ti audit and assurance study guide 2013
DESCRIPTION
Technical Integration - Business Reporting study resourcesTRANSCRIPT
The Institute of Chartered Accountants in England and Wales
AUDIT AND ASSURANCE Advanced Stage
www.icaew.com
Study Guide
For exams in 2013
Contents
1 Introduction 1
2 Aim of the papers & specification grid 3
3 Study guide 4
4 Skills assessment guide 21
5 Technical knowledge 24
6 Key resources 27
Study guide 1
1 Introduction
1.1 What is the Advanced Stage? Structure and progression
The Advanced Stage of the ACA qualification is designed to ensure that students are able to integrate and apply their technical, professional and ethical skills in a variety of business environments.
The diagram below shows the five modules which form the basis of the Advanced Stage. The Advanced Stage is comprised of two technical integration modules and the Case Study. The two technical integration modules will be examined in a business scenario context which draws together a number of different areas of technical knowledge.
The Professional Stage consists of knowledge modules and application modules. The knowledge modules introduce the core technical knowledge and skills required by a chartered accountant. The application modules further develop and assess practical application of technical knowledge and skills.
The technical knowledge acquired at the Professional Stage is developed to an advanced level and integrated in a broader range of business scenarios in the Advanced Stage technical integration modules. The application of technical knowledge in these modules requires an appreciation of the typical issues and problems facing businesses and their relationship to corporate reporting, assurance and taxation. A greater depth of business and financial analysis will be required to understand the implications and risks arising from the business issues.
New technical topics are introduced in the technical integration modules, that are not dealt with elsewhere in the syllabus. A deeper level of technical ability is expected of candidates across the entire ACA syllabus to reflect the greater financial and business awareness needs of trainee chartered accountants approaching qualification. This is reflected particularly in assessing students’ proficiency and ability to integrate knowledge and skills both within and across technical subjects in a range of complex business scenarios. Students will also be required to apply professional knowledge using more advanced skills in the technical integration modules. These professional skills are then examined to a greater extent in the final ACA module: the Case Study. This module requires higher level cognitive skills, analytical and evaluative skills and emphasises the importance of communication and articulation skills.
Audit and Assurance 2
Assessment
The two technical integration modules will be examined using traditional paper based assessments. Each paper based exam will be 3.5 hours in length. These exams will contain questions requiring the integration of knowledge both within technical disciplines and across technical disciplines. Questions integrated across all subject streams are an essential step towards the Case Study but will have more structure and guidance than those at the Case Study.
The Case Study will continue in its present format of a 4 hour written exam with ‘advance information’ provided to students ahead of the exam and ‘impact information’ issued in the exam, containing the Case Study requirements.
Flexibility
There are no regulations stipulating the order in which students must attempt the technical integration modules. The Case Study must be the final module attempted and can only be attempted in the final year of a training contract.
There is no restriction on the number of attempts permitted at each advanced stage module.
Open Book Policy
Students may take any written or printed material into the exam hall subject to practical space restrictions.
Study guide 3
2 Aim of the papers and specification grid
2.1 Module aim The aim of the Business Reporting paper is:
To ensure that candidates can apply analysis techniques, technical knowledge and professional skills to resolve real-life compliance issues faced by businesses.
Candidates may be put, for example, in the role of a preparer of financial statements, or other corporate reports such as on sustainability and corporate responsibility, an advisor or in an assurance role facing business issues where there are reporting implications. Compliance issues relating to taxation will also feature in this module.
Candidates will be required to use professional judgement to identify and evaluate alternatives and determine the appropriate solution(s) to compliance issues, giving due consideration to the commercial impact of their recommendations.
The aim of the Business Change paper is:
To ensure that candidates can provide technical advice in respect of issues arising in business transformations, mergers, acquisitions, alliances and disposals.
Candidates will be required to analyse and interpret both external and internal financial and non-financial data in order to plan for change and provide advice. In undertaking this analysis students will be expected to evaluate the impact of stakeholder influences on the data, including the impact of choice of reporting policies.
