ACCA Audit and Assurance Paper F8 (International) Course Notes ACFBCN11(J) INT(nine lectures of alte chapers~ausio youre confrable wih a chap, the there's no need ib and vualwakthoughsofaltekey revit cri. ances, tetmnques and lect eX2TPES, Hoyeyer, ere are some elements whee another guided ‘Sele debi of exam standard quesions wa tough would hep, ten use the cin lecture io fromthe OBA Bank speccaly adress the aspects you need o see again. ‘tbe lectures have easyto-use indexes that alow youto |ump sagt the seen or eure example youd eo —| ay realy ihe the fact that you can pause the tain and play tas mary tines as you the - rt etre! yur paper hs highly exainabie pics Contact ur suppar iam who wibe happy hep that were coveredin detain a previous i per, Bere wl Be oie lecures help Emenee ee you cover hese 06450751100 Spe deta willbe provided atthe prot place nthe checkpanlstge uitence as you pogess through the Thanks ote course this Onine Classroom rely seems fo wrk Thais acarsta sed oupste and env cus ie wh ah egy charges and ew ih ‘toto oxane BFP apis. Fon one oe epance aor War. ste! exe outed eee ese cousanaes gly. Taco pls acca) chochd by arte or ana hou ro ed. ne ay a 88 ro rl aos ad nara ps. Howe gen evn ef dene tren eo Charged ina oot peo ti ata Stan ar may ip gh or Gate or act re ‘abyss eal fray camennca atts mh case (Cy tad seo aor er po peso it us kaw at ADCAcoursestedbachBbypcom £0 wo can coe ‘ned n adic we wou wae a cupesions ou may ave oar more assy mater.F8 Audit and Assurance (INT) Study Programme age lnosicton oe paper de couse, ‘ 1 Teconcpta at ant ater asuare engages 3 2 Salty att an ropulaton, 2 3 Capris govarnee a 4 lesen ofce sd ACC Cade of ie nd Can 5 5 nl uae a 8 Retasesenen a ‘heat "aia y Gron nd Pegs Tad 18 7 ui paning and ocsnenstn, a 8 Inston stein 13 © lesa 5 0. Tesotoonas 2 1A oes and sarging cs ‘Cheakpiat? "adn Susy Glace and Pages Teh 12 Nencuren ea 708 1 ey - a 4 Reeuans. 2s 15 ant aneash a 6. Gales capt andre encima a 1 Nottie 2a 18 ‘stove an eteton 25 19 ‘Repos m ‘eaten Taste Sud Goons maPogenToh a “2 Anew Letue Bape, 28 21 Gheron and bre a aT 2 Bop Aesonad nose tn Paper an ” sagen: 8 Plt age ios and Sent ise). Aacrecnrn.n nT 3 iwwrrooucron ee ei nee! Overall aim of the syllabus “Teer oeye an undentndeg ofthe poss caning au he asus agape ards _xoleton ne covet fw pessoal agit ace The syllabus Tha toad sabes headegs a: A Assttanewa dein 8 hema mt © rng ad rk assesment acon E Aseeviree F even G__ Fapeing Main capabilities Oncaea spss canes shu be abe “+ iptanne ntc, ppse ad sp of uate egapenentsincin ele eel as andi ay aria tamer “+ Bath mare inn ut an ect sa pat a ovr proemance menagarent and Isilon wih he ovat “+ beneath neater tts an ndesandng tb nly ands ensue assesses te ‘ulna sitemeter ang am ao Sher esi) pas neu ot ‘anda strats + esse aerate oman systems ait en to dry an commie cto hs nlite pel consxances mae appt zemenctons + enti ae crete he wk an evseoe equa mt ne bets aut engagamers an ‘re plete alte neal Sands on ig + Enda ergs and mst te aut an as rcessay + alan corcasons ton aut wa ae refetein dren peso udreper xan te ones each pe otepo. ‘Avance Auda surance er Links with other papers ‘scan sno uae ea i ine arov) an ine foes ne aus) ks xa Reacon is paper arr papas a may precede low thet ACCA ton shows apr Ff Paper F, ho acon nodes assumed ne ‘lately be alors win Paper F Franconi, AcreeN NUNIT Bry ‘snrRooucTOn Achieving ACCA's Study Guide Outcomes |, a a a OS Soe a Soma 7 1 a oT Gores Tan is SH ns SS = Bi viens 7 hanna aga 3 pes es ct ca a ones eee Sones ac ae a DB ring nt i sessment — Saat he sa ET 7 fiw a oe cont aimee Soot aig a oon Sonat BB ser cnt aio Sar BF toned ora cone ot toutes ce oC Tavaar a oe TRS 7 oto tones 1 crac NT 5 BryerRoouerion Audit evidence “havea fees by os Chapt eo Chapt Ei The sub opens Cheater 1218 Et hs sarong ad oe weal ws Chap ES Compuadd tecigs Chapter EE The wot cates Chapter ET Naoprttrgaaione Chapa Bi rcien FA_ Subsequent vers ‘Chaptor 18 F2_Gangeonce hapter a_Witenepesniaone hope Au ali and fare Chapter |. Gt hosts hana G2_Aeprso naval ‘Chapter (3 Fora auitopets ‘hapars ieaie Far Bah has es te ean son a ne 2010 tng. ‘Theexarint i tee how pape wh 1 ites ead adrcing ne. A questions te compu ‘Sime guesions wi cpa sarlas sy spas AE uesine wl guess ot wl response arog quests on planing ee neu ay eure cauaion an irapeton cue base SS Marks a ee sot [ame oD er BD oan @ | 7 ie‘Thetoing ian pps sto sy nes Question practice “sia quston we eran you ata reece Yotleanag on aha xc Real-life examples Faure dts jour Ceci Guitance Section reference in the Study Text ‘ecru ter onsale yor roe gen is se wh bona eng fhe sue Formula to learn crecn NT ° iesrs Comes utara te xan scrmans on pastes meer wh cr exgeern of rear ea re pect can sogests at pass Paper Au ar Suan, jo ons deep arbre -AorACN HL) INT ° iesrs ean ORME Doe ‘Aletta ni er re corpuor so Baten hoes o male ts of wich question ou Wil atone bu yau sel ge sre hag hto Pe crm wih oust tes ‘hosing quesion rd il anys be bul ound a cates Ths maybe sre ald ara stata cle congary an ystems or tay aeo dese nora onan. Ths Ne uso hee euhue esto gan Fam ung fe edeg anc ag ire soil proba ta goodies tke un {esate he tseatns you have nace tsi Fesh your mind. Th exarine coal blewes ha Ps | whee you Sha spend masa he eager pong ne 17) Skill 2- Analysis of a question's requirements ‘Younes fe nearing ofthe wes use ye examin es are ead