AAA 1 - REVISION

CHAPTER 1 Practitioner - Auditor

1. CONCEPT OF AUDIT AND OTHER ENGAGEMENTS Responsible party - Management of client's entity
EXAM QUESTIONS Intended user - Shareholder
--> Number of assurance engagement's elements 3 party relationship/ criteria/ subject matters/Evidence/Conclusion
--> Naming the elements of an assurance engagements FS/…
--> Applying in the specific assurance engagement/scenario
2. AUDIT AND OTHER ASSURANCE IN COMPARISION
--> Level of assurance
--> Reasonable assurance --> Evidence required
--> high level of assurance but not absolute Sufficient appropriate audit evidence
--> positive assurance
--> positive wording/opinion
Eg: statutory audit
--> Limited assurance
--> moderate level of assurance --> Analytical procedures
--> negative assurance Less evidence required
--> negative wording/opinion…
Eg: review on….

3. RESPONSIBILITY

MANAGEMENT AUDITOR

Prepare FS true and fair --> Give opinion on FS

= comply with IASs FS = comply with ISA

Prevent, detect and correct obtain reasonable assurance

MM due to Fraud and errors Fraud and errors that FS are free from MM
due to fraud or error
= professional skepticism
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… = discussion among audit team

ISA 250 = perform risk assessment

It is the responsibility of mgt --> Direct effect Eg: tax laws, pension
= manage the business Laws and Obtain SA evidence about
comply with laws and regulation COMPLIANCE
regulations --> Indirect effect Eg: environmental regualtion…
Undertake Audit procedure
to identify NON-COMPLIANCE
(refe slide)

Related party relationship MUST UNDERSTANDING

--> must be disclosed related party relationship
Related party transactions
Related parties Transactions
--> must be disclosed Obtain SA evidence that all
control/significant influence related party…has been disclosed
Eg: parents, Key personel… adequately

Assessment of entity's Evaluation of mgt's assessment

ability to continue Going concern Conclusion on going concern
going concern Appropriate Unmodified
if Material uncertainty exists
--> 1. Adequate disclosure
Unmodified opinion
with MURGC section
--> 2. Inadequate disclosure
Qualified or Adverse
Inappropriate Adverse
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Adjusting events Active duties

--> Adjust the numbers
on the FS
Subsequent events Must perform Audit procedures
to obtain SA audit evidence that
Non-adjusting events all subsequent events required
--> If significant/important adjustment or disclosure have
=> disclosure on the Note to FS been identified
Passive duties
No requirement to perform AP
If known, take necessary actions
Eg: disscuss with mgt
How mgt intends to address the matters
(refe slide)

4. CORPORATE GOVENANCE
to Promote transparent and efficient markets
to protect shareholders' rights
…
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4.1 UK CORPORATE GOVERNANCE CODE
Board Leadership and
Company Purpose
Division of
Responsibilities
Composition, Succession
and Evaluation
Audit, Risk and Internal
Control
Remuneration
--> led by an effective and committed Board
--> All directors must act with integrity
culture of openness and transparency
Composition: a wide range of knowledge and experience
from a variety of sector
--> CEO # Chairman
--> No one individual should dominate decision making
--> NEDs balance with Eds
--> NEDs is to monitor, advise and warn Eds
A Formal and transparent procedure to appoint directors
Nomination Committee with majority of NDEs
Combination of skills, experience and knowledge
Regularly refreshed
Annual evaluation of performance
re-election annually
Establish Audit committee of at least 3 NEDs
ED’s remuneration should be linked to performance
Profit related pay is encourage
No director should be involved in deciding his packages
Remuneration committee (NEDs)
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CHAPTER 2 - ETHICAL CONSIDERATION

1. FUNDAMENTAL ETHICAL PRINCIPLES

5 PRINCIPLES 5 THREATS

PICOP
I Integrity Self - interest
O Objectivity Self - review
P Professional Competence and Due care Familiarity
C Confidentiality Advocacy
P Professional Behavior Intimidation

Key words Key words

Integrity straightforward and honest…. Self - interest …………………………………………………………………………………………………
Objectivity not allow bias…… Self - review …………………………………………………………………………………………………
Professional …………………………………………………………………………………………………………………………………………………………
long association with client/know client too well
Familiarity
Competence …………………………………………………………………………………………………………………………………………………………
…………………………………………………………………………………………………
Confidentiality …………………………………………………………………………………………………………………………………………………………
Advocacy promote client/support/advocate…
Professional Behavior …………………………………………………………………………………………………………………………………………………………
Intimidation …………………………………………………………………………………………………

Example:
CONFIDENTIALITY Self - interest Eg: own shares, gift or other interests
--> Legal duty to disclose Self - review ……………………………………………………………………………………………………………………………
Eg:….. ……………………………………………………………………………………………………………………………
Familiarity
--> right to disclose ……………………………………………………………………………………………………………………………
Eg:…. Advocacy ……………………………………………………………………………………………………………………………
Intimidation ……………………………………………………………………………………………………………………………

CONFLICT OF INTEREST
Circumtances: Eg: Audit of FS for both Vinamilk and TH true milk
Safeguards: client's consents, separate team, chineses wall, confidentiality agreements…
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CHAPTER 3 - QUALITY CONTROL

[SUMARY]
QUALITY CONTROL --> ensure that the audit work is carried out comply with ISAs
PURPOSES --> appropriate audit opinion
The need for quality
standards Reasons
WHY?
--> Client
--> Individual audior
--> Engagement partner
--> Supervisor

WHAT IS AUDIT QUALITY --> Policies/procedures

CONTROL? --> adopted by audit firm
to ensure….

Quality control PROCEDURES

--> Engagement quality control review for ALL LISTED COMPANY / high risk
company
--> Recruit employee with competence/knowledge/experience…

--> More training

--> All works must be reviewed by higher-level staff

--> Allocate experienced and competent staff to engagement

--> Due diligence process should be performed before accepting new client
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ELEMENTS OF AUDIT
QUALITY CONTROL SYSTEM

HALEEM
--> H -Human resources
--> A - Acceptance and continuan of client relationship
Only suitable client and engagement should be accepted and retained
--> L - Leadership
Strong and ethical leadership
--> E - Ethics
Firms comply with ethical requirement
--> E - Engagement performance
Control procedures/Control actions in place to ensure the engagements are performed
in an effective manner

--> Direction - properly direct

--> Supervision - sufficiently supervise
--> Review - adequately reviewed
--> Document
--> Consultant

COMPARISION OF "HOT - REVIEW" AND "COLD-REVIEW"

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client too well
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