ

ISBN 978-1-78415-252-9

© Kaplan Financial Limited, 2015

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Advanced audit and assurance paper P7 INT & UK

Contents

Chapter 1: Regulation in a global economy 1

Chapter 2: Code of ethics and conduct 7

Chapter 3: Professional appointments 15

Chapter 4: Quality control 21

Chapter 5: Obtaining professional work 25

Chapter 6: Tendering 29

Chapter 7: Money laundering 33

Chapter 8: Professional responsibilities and liabilities 37

Chapter 9: Planning, materiality and assessing the risk of misstatement 49

Chapter 10: Group and transnational audits 57

Chapter 11: Evidence 67

Chapter 12: Completion 79

Chapter 13: Auditors’ reports 85

Chapter 14: Reports to those charged with governance 91

paper P7 INT & UK

Chapter 15: Other assignments 95

Chapter 16: Prospective financial information 101

Chapter 17: Audit of social, environmental and integrated reporting 105

Chapter 18: Forensic audits 111

Chapter 19: Outsourcing and internal audit 115

Chapter 20: Auditing aspects of insolvency (UK syllabus only) 121

Chapter 21: Audit of performance information in the public sector (INT syllabus only) 127

Index .I.1

Advanced audit and assurance

paper P7 INT & UK The content and style of the

exam

You will be given 15 minutes reading and planning time before this 3 hour exam

Section A (60%) – 2 compulsory questions

• This section is compulsory and contains mainly 'case study' type scenarios

• Q1 is worth 35 marks Q2 is worth 25 marks

• 4 professional marks will be available in one of the questions

• A range of topics, issues and requirements can be addressed here (e.g what are business risks, steps to be taken at the planning stage, and ethical considerations)

• It is vital that your answers address the specifics of the case scenario

Section B (40%) – choice of 2 questions out

of 3

• These questions will have more focus

on specific topics (e.g 'auditor's reports', 'professional ethics')

• There will be less scenario content than

in Section A

Aim of the paper

To ensure that candidates can exercise judgement and apply techniques in the analysis of matters relating to the provision

of audit and assurance services and can evaluate and comment on current practices and developments

Advanced audit and assurance

Advanced audit and assurance

The keys to success in

Paper 7

• Answer all requirements to each

question attempted

• Be strict with your time REMEMBER:

1.8 minutes per mark (after reading

time)

• There is very little scope for note learned

knowledge: you MUST appy your

knowledge to the specific circumstances

of the scenario

• Take your time to read and understand

the full question requirement before

reading the scenario

Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email

to mykaplanreporting@kaplan.com with full details, or follow the link to the feedback form in MyKaplan

Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions

Regulation in a global economy

In this chapter

• Main sources of regulation

• Public oversight and corporate governance

• Board structures

• Audit committees

chapter

1

Chapter 1

international standards on auditing

(isas) are issued by the international

Federation of accountants (iFaC) – these

provide the basic principles and essential

procedures in most audit areas

iFaC issues auditing standards through

its standing committee, the international

auditing and assurance standards board

(iaasb), whose mission is to establish

high quality, assurance, quality control and

related services standards to develop the

harmonisation process worldwide

IFAC’s Code of Professional Ethics

ACCA’s Code of Ethics and Conduct The main sources of regulation

Chapter 1

Public oversight and corporate governance Corporate governance is about ensuring that public companies are:

• managed effectively

• for the benefit of the company and its shareholders

Good corporate governance can be enforced:

• by law – e.g The Sarbanes-Oxley Act, USA

• by agreement through codes of best practice – e.g UK Corporate Governance Code, or

• through a combination of the two

Fair financial

control

Constructive relationship with shareholders

Effective management

Fair appraisal

of performance Fair remuneration and benefits directors (NEDs) with sufficient experience and ‘clout’ Support/oversight of management by non-executive

Good corporate governance requires

Regulation in a global economy Chapter 1 Board structures

• collective board responsibility

• no distinction in law between responsibilities

of executive and nEDs

• need to distinguish between functions of

executive and nEDs

• need to establish board committees to

monitor and act on different functions

UK & IRElAND

+ jurisdictions with comparable systems of

company law

Unitary board structure

• executive management with operational responsibility for running the business – CEO, CFO, vice presidents, etc., and

• the board which has purely an oversight role

US

+ similar jurisdictions

Supervisory board structure

Regulation in a global economy Chapter 1

Audit committees

The UK Corporate Governance Code requires companies to have an Audit Committee consisting of

at least three non-executive members with clearly written terms of reference Key revision points:

Disadvantages:

• Fear purpose

to “catch out” management

• Overburdening

of non-executive directors

• May lead to “two-tier” board

• Costly

Advantages:

• improve quality

of management accounting

• improved communication between directors, external auditors and management

• avoids conflicts between auditors and management

Objectives

• increase public confidence in credibility and objectivity of published financial info

• assist directors in meeting their responsibilities in respect of financial reporting

• strengthen the independence of the external auditor

Main functions include:

• Review of company internal control procedures

• Review of internal audit function

• Review of external auditors results to ensure audit has been carried out efficiently, effectively and independently

• Recommending remuneration and nomination of auditors

• Reviewing requirements satisfied under

uk Corporate governance Code

Regulation in a global economy

Exam focus

To practise the basics use the following test

your understandings (TYU’s) Complete Text:

Chapter 1:

• TYU 1 ‘Becher’

• June 2010 – Question 2