nun te BPP Praca 4 Reisen Kt ‘Yeu certo ea ac em proc bt tis part a you age he ieee telaen em rani ‘oe measly nso eer pont whereas “sre meas cel examining =n ‘sue or cansceing pos a cas. so erequenen os questo en cena sunber sdb equrrents you redo mek xe hese x0 ‘heat eraedon ie qssin pape anighog a underning ba shat eraser sconPreorshe. Skill 3 - Disciplined time management ‘The rain: as id tue he eet fe pes spe hone Sone ues, rst tty Cteson ae sir Sim presi. Yun alte 8 indies eat na aval xan a sit inprane balou altel be doa amnutlrn boh each questo ane weet sb-equranerc win each esion a eee Inte rane ae no question ch ie gy sys rsa. You so am communica yr pons cay bt conceo) se heads, ser parapaptsadists of forts making seal yo fae epante pani no separate eragaghs. May ssc queso canbe answered as eect sng ala yout and he earner eenges is pach ACFEONI NNT ‘e ie-Skill 5 - Producing a tailored answer to the exam scenario "ou aoe ap your hee nowage oPaspts oe que tin xa. Tha best yb lor you aver iaok fcesne sana anthan bal em nya ret ‘Ako mke su you wre your awain amar wich ley ne qs you ited ‘esse, Forex you ate min ep the oad ects you sol neu pessoal [ange an a ge, screens) at " iee 2The concept of audit and other assurance engagements How have the syllabus learning outcomes been examined? Went ané cere he tte and geal preset etena ust enmpgenens| Eris he aie and devlepant ‘sos ine conapiscl Slab he aire apa wh Tye (as) masks decoy sewrdehpand —_rpacs desc aus seen ‘cuss cons of rae esata areata ReparingYeaa? anon fot We) Bins ‘Soot ode sels Eslanfe feaknens fam Unlandan a eames an 02) (0) Sra ssnrte raat sermon engagement Crparsonciegeivesauarce Smition 8) Englan e pect assurance an ty he autora pouting Brampton Cop 1208, 4 the cies nd op shite of nny eu and ‘Sete tat og matting Iaagonet edie ha oor peemarce) cy i1: THE CONCEPT OF AUDIT AN OTHER ASSURANCE ENGAGEMENTS ‘Overview ee peterert purpose of externa aut ‘The aut report Assurance ‘Accountability, stewardship ‘and agency Br, “12 4 {1 THE CONCEPT OF AUDA AND OTHER ASSURANCE ENGAGEMENTS ‘The purpose of external audit The purpose of extemal aut is oerhance the degre of confisence of users in the ‘anil statements, Defriton ternal audits provide assurance to harold thatthe nancial statements are Prepared, nal materi respects in accorance wi an apicatefrarilepering ‘renenork ‘an aut is conducted in accorance wih eatonal Standards on Austin (AS) and relevent ethical requirements, Audtors must be independent and inartal ofthe company they ae austin, and so ae n pesto provide an opinion othe companys ones hat he anc sateen ae ‘presente fay ‘The pirase presnted fs’ interreted as meaning + Fecal + Free tom bias ‘+ Refectite commel substance ofthe business's trarsacons Most nationalisation requires the dct of allcmpanies to proce franca Statements for presentation tothe shareholders. This is a recogion ofthe dson| between hase ho own fe company the shareholders ad hase wh unten ay 4o-dy bass management dirctors —_ iad Stateranis |¢“———*"* ‘Shareholders Aopen Management ae Comany [4 Manage _] Acracntiun int 6 Bry){1 THE CONCEPT OF AUDIT AND OTHER ASSURANCE ENGAGEMENTS 115. Management are requtred to acount forthe stewardship oe assets laced under tor canio. They achieve his by prepcng frarcial statements wich ate presented ithe staretoters 118 Anextemal suds another legal equterent for incorporate eis, athough many sealer ets are exempt for he requirement. The Greco’ siemens have tobe texamined by an independent exper, the ao, who i requred to give an opine on ter tut ana faimess. 1.7. The auto’ opinion enhances the eres fhe facial statements by proving reasonable assurance fom an ndependet source tat the fancl items taken as whale ae fee fom mateal mssateet,Reasonatleassurarce is 2 igh vel of 2 The audit report 2.1 The utinate sim ofthe audt proces i fr be audtrs oben apoio fo exes their pinion ath shcehaldes a o whether the frail tatoments have been prepared, n al material respects, in acorésce wih te pplcabie nancial roparting tarework, 22 isis done by issuing an aut report the sudtors are hapoy wt he ania ‘atoms, hen they wssue a report wich glves an unmodified opinion Example audit report INDEPENDENT AUDITOR'S REPORT [Appropriate Aderessee] Report onthe financial statements We have ated the accompanying franca statements of ABC Company, ich comprise ‘he tatoment of nancial postion a at 31 December 20Xt, ad th income statement, statement of ctangesn equity and statement of cash fows forthe year hen ended, and @ ‘summary of sincant accounting pices and cher exanaor information. Management’ responsibilty forthe financial statements Management responsible forthe preparation an a presentatin ofthese financial sialon accordance wh temaoralFranclReporing Sanda and for such intemal contol as management determing is neessary to enable te preparation of ‘nancial siaements hat are free om materal msstterent, whether duet aud or ero ‘Autor’ responsibility (ur responsi is to express an opinion on hese nancial sates based on out aut, We conducted ou austin accordance wt tematonal Standards on Aun, Those standards require hat we cooly wth tical equtements and pan and perom te ‘aude to cbtan reasonable assurance abou wheter te frarcalstaloments are fee or terial misstatement AcreCN Hu) NT 6{1 THE CONCEPT OF AUDIT AND OTHER ASSURANCE ENGAGEMENTS ‘Anauatincvesperoming procedures bn aust edence sue