Taxation and practical business techniques are particularly important in this module, where business techniques include aspects of business strategy, business finance, performance management and costing. There will also be financial reporting, assurance, ethical and legal implications to be considered when developing and assessing strategic and business plans.
2.2 Specification grid This grid is a general guide as to the subject matter within this module and assessment coverage over a period of time.
BR BC Weighting (%) Weighting (%) Ethics and law 5 – 10 5 – 10 Taxation 20 – 30 25 – 35 Audit and assurance 30 – 40 10 – 20 Corporate reporting 30 – 40 15 – 25 Business analysis 0 30 – 35
Audit and Assurance 4
3 Study guide
3.1 Help yourself study for your ACA exams
The right approach 1 Develop the right attitude
Believe in yourself Yes, there is a lot to learn. But thousands have succeeded before and you can too.
Remember why you're doing it You are studying for a good reason: to advance your career.
2 Focus on the exam
Read through the Syllabus in this guide
This tells you what you are expected to know.
3 The right method
See the whole picture Keeping in mind how all the detail you need to know fits into the whole picture will help you understand it better.
• The Practical significance and Working context to each chapter in the study guide put the material into context.
• The Learning objectives and Section overviews in the Study Manual show you what you need to grasp.
Use your own words To absorb the information (and to practise your written communication skills), you need to put it into your own words.
• Take notes. • Answer the questions in each chapter. • Draw mindmaps. • Try 'teaching' a subject to a colleague or friend.
Give yourself cues to jog your memory
The Study Manual uses bold to highlight key points.
• Try colour coding with a highlighter pen. • Write key points on cards.
4 The right recap
Review, review, review Regularly reviewing a topic in summary form can fix it in your memory. The Study Manual helps you review in many ways.
• Each Chapter Summary will help you to recall that study session.
• The Self-test actively tests your grasp of the essentials.
• Go through the Examples in each chapter a second or third time.
Study guide 5
3.2 Study cycle The best way to approach the Study Manual is to tackle the chapters in order. We will look in detail at how to approach each chapter below but as a general guide, taking into account your individual learning style, you could follow this sequence for each chapter.
Key study steps Activity
Step 1 Topic list
This topic list is shown in the contents for each chapter and helps you navigate each part of the book; each numbered topic is a numbered section in the chapter.
Step 2 Introduction
The practical significance and working context sections for each chapter, set out in this study guide give you the big picture in terms of the context of the chapter. The Examination context guidance shows what the examiners are looking for and tells you why the topics covered in the chapter need to be studied.
Step 3 Section overviews
Section overviews give you a quick summary of the content of each of the main chapter sections. They can also be used at the end of each chapter to help you review each chapter quickly.
Step 4 Explanations
Proceed methodically through each chapter, particularly focusing on areas highlighted as significant in the chapter introduction or study guide.
Step 5 Note taking
Take brief notes, if you wish. Don't copy out too much. Remember that being able to record something yourself is a sign of being able to understand it. Your notes can be in whatever format you find most helpful: lists, diagrams, mindmaps.
Step 6 Examples
Work through the examples very carefully as they illustrate key knowledge and techniques.
Step 7 Answers
Check yours against the suggested solutions, and make sure you understand any discrepancies.
Step 8 Chapter summary
Review it carefully, to make sure you have grasped the significance of all the important points in the chapter.
Step 9 Self-test
Use the Self-test to check how much you have remembered of the topics covered.
Step 10 Learning objectives
Ensure you have ticked off the Learning objectives.
Moving on... When you are ready to start revising, you should still refer back to the Study Manual.
• As a source of reference (you should find the index particularly helpful for this).
• As a way to review (the Section Overviews, Examination Context, Chapter Summaries and Self-test questions help you here).
Remember to keep careful hold of the Study Manual – you will find it invaluable in your work.