amount and Aisclosues inthe fnacal steren. The procedures sled depend on he outs Judgement, cing he assessnent of erst cf ato misaterent oe aril tater, ether det fs or ero main ese rik sesso, easter, conser ita conte eleven oe ently’ preparation andar reserabonct ba ‘nancal sisterensin oro desgn aust procedres hat are aepapte nthe creanstances, but ator the purpose af exesing an opnon on he efecvenes ote nis ioral canto An aust ao nudes evaluating be appropri of counting polis wed andthe reasonableness azar estates made by mangement 5 wo evaling the oval preseticn he racial tenets, \Wetelove ta he audit evidence we have obtnd s sufent and spon prove bass frou au oprion Opinion nou opinion, roca tenons prose yn allmateri espe ergs ne and far ew he racial pesto of ABC Company a 31 Dacemter 20, and} 1s rac erteance ands a flows rhe ye en ones acorns wih ‘rematonal andl Repoing Sands Report on ther ga and regulatory requremants {For and cone of is sect of te ass reper wil ary epedng on entre ‘hear’ ter eparng esposbies | tuto’ sara} [Pa lta reper (Autor ees] true and fair 23 (a) The autor required oreport hat he ania statement resent ty. nal ‘material respects, (or give a te ae far view othe nancial postion, fnancial peromance and cash tows ef the cogany concened (©) 1SK200 vera Objectives ofthe Independent Aur andthe Conduct of an Aun ‘Acordance wth ISAs doesnt dene te ter Yai However, under IFRS, IAS 1 Presentation of Fail Statements interprets ‘meaning afl representation of asses, abies, income and expenses a st cut the Framencr (6) _Utiatey rue and fa may ned to be decided by a cout where thre is contention Te counts tet complance wn he denied nancial reporting amework as prima facie evidence that he Fanci satmens ae rested fal Materiality 24 The objective ofan aut o nancial statements i to enable the autor to expess an opinion on whether he franca statements ae prepares in all material espectsn accordance with an isentedthancalepetng tamer 7 Br,ie {1 THE CONCEPT OF AUDIT ANDO OTHER ASSURANCE ENGAGENENTS 25 Whatis materia? (2) Missttomens,cudng omissions, are material i they coud influence the ‘conomie decisions of users taken onthe bass fhe facial sistemens (Judgements abou mately are aflected ty the size orate of amiss, of ‘combina ofboth (6). Tre ausecr wl determine mately trough he professional udgerent,afocted by he secoption of te neods ofthe users ofthe nancial statment. (Chater coer his rein more deta), (8) The austor'notresponsbe forthe detecton of misstatements that ere not materia tothe frarcal slatoments.a a whole Reasonable assurance 26 ‘No audtarcan gve 100% assurance. The highest vel of assurance given, a nthe case of story aud s dese as Yeasonabl assurance ‘Reasonable assurances et abscue assurance because thre ae herent imitators of ‘an aust nie est nthe autor fring an option on evidence hats persuasive rate! than once. Limitations of the audit and materiality 27 ‘Te assurance given by autos gonered bythe fc tha audios use judgement in cing what aut procedures to use and what conclaons o draw, end aso by he limitations of evry ant, These ae Mustoted in the folowing dagram: 0{1 THE CONCEPT OF AUDIT AND OTHER ASSURANCE ENGAGEMENTS aA ea i: 7 28 Audtor’ reports are covered in mote detain Chapter 19, 3° Assurance 3.1 THeACCA 8 syabusexends Beyond auto he wie conte of assurance Definition 52 ‘An assurance engageentisan engagement in which practioner exresses 2 cancion designed to eanace the degree of confidence of he intended users che than the responsible party abut he cvzore of he evauaton or moasurment of a subject matter agaist enter: [risatonal Framework or Assuraoe Engagements) crocus. nt ° IeIe {1 THE CONCEPT OF AUDA ANO OTHER ASSURANCE ENGAGEMENTS 33. There ae five aren oan assurance engagement. These are ustated by the diagram below Fractionee Joa 7 [cera Subset fe meter il Use Fee 134 One wayto remember the fie elamens of an assurance report is using the mnemonic REST + Citeia + Report + Evidence + Subject mater + Thoo par rlatonship (esponible ary, user, practitonr) 35. Inessence, assurance descies the process whereby one parti tying tog some evel of omft io arate arty aout a subject mater 36 Thesteluor aus tere an example ofan assurance engagement. 37) The purpose ofthe aus primarily to gte assurance othe shaeholes (he main stokehldrs) but ere are advantages o many cer usergroups of ain the faci Stotomens audi. These goup incude pote investors, lenders, esloyees, tustoms and supple 38 Many assurance engagements sre undertaken vlutarly but they may alo happen as 8 resutofarequrementirgase an he erty by arate ary (forexamiein the case of the stator aut 219 Other examples of asurence engagements inde + Areviwof he sfctvenaes of an ey’ internal enn ar computer systems + Areviwof teas to an entiys going concer 1 review ofan eri al year esuts ACEC) NT 2{1 THE CONCEPT OF AUDIT AND OTHER ASSURANCE ENGAGEMENTS ‘What ober examples of assurance and assurance repos exit? Consier the folowing scents: SSS (1) Youare caren thinking of bag house bultin 1800, What asurance repr cou eu ‘obtain and who ight provides? (2) Yourtiends considering meeting up with someone they have met onan on-Sne dating webste. What assurances do you hk ey soul seek before meeting vn? (8). Youworkcor ca coun which is just about sue & $1000 grat to an erganzaton which us sors ate courses or eiten wth special needs. What assurance report coud you cba and wna mht vee is? aoracn niin a ie1 He coNcEPT AUDIT AND OTHER ASSURAN NGAGEMENTS $310. Anaxsurance repo rovies the folowing beefs othe users of ifomaton: + Indopendent option rom an extemal sure that enhances the credit of he information + Moragemen basis reduced {ay non standard oc made opinion draws atonton isk {The retvence of he nermaton maybe improves byte expertise and inowedge the assurance fm, 4111 Allasurance engagements, wheter svbjatd to legal regulation such as stator aust or aconracual aangement shuld be pefored ia siniar manne: + Aare the soope of workto be peromed + Formaise l ofthe tems of ho engagement in a contact engagement let + Pranthe werk, The level of work shoul be based on the fk and lve of assurance esred + Obtain suicen appropri evidence on which io base the conan + Perform overall eview and frm opin + sue por the cnt 4 Levels of assurance 41 An assurance engagement wl provide the user wi eter reasonable assurance Imited ‘Type of engagement Evidence gathering The assurance report procedures Reasonable assvance 9. statutory aust Suffer pproprite ‘evience ie abaned by. + Otiarng an understanding ofthe entiy + Assesting ak + Responding risk + Pororing fre procedures (sami) to draw acondution The evidence yaad s ltd, invoing tchriques sich as encity and ansyical procedures Postve exression (section 42) ‘ined assrarce 9. revew ofall year resus Raabe open (ceoton 42) 2r 42. Reporing aeent evel ofasurnce THE CONCEPT OF AUDIT AND OTHER ASSURANCE ENGAGEMENTS Posie expression ‘nour pion intemal cone selective, nal materia respects, tased on XYZrieri" Negative expression Based on our work described his reper nating has ome to cur atnton that causes uso bee that intemal consis nt eectve, nal material respect, based on XYZtaria” Exanpes of itferent types of assurance engagements nd th level of surance en) ener Enteral au Reasonable assurance | Story enemal aut Review = Review ofierin ra Negatve eession yr) nancial statements ‘areecupon procedures | None ~ Brannaton ofsttenen: of fnancal postion ~ Examination of sagen Sales and prof Conpaion Nene Preparation of nancial Semen = Preperation oftaxrotuns 2 Ieie {1 THE CONCEPT OF AUDIT ANO OTHER ASSURANCE ENGAGEMENTS ACFOEN INT Bs1: THE CONCEPT OF ALDI AND OTHER ASSURANCE ENGAGEMENTS ‘Additional Notes 5 Bry“ONCEPT OF AUDI AND OTHER ASSURANCE ENGAGEMENTS 5 Accountability, stewardship and agency 51 Agency theory ‘The rl of eternal aut ote expand in eaten othe econanc mel of agency theory. a eS ‘Agents ace people employed or used o prove a pata sence. nthe cas fa company, te | peal being used to prow the serie of managing the bushess aso hae the second oe of | being peop the own rating to maxese the personal weath 52. Anageney relationship Principat | <> Agent eganewer_| _» Eroges aaberpenon to perio a serie on ther behalf + Dalogates some decision- mating auth Do Tina nay hv cars mates oT ages? “Ppa nay ussan wus hy have pled aieoert “+ Php and sn may hve reat > Oo Possibe solutions + Stag mason alg the ts 2a co tren oa + Montag ocr 6g east) crocus IT 2% Ie1: THE cover AUDIT AND OTHER ASSURANCE ENGAGEMENTS ‘The agency relationship in audit 53 Inthe case oa company, management als 6s the agents of the body of sharholes, te Principals. Management re accountable fo thor stewardship ofthe company. ‘The shareholders have ied acces infomation abut he operations of the company ‘They may lock st inthe drectrs and may believe ta! he ifomabon inthe nc Statements is biases ‘The enteral autor, theeore, peor a stator auto adress asiple agency cnt between sharers and dct, 54° In sation the auto can be seen as an agent of the sharers. Unde aw, they pet to andar apoited by the sareoldrs 66 Chapter 2, This raises more concerns wt egard oust and confines. One key factor heres the importance that shareoiers lace on he autor independence fom the dat, ‘dors have an mporant incentive fo maintain dependence and pret hereon inode tokep and wn more aut work. Te profession ao mpases guidance inrlton Toindependence (ee Chap 4), 6 Chapter summary Trepupoceot | Tepes of tema aust so pramote extras! | conidnce and st nana oman 2 | Meautropt | Te objectve cf any ator assurance enggener Lopes opinion ne im fa apor. 3 aesance ut on one of assurance engagement 4 | Lovet otasvance | Reasonable sesrancn is usa pred intsot postive expression Lite assurances usps ints nega expression ™ 5 | Aecuetiy, | audtcante eledin ton to agen theory Stars ant a | 2" Br,1 THE CONCEPT OF AUDIT NO OTHER ASSURANCE ENGAGEMENTS IND OF CHAPTER ACFECN HH) NT 2Statutory audit and regulation How have the syllabus learning outcomes been examined? See Desorbe th eguatory fenvecoment wth which enable autos tocar out thee tory aus take place _dutes Export (1208), arts ‘mectansms fr the regdtion of ations plan te star rgul geverring the apporimen, removal an resignaton of Espa fe devlopmen and stays ol heraoal Sancards enauctrg Sts) nierationa Stender on Austing (545) an nator tne 7 amy,Overview ATUTORY AUDIT AND REGULATION eee ‘The regulatory framework Appointment, removal and resignation of, Auditors Note: throughout thse notes the abbreviation ISA wil be used to rofer othe Intemational Standards on Aulting Mechanisms forthe regulation of auditors IFACIAASS National aw and standards + ACCARhe profession Development nd} { Regulation by the ‘status of ISAS ‘roession| ”2 STATUTORY AUDIT ANDREGULATIEN 1 The regulatory framework 