Stud
y gu
ide
6
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
1 A
n au
dito
r ne
eds
to k
now
the
sta
tuto
ry
and
othe
r re
ason
s w
hy a
ssur
ance
se
rvic
es a
re p
rovi
ded,
alo
ng w
ith t
he
stan
dard
s ag
ains
t w
hich
tho
se s
ervi
ces
are
judg
ed –
tha
t is
the
qua
lity
cont
rol
stan
dard
. Th
is c
hapt
er s
houl
d re
min
d yo
u of
the
bas
ics
of a
uditi
ng a
nd t
he
reas
ons
why
ass
uran
ce s
ervi
ces
are
pro
vide
d to
com
pan
ies.
The
sta
ndar
d of
qua
lity
exp
ecte
d on
all
assu
ranc
e se
rvic
es is
als
o su
mm
aris
ed.
Sto
p a
nd
th
ink
Can
you
iden
tify
whe
re q
ualit
y co
ntro
l st
anda
rds
are
used
with
in y
our
firm
?
How
is y
our
role
with
tho
se s
tand
ards
ch
angi
ng a
s yo
u p
rogr
ess
to m
ore
seni
or p
ositi
ons?
All
ICA
EW m
embe
rs in
clud
ing
trai
nees
are
exp
ecte
d to
ens
ure
that
q
ualit
y co
ntro
l sta
ndar
ds a
re
mai
ntai
ned
on a
ll as
sura
nce
assi
gnm
ents
. A
s yo
u pr
ogre
ss in
se
nior
ity in
you
r fir
m, y
ou w
ill
beco
me
mor
e in
volv
ed in
mon
itorin
g th
ose
stan
dard
s an
d ad
visi
ng ju
nior
st
aff o
n q
ualit
y co
ntro
ls n
eces
sary
on
assu
ranc
e as
sign
men
ts.
Cha
pter
1 is
ess
entia
lly a
n in
trod
ucto
ry c
hap
ter.
It in
clud
es
impo
rtan
t ba
ckgr
ound
kno
wle
dge
muc
h of
whi
ch y
ou w
ill h
ave
been
in
trod
uced
to
befo
re.
The
basi
c p
oint
s of
aud
it an
d as
sura
nce
assi
gnm
ents
hav
e al
read
y be
en c
over
ed in
the
A
ssur
ance
and
Aud
it an
d A
ssur
ance
man
uals
. At
the
Adv
ance
d st
age
ther
e w
ill b
e a
grea
ter
emp
hasi
s on
m
aint
enan
ce o
f qua
lity
cont
rol
stan
dard
s an
d yo
ur a
bilit
y to
ap
ply
this
kno
wle
dge
to m
ore
com
ple
x bu
sine
ss s
cena
rios.
N
ote
the
chan
ge t
o th
e st
ruct
ure
of t
he F
RC. A
lso
note
th
at a
ll IA
PSs
have
now
bee
n w
ithdr
awn.
Esse
nti
al p
oin
ts
Dire
ctor
s’ lo
ans
and
tran
sact
ions
Qua
lity
cont
rol
Aud
it a
nd
Ass
uran
ce
7 Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
2 Et
hica
l beh
avio
ur is
one
of t
he k
ey
dist
ingu
ishi
ng fe
atur
es o
f bei
ng a
p
rofe
ssio
nal.
The
role
of t
he
pro
fess
iona
l, be
the
y a
doct
or, l
awye
r or
acc
ount
ant
is d
epen
dent
upo
n th
e tr
ust
of t
he g
ener
al p
ublic
.
In o
rder
tha
t p
ublic
con
fiden
ce is
m
aint
aine
d in
the
acc
ount
ant
in
pra
ctic
e or
in b
usin
ess
the
high
est
pos
sibl
e st
anda
rds
mus
t be
ach
ieve
d.
Ethi
cal g
uida
nce
is p
rovi
ded
thro
ugh
regu
latio
n an
d p
rofe
ssio
nal c
odes
of
cond
uct,
how
ever
, the
suc
cess
of t
hese
de
pen
ds la
rgel
y on
the
inte
grity
of t
he
indi
vidu
al.
For
the
acco
unta
nt t
he r
ole
of e
thic
s is
m
uch
broa
der
than
sim
ply
mon
itorin
g hi
s or
her
ow
n be
havi
our.
The
ac
coun
tant
is a
lso
resp
onsi
ble
for
cons
ider
ing
the
deci
sion
s an
d ac
tions
ta
ken
by o
ther
s in
clud
ing
fello
w
acco
unta
nts
and
clie
nt m
anag
emen
t an
d st
aff.
Sto
p a
nd
th
ink
Can
you
thi
nk o
f any
exa
mpl
es o
f si
tuat
ions
whe
re a
n au
dito
r m
ay b
e re
qui
red
to c
onsi
der
whe
ther
a
deci
sion
mad
e by
the
man
agem
ent
of
a cl
ient
is e
thic
al?
All
ICA
EW m
embe
rs in
clud
ing
trai
nees
are
exp
ecte
d to
com
ply
with
et
hica
l gui
danc
e. H
owev
er, a
s yo
u be
com
e a
mor
e se
nior
mem
ber
of
staf
f you
will
bec
ome
incr
easi
ngly
re
spon
sibl
e fo
r en
surin
g th
at e
thic
al
stan
dard
s ar
e m
aint
aine
d.
Cha
pter
2 r
evis
es t
he t
opic
of e
thic
s.
Muc
h of
the
det
ail h
ere
will
be
fam
iliar
, how
ever
at
the
adva
nced
st
age:
The
gene
ral p
rinci
ple
of e
thic
al
beha
viou
r is
like
ly t
o be
impo
rtan
t
Ethi
cal d
ilem
mas
are
like
ly t
o be
less
cl
ear
cut
so y
ou w
ill b
e ex
pect
ed t
o us
e yo
ur ju
dgem
ent
rath
er t
han
sim
ply
rep
eatin
g et
hica
l gui
danc
e
Read
the
sec
tion
on IC
AEW
Dut
y to
Re
port
Mis
cond
uct
as y
ou w
ill n
ot
have
com
e ac
ross
thi
s be
fore
.
The
IESB
A C
ode
of E
thic
s fo
r Pr
ofes
sion
al A
ccou
ntan
ts a
nd
the
ICA
EW C
ode
of E
thic
s ha
ve
been
cov
ered
in t
he A
ssur
ance
an
d A
udit
and
Ass
uran
ce
man
uals
at
the
prof
essi
onal
le
vel.
Not
e ho
wev
er t
hat
as a
re
sult
of t
he r
evis
ed F
RC
stru
ctur
e th
e AP
B Et
hica
l St
anda
rds
are
now
ref
erre
d to
as
Eth
ical
Sta
ndar
ds fo
r Au
dito
rs. A
t th
e A
dvan
ced
stag
e th
ere
will
be
a gr
eate
r em
pha
sis
on y
our
abili
ty t
o ap
ply
this
kno
wle
dge
to m
ore
com
ple
x bu
sine
ss s
cena
rios.
Esse
nti
al p
oin
t
Mak
ing
ethi
cal j
udge
men
ts
Stud
y gu
ide
8
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
3 C
orp
orat
e go
vern
ance
reg
imes
(p
rinci
ples
or
rule
s ba
sed)
are
im
port
ant
to h
elp
ensu
re c
ompa
nies
ar
e m
anag
ed e
ffect
ivel
y. C
omp
lianc
e w
ith c
orp
orat
e go
vern
ance
re
qui
rem
ents
is n
ot o
ptio
nal –
the
au
dito
r th
eref
ore
need
s to
und
erst
and
gove
rnan
ce r
equi
rem
ents
and
adv
ise
clie
nts
whe
re n
eces
sary
on
com
plia
nce
issu
es.
Sto
p a
nd
th
ink
Can
you
thi
nk o
f situ
atio
ns w
here
co
rpor
ate
gove
rnan
ce h
as b
een
inef
fect
ive
– po
st E
nron
? D
oes
this
m
ean
that
imp
lem
entin
g co
rpor
ate
gove
rnan
ce is
not
cos
t be
nefic
ial f
or
mos
t co
mpa
nies
?
Aud
itors
are
par
t of
the
cor
por
ate
gove
rnan
ce r
egim
es –
wor
king
with
th
e au
dit
com
mitt
ee a
nd r
epor
ting
on c
omp
lianc
e w
ith c
orp
orat
e go
vern
ance
in s
ome
situ
atio
ns (
eg
Sarb
anes
-Oxl
ey).
A w
orki
ng
know
ledg
e of
cor
por
ate
gove
rnan
ce
is t
here
fore
ess
entia
l to
fulfi
l the
au
dito
r’s
oblig
atio
ns fo
r m
any
audi
t an
d as
sura
nce
serv
ices
.
Cha
pte
r 3
deal
s w
ith c
orp
orat
e go
vern
ance
. Thi
s is
an
impo
rtan
t is
sue
in t
he s
ylla
bus
as it
is b
oth
topi
cal a
nd h
as a
sig
nific
ant
imp
act
on b
usin
ess
entit
ies
curr
ently
. Als
o no
te t
hat
in a
n ex
am q
uest
ion
audi
ting
aspe
cts
of c
orp
orat
e go
vern
ance
and
fina
ncia
l rep
ortin
g re
qui
rem
ents
cou
ld b
e co
mbi
ned.
Mak
e su
re t
hat
you
are
fam
iliar
with
th
e ke
y pr
ovis
ions
of t
he U
K C
orp
orat
e G
over
nanc
e C
ode,
the
UK
Stew
ards
hip
Cod
e an
d th
e gu
idan
ce
on in
tern
al c
ontr
ol. Y
ou s
houl
d al
so
be a
war
e of
the
pro
pose
d re
visi
ons
to
the
UK
Cod
e de
scrib
ed in
sec
tion
3.4.
Sa
rban
es O
xley
is a
lso
impo
rtan
t fr
om t
he in
tern
atio
nal p
ersp
ectiv
e.
Muc
h of
the
kno
wle
dge
rega
rdin
g co
rpor
ate
gove
rnan
ce is
new
to
your
st
udie
s. Y
ou m
ust
be a
ble
to
unde
rsta
nd t
he r
easo
ns fo
r th
e di
ffere
nt g
over
nanc
e st
ruct
ures
as
wel
l as
app
ly t
hem
and
, w
here
nec
essa
ry, i
dent
ify
wea
knes
ses
in t
hose
str
uctu
res
with
in b
usin
ess
scen
ario
s.
Esse
nti
al p
oin
ts
UK
Cor
pora
te G
over
nanc
e C
ode
UK
Stew
ards
hip
Cod
e
Eval
uatio
n of
cor
por
ate
gove
rnan
ce m
echa
nism
s
Sarb
anes
Oxl
ey
Aud
it a
nd
Ass
uran
ce
9 Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
4 It
is e
ssen
tial t
hat
audi
tors
pla
n th
eir
appr
oach
to
an a
udit
corr
ectly
as
this
en
sure
s th
at s
uffic
ient
app
ropr
iate
au
dit
evid
ence
will
be
obta
ined
.
Aud
it p
lann
ing
focu
ses
on t
he u
se o
f th
e au
dit
risk
mod
el, w
ith s
peci
fic
emp
hasi
s on
the
ass
essm
ent
and
dete
rmin
atio
n of
con
trol
ris
k an
d in
here
nt r
isk.
Whi
le p
lann
ing
is c
arrie
d ou
t by
sen
ior
mem
bers
of t
he a
udit
team
, as
an a
udit
seni
or, y
ou w
ill
beco
min
g in
crea
sing
invo
lved
in
pla
nnin
g ac
tiviti
es.
Sto
p a
nd
th
ink
Hav
e yo
u en
coun
tere
d a
situ
atio
n w
here
the
aud
it p
lan
was
inco
rrec
t or
in
app
rop
riate
– w
as t
his
a p
lann
ing
failu
re o
r th
e re
sult
of e
vide
nce
obta
ined
dur
ing
the
audi
t? E
xcel
lent
pl
anni
ng d
oes
not
nece
ssar
ily m
ean
that
pla
n w
ill n
ot h
ave
to b
e ch
ange
d as
the
aud
it pr
ogre
sses
.