11) Thang pees isto eon fom ang ofsouces tonal egisaton atonal regulon an standard sting Intemational standa-seting Frofessenal bees, 9, ACCA 12. Legislation wi nara estas lights nd duties of udters + Elbit oat as autor In he UK the relevant lags the Companies Het 206. SD] Ausitors’ rights and duties seat 13 Rohs [Dates T = “+ Accesso books and ecards Resort opnion ofthe company een + Infrmatin and expanations “ x + Receive noice ofatend ‘he FS ae tity Adon statuary ‘general metings resented requremen to + Speak a genta meetings 2 ‘+ Pightto receive a copy of en any ween escluon + = stoguate proposed records and retums Accounts gre to records + Consseney of othe intrmaton + Diseosue ot recor’ tenes The Companies Act 208 makes an offence for @ company oles trowingly er recklessly 0 make a sistementin any rm ban autor whch s misleading, feo deceptive, Eligibility 14 Most gal famewors requ audios tobe members ofan appropriate poessonl body sich 8 ACCA, Ey Br,Ie 2 STATUTORY ALDI NO REGULATION 2 Appointment, removal and resignation of auditors Caliente inpanc fa ust: beng independent nn agent oft shareholders, ‘n mos tedltns thisisestablstedin the lw reno appinimet, removal nd resignaton of audiers. vervew f equations ‘ppointnent + Normal appored annual “By sharehloesornaryrsolon + lnpariclar circumstances, 9 fst autor, casual acency directors can apecin audios > Resouion by shareoldes + Auditors ened a: ~ Nate of resolution “= Make wit epresenaton saying why they ugh to stay notice Speak at staeholers' mootings unl ther tem office ‘woud Mave expces ‘+ Auditors must deposta statement of crcumstances at carpans registred ofc within 14 days of easing to Pod fice and send a tatrent to he regulator autorty Resignation + urs ay sgn a any fine + Give veten nace wih statement of crcumstances menberieredton. + Note of resignations sent by the company tothe equator, auterty. + Autrs can require decors to cal an extraordinary general "mosing, win 21 dys to discuss the crcumstances of resgraton + Rghtto speak atthe general meting on mars wich cofoem them a audios. ACFEENII() NT 22 STATUTORY AUDITANOREGULATIN 3 International Federation of Accountants (IFAC) 31 Role Membersip Nott proft organisation [eae] 18? members (accountancy bodes of god standing 2. CCA) (1) Beets menbes of oad [Gas 1 representative rom each (2 Determines franca! Counc member cenirutions Supenises FAC wok [Boars] President + epresenatves preganme L from 1 counties (loci vey 3235) Ccany ost FACS vor [“comnies ] @8-ctpance, eis, proyanme eee Transnational Audios (1) Setigh quatyauting = [—Tygg] 18 members notin by (is) and assurance eae IFAC Boar (SES) standards (2) Fecitates convergence of erational sd tional standars (9) Stengten pubic confidence in profession ‘See Sections 3, 4 and ft futher deta 32 (FAC was st up in 197 tis anongroft, non-governmental and nor poli interstnal organisation of accountancy bedi. Mission 33 Themisin of FACis, to sere the pubicintrest,stengthen he pobl accountancy ‘rofessan and cornet he development of song inemaonal economies by eating an poming aterene to higt-qualty profesional stancads, tthering the Intemational onverence of such standards rd speaking ou on pubic inet here he profession's expertise is mos rlvant” ferscnna .ie 2 STATUTORY ALDIT ANDREGULATION Membershi 24 Membership in IFAs open to accontaney bodies recognised by lanlgeneral consensus iin ei counties as sutstartilratonal gastos of good standing. Through IFA, members are stomatal reqsored as merbes ofthe Inematona ccouning Standards Goad (SB). There were 157 mene bodies rom 123 counties represering ‘ove 25 lon accounts worlwide a June 2008, Council 35 Tis consists ofcne representative tom each member body of FAC. elects te menbers ofthe Board and establishes he bas of nancial cetrbuon ty members. Board 48 The Boat consis ofthe President ard represents om 16 counties ete by he Counet for tree year ts, Eactons tothe Board ar eld analy so that one tid of the Board raies each yar, ‘The ole ofthe Boss to supervise the general FAC work program. “The work rogram ali implemented by male wring groups ote flowing Standing ‘echnical commits: Irtmatenal Aung and Assurance Standards Board CConglanee Commitee Education Commitee Eics Commitee Franca ard Magerent Accounting Commitee Publ Secor Commitee ‘Transnaonal Austors Commie (exeutve am of he Forum of Fis) 4 International Auditing and Assurance Standards Board (IASB) 44 The NASB as established fo devecp and issu standards and statements on austin, assurnoe and related services cn beha of the FAC Board 42. The 18 members ofthe IASB are rena by the IFAC Boar based on names pat foeward by the member bees and Forum of Fs. 43. The objet ofthe IARSB, on teha of he IFAC Board o serve he pubic inte by seting high quay auding ad usury lands el by aang Bi convergence inteatonal and atonal standards, thereby enharcing the qual and unfomity of practes througout te worlé and svengthenng pubic confidence nthe gba auiting and ‘assurance profession, The AASB actiews this objects by2 STATUTORY ALI AND REGULATEN ‘+ Estaishing high quay audting standards and guidance for frail statement aust that ar gnoraly cceped and recogased by nestor, aus, governments, banking regula, scutes equates and other key sakehoders 203s he word + Establishing high quay standards and pudare footer pes of assurance services on bth facil and non nancial maters + Estaishing hgh quaty stands ard guidance free related sence ‘+ Esabshing high quay standards for usty contol covering the scope of senoee reseed by he IASB, and ‘+ Publishing ter pronouncements on aug ard assurance mates, thereby _avancng public unactaning ofthe oes ad espensibly of professional austere and assurance sence providers. g 5 The scope and authority of IAASB pronouncements Som 541 TheIAASB'sproncuncemens gover assurance and eld series that re conducted n = accordance with niematonal Standards, They dort overdo the claws or reulatons ‘The pronouncements the IAASB examinabl fale two categares: ‘+ Inematonl Standards on Austin (ISAs) ‘+ lematon! Standards on Assurance Engagement (AES) 52 ThelAASB's Standats conan bas pncpes and essential rocedues ogther with ‘elated guidance in he form of explanatory and oer materi. Te base piles and ‘essential procedures are to be undersioad and agli in th context ofthe exlanatary ant cher mala that provide guidance fr tl aplaion. tis therefore necessary fo conser the whole et oa Standard understand an apply the basic panes and essental procedures Inereeponal ereunstances, a professional acount may judge It necessary o depen froma requiement ofa Slandard to achieve mere efecvaly the objective ofthe ‘engagement When such asiuaon ass, the pression! sonurtant shoud be prepared Iojustty the deparure ISAs and national standard-setters 53. Many national stntard-seters ae moving towards the adoption of IAs in place of ter revs local udting stands. By the en of 2008 over 100 counties had adopted of incorporated I in tential suing Standard or are using /Sks asa bas preparing naonal ang standards. Acrecn nin 3% Ieie 2: STATUTORY AUDI ANO REGULATION Liaison with national standard setters 54 << _ | sen grup of national standart nS setters RASe | cvayemmmimen | 00 UKANéing rates Bors " apa) nq meng wt son eoup to Standard sters who + Share knowledge on itratonl and + dre sritcanty activ inthe ronal evelopmerts acing he ‘evetopment of natona auding ory of ties on future standard standards sting apenas “+ Have atop or lan to adopt Shs, + Bringing he svengts ofthe MASS ant or ate demonstrably commited ‘aional using standard sees to beat towards he achievement of ‘on standard at an ery stage inti convergence fntematonl and development atonal standaris + Retieve cose cooperation and “+ escent resourced to ‘engtbanedconmuricaion eg. by Patpate acelin cobaborave closer colabraion on projects and fos ‘ining dupe + Represent he worlds gest + Aetiove wer mvchement by national economies sucting standard stern AASS tsk ‘eres orto advance esearch apendas ‘The process in the development of IAASB Standard 55 cha conan Aroet ae fore etbahed ta eee a a stand race statement I “ranaparet dba A popneed sani ucssadatanetng, open he pul q Tapoere for pbl comment Exposure a ae put nthe BASE mete ate wey trite for comet fora nium e120 a. Any comment rect othe par sa are aaa 2a open ating ve AAS, ana rv arena q “atimatv approval opr atey te ateae vt ef a at 848 members ACRACNT TNT %2 STATUTORY AUDIT aN REGULATION Status of ISAs 56 2 stator acts governed by kcal egislation te satus of As wl vr between counties ‘+ Nationa standards may cornu o ei, bul aligned weh he pinciplsof Sts. +The IAs cou be adopted wihout any aston quidance relating to natonal crcumstances (e.g Sut tea) +The SAs coud be adopted but wih atonal spe dares ade eg. ISAs (UK and Ilan), ‘The IAASB Clarity Project 87 In 2004, the AASB began a cmprehensive program to ankance the clay of ISAs by Seltng an over objective for each SA and ingroving the veal readably and understandably teeughsructural ans srafing ingroverent. {the end of 2008, te AASB ta Eales at ts laid IS, and autos allover the word now hae acess o 36 newly updated an clarifies Shs anda dafied ISOC. The improverens arising from the Cay project canbe summarsed below: + ening the sutton overall objective when conducng an aut ‘+ Setting an objective in ach SA and exabshing the aud’ bigation in elaon| totatobjecve + Claitying the obigations imposed on aur bythe requirements ISAs andthe language used to communicate these requrenents ‘+ Eliminating any possible ambiguity about he aus equteents| ‘+ Improving the overall eadability and understandably ft ISAs trough stuctual ant rating inproverenis2 STATUTORY ALDAT ANO REGULATION 6 Regulation by the profession es suchas ACCA ay apatite regain othe pres. 61 Raleottne ACCA Education and] Ase menber of FAC, ACCA must comply wih FACS traning of auditors | ernaional standards ae guidlines on + Pre-qualieaton education and taining = + Centing professional edvstion Tmplementation and | FAC merber odes such as ACCA mus prepare eal ‘enforcement of | requremertstasadon IFAC’ Intemational Code of tics for tical requirements. | Professional Aczourtas, Member bodies must provi hgh standards of profesional conduc and ensue that tical requrements are observe. Disciplinary acon shuld nomaly be taen inthe folowing instances: ‘+ Fale to observe te required stand of professional are sil or competence; + Non-complance wi the ues of eis;o + Discredtable or dstonourabe conduct. The powe for display acton may be provided by legion or by the consittn ofthe professional body screen) ”7 Chapter summary 2 STATUTORY AUDITANDREGULATIN. ‘Auto rights and duties ae governed by natorl logislaton [2 | Aooannertranoval | Appoirient and eoval cure shareholders ‘andresignston of | reslutions, Assos may resign at nie by givng austrs | note in writing 3 | Ineatona | IFAC sa maton ergaiaion of acontney | Federation of bodes is mision io establish and pomate Aecourtarts adherence to high-quality profession standart, 4 | inemstona’Audting |The AASB, an operating board of FAC produces | rd Assurance Intemational standards on autng sssurance and Standards Board | related services 5 | Tre scope and |AASB pronouncements donot over laws or authority of MASS | regions tut were tey frm part al he equity roreurcerens | ramewor (en the UR) they are anda |8 | Regulatn y the | Professional bodies, such a5 ACCA, estabish profession ‘regulations relating to education and training and | 2ie 2 STATUTORY AIT AND REGULATION [END OF CHAPTER [ACFEEN INT 0 —Corporate governance How have the syllabus learning outcomes been examined? Sytabuslearing out Dscss he cj, ewes sed ingore epee govonaree Deca temas Fr aur canmuneat wih tse charged wih governance ‘ecw he prow ond code of cape fh OECD) hat re Deserbe goed ore everarce equremerselang Todos resostilie (ep ‘skmanaenet sda conta ae eporing respariies ours ‘nayee be saci nde of Elan he portance oa ora sk manager Congare to responses of ‘esign ar operation of systems Enlraon of anitconmaee eset wo pete responses of Dose cages we governs Elan fr earpls of mats ‘hat mig be commando mb he autor ipa deoporae ie Bes oP se a conmton “1 oko (9 1208, 2 aks 2 (1200), «rans Coney 608, TemasOverview ‘Corporate governance codes ey Internal control and risk management 2 Ault communication ‘with those charged with ‘governanceThe 12 13 2 CORPORATE GOVERNANIE Corporate governance ponte soreness eas by wich porns re dred ard one ae gvenmantsa een Sara ela esr a "Suc mt ncn mil cores gover ss ae eeoped be renee es wn he pats “Agen export porenance eho tase hat cartons wet apa fcr Gan copat gona fle, en at copuctas fe Ho Sezonbeinaest ao age of cotstnds, xl aol cmens wha ‘ich hey oped ha eb oe ceab te Croany ane Sorel Tha ton pease toutes oe weit soc es atl (0E0) OECD Principles of Corporate Governance ‘The OECD (Organisation for Economie Co-operation and Development) has developed is ‘1 Principles of Coprste Governance. Ter purpose is to serve asa reference pont ‘These princes can be used by plcy makers, as they examine and devel the iegal rd ‘equator taewors fr orporate governance hate ter own economic, soc, legal an cultural circumstances, and by mare parcgans as thay deel th oun practes. ‘The Pipes ar: 1 Consistncy with the law 11 Therights of shareholders IM The equitable treatment of shareholders WV Theroloo stakeholders Disclosure and transparency Vi Theresponsibiliy ofthe board The OECD document proves dtaled recomendations expanding on each fhe inp.5) CORPORATE GOVERNANCE a 2. The UK Corporate Governance Code 21. The UK Corporate Governance Codes an example ofa best practice model. atv oar Leadership + Every company shoul be beaded by 2 fective board, wich is colertety response for the success of ie company + Ther should be aca dson of respensiites atte heat ofthe company between the running ofthe bard and he excetve respon rte runing ofthe company's business, Noone indidal shoul have nftered powers f decison. | “+ The chalman responsible fr leaders ofthe board and ensuring ts efecvenss ona aspects ofits role, | ‘+ As part of her rle as members ofa unitary board, nor-excute decors shoud | consructely chalenge and help develop propsals on satay. Etectiveness +The board ards committees shuld hae the appropiate balance of sil, exporence, Independenoe and knowedge ofthe company enable hom to Gschaye the respectie | ies and responsbites ofc + There stole a forma, rigorous and vansparent proved fr the appoint of new rectors tte board, + Al diectors shoul be abl to alocatesuficient me fo the company to discharge thle responses efi. | + Airecors shoud receiv induction on joining the board and shuld repr updete and | toesh thor stils and knowedge, | + The board shuld be sulin atiney maner wi iforatn in a for and of a qualy appropiate to enable ito discharge is ies | The boar should urerake formal nd rigorous anual evaluation of ts onn perfomance ard that of comities an idvdual oct. ‘A draclrs shoul be submit fr e-tecson ered ntervas, subject o continued _sasactory perfomance ‘ecountaiity + The board shoul present a balanced and understandable assessment ofthe companys poston and prospects +The boards responsible fo determining the nature and extent ofthe sian risks itis ing tthe in achiwng its stati objects. Tho board should mania sound risk ‘manageneat an nim conto syens, +The board shoul establish formal and anspaent aengements fr consdeng how hey should apply the comport eperng and rsk management and neal cont paces and for maitaring an appopriaterelatenship wth the company audits ACFECN 1) “ ie2 CORPORATE GOVERNANE Remur | ‘+ Levels of remuneration shoul be sufcont ostact retain and motvate dec of the ua equred torn the company successful, but company shoud aval paying more thanisnecesar fr his purpse. A sigifcatpopoten of execute directors | remuneration shoul be stuctred so sto nk rears ocorgerat and Indu | performance. ‘+ There shoul be forma and wansparet procedure for devtoping poy on execute remuneraton ad fo fing he remuneration packages ofindidul rectors. No decor ‘Should be ised in dectng his or her eruneraton, Relations with shareholders + Thete should be ioe wih sharbalders based onthe mua understanding of ‘objects. The toad asa hol has responsbilly for ensuing tet satsecorydaogue vith sharenciers aks place. ‘+The board should use the AGM to communicate wih vests and to encourage hele patpation, 22 The UK Corporate Governance Codes pa of the UK Sock Exchange iting ules. ited conanies must make a statement on how they apy te principles in he Code. The companys io requed to cont hati complies wah he Code prousions, or where oes no fo provide an explanation. urs are required review these mates Auditors and the UK Corporate Governance Code 223. Autos whi the UK must repo on whether ited companis hae complied wth specie rovsions inthe Code. They must review and report on he folowing provsons: (a) Wheter he det’ responsibity fo prparing he annul repo and scours eles inthe ep. (0) Whether the drectors have reviewed and repre onthe eectveness fhe isk ranagemert and internal ental ystons, (©) Wetter tne boat has established an aut commits oft last te non execute eco r at east wo non excouivedetors fe sma companies), (0) eer att connie ts wien ms fleece (6) Wetec kre rte acorns aaa eb ne mate (0 here au conte anges nets seating eal (0) heer sit connie on and vs te cheese oottarves (Wheres conten has nay espns fhe pce oh cera ats (0 ow astra mired yee eta attr poner autteanes, eon Bry{CORPORATE GOVERNANCE: Responsibilities of the audit committee 2 oxcomome 7 Tomonitor To review internal fart conto an ak serene maragonent yt Tomer and [Tennent poey sfectveressl nimi non ‘nual aust snatseneesby departs onal aur se Wr tre 0 Toriowand cents somal aut rontr fecton'o ‘peter and conse ama abet ser ae eal mor reese on Toone Te moor ‘enero nd ancogenerts ‘eoatenert ems sequin te fester sitar pinay of wnsie ble Toren sononine. repped Ie removal of extemal ausiot |AcreCN aN “«3) CORPORATE GOVERNANCE Advantages and disadvantages of audit committees 25 co Disadvantages (a) ltilesd to inereased confidence n | (a) There may te effeuty selecting ‘he cre and objet of suffcent ton xecute dretor ‘nail repos, wit ie necessary competence in (0) By speiasng in he grabs of _austing mates fete commitee to fareialepring and this, to some berealyefecive (0) Thwestablshmantof sucha responsi inthis areal low formalised epoting procedure the executive drectrsio devote their | may dissuade he auditors from attention to management raising matrs of usgement and lathom oreparirgeniyon | (©) Incass where the interests ofthe mater of fat ‘orpany he exceuve dectors and theempoyees confi, the sult |e) Costs may be increased onmitee might prove an impartial body forthe austos to consult, (6) The tema sto willbe abe to report othe aude commits. (©) Theexera austosshave 2 independent point of reference ‘The importance of internal control and risk management 26 (a) _Asound system of intemal corto conrbutes to seeguarng te shareholder's lnvesnent an the company’s asses ‘An intel cont system: + Fouts te efecteness and ffieny of operations + Helps ensure the relabity of iferal and extemal reporting ‘+ Assist compiance wi ins and reuters. (0) Thess faced by 2 company re cotnualy changing. A sound sytem finer contol therefore depends ona thorough an requ evaluaton of erature ané extent of ks to which the company exposed. Sinco profi i part, the evard ‘oc sucessful taking, the ppse of inemal cons o heb manage and cio is appropri rater than o elma11 CORPORATE GOVERNANCE Responsibilities of management and auditors coe + erty and evant sks Tiarapenen | {Design operate and meter a state syston | cheat cont + Setpoices on nial cote + Seokregulr assurance thatthe syst is * {unctoning effctely May employ nema + Ensue that the internal contol ystems audio mentor ontols ct in managing sks + Obtain understanding ofthe business andthe = rks foes Cxtemalavitors | >) + Ascent of eral conto system ‘+ Imordeto design appropiate auc procedures + May oper any conto defences dented 3. ISA 260: Communication with those charged with governance 31.164 260 sets out guidance for audios on communication of aut raters wih hose charged wih governance IGA 260 dssngulshes between tose ‘charged wih governance’ and management ‘+ ‘Charged wth govemance i dened as te person(s) orerganisains) wth responstlily for overseeing the stateic direction oft ey and obigatons rong tote accurabiy ofthe erty + Managements dened ashe persons) wih executve responsi forth conduct ofthe est’ operations. “The objectives ofthe ISA ato achive the folowing + Communicating the auto’ responses in respect ofthe aut and an overview the planed spe and timing ofthe aut + Obtain formation avant tothe aud rom those charges wth governance + Provide tose charged wih governance wih et formation about the aut + Promote efetve thoy communication between the auditor and those charped vith overance|3: CORPORATE GOVERNANCE je) Feauites st the mars hat he autor weld nomaly communist those charged wih governance. Em ‘Third parties interested governance ‘32 Occasional hose chargd wth governance may wish prove thd partes, for example bankers c certs regulon autres, win copes ofa ween communication fom he airs tis important o ensure that thr aries who see fe commisicston understand that was not prepared wih fem in ind + Thereport has ben prepared forthe sole use ofthe tty ‘+ tmust ot be disclose oath party, or quoted o foros to, wthouthe writen consent ofthe suds; and + Noresponsbitys assumed by the audios o any aber person. ‘communications to those charged with ie