Failu
re t
o pl
an c
orre
ctly
mea
ns t
hat
the
asse
ssm
ent
of o
vera
ll au
dit
risk
may
be
inco
rrec
t, le
adin
g to
in
appr
opria
te a
mou
nts
of a
udit
evid
ence
bei
ng o
btai
ned.
At
the
wor
st, p
oor
plan
ning
mea
ns t
hat
mat
eria
l tra
nsac
tions
or
acco
unt
bala
nces
will
not
be
audi
ted
corr
ectly
, inc
reas
ing
the
risk
of
mat
eria
l err
or in
the
fina
ncia
l st
atem
ents
.
Cha
pter
4 is
the
firs
t of
thr
ee c
hapt
ers
deal
ing
with
the
aud
it p
roce
ss. T
he
dang
er h
ere
is t
hat
as m
uch
of t
he
tech
nica
l mat
eria
l has
bee
n co
vere
d in
you
r ea
rlier
stu
dies
, you
un
dere
stim
ate
the
imp
orta
nce
of
thes
e ch
apte
rs. Y
ou m
ust
how
ever
re
ad t
hrou
gh t
he c
hap
ter
care
fully
. In
part
icul
ar y
ou s
houl
d no
te t
he
follo
win
g:
The
imp
orta
nce
of p
rofe
ssio
nal
scep
ticis
m
Risk
ass
essm
ent
is a
n im
port
ant
topi
c an
d in
an
exam
inat
ion
is li
kely
to
be
test
ed w
ithin
mor
e co
mpl
ex s
cena
rios
incl
udin
g co
mp
lex
finan
cial
ac
coun
ting
issu
es
The
rela
tions
hip
bet
wee
n bu
sine
ss
risk
and
audi
t ris
k
The
role
of i
nter
nal c
ontr
ol
Wor
k th
roug
h th
e Se
lf-te
st q
uest
ions
at
the
end
of t
he c
hap
ter
to p
ract
ice
app
lyin
g yo
ur k
now
ledg
e. T
hese
re
qui
re s
ome
know
ledg
e of
C
orp
orat
e Re
por
ting.
Basi
c au
dit
plan
ning
has
al
read
y be
en c
over
ed in
the
A
ssur
ance
and
in t
he A
udit
and
Ass
uran
ce m
anua
ls. A
t th
e A
dvan
ced
Stag
e th
ere
will
be
a gr
eate
r em
pha
sis
on y
our
abili
ty t
o ap
ply
thi
s kn
owle
dge
to m
ore
com
ple
x bu
sine
ss
scen
ario
s.
Esse
nti
al p
oin
ts
Prof
essi
onal
sce
ptic
ism
Diff
eren
t au
dit
appr
oach
es
Aud
it ris
k m
odel
Cre
ativ
e ac
coun
ting
Inte
rnal
con
trol
issu
es
Stud
y gu
ide
10
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
5 Th
e au
dito
r m
ust
obta
in s
uffic
ient
ap
pro
pria
te a
udit
evid
ence
for
each
tr
ansa
ctio
n cy
cle
and
acco
unt
bala
nce
bein
g au
dite
d. T
his
invo
lves
col
lect
ion
of t
hat
audi
t ev
iden
ce w
hich
is li
nked
to
the
ass
ertio
ns b
eing
aud
ited
and
the
busi
ness
pro
cess
es w
ithin
the
co
mpa
ny.
In s
ome
situ
atio
ns, s
uch
as r
elat
ed
part
y tr
ansa
ctio
ns, t
he a
udito
r m
ust
obta
in s
uffic
ient
evi
denc
e fo
llow
ing
spec
ific
ISA
s.
Sto
p a
nd
th
ink
Hav
e yo
u en
coun
tere
d a
situ
atio
n w
here
the
col
lect
ion
of e
vide
nce
was
di
fficu
lt? T
here
may
be
a sp
ecifi
c IS
A
to a
ssis
t in
tha
t ar
ea.
In p
erfo
rmin
g an
aud
it, a
udito
rs m
ust
obta
in s
uffic
ient
ap
pro
pria
te a
udit
evid
ence
. Fa
ilure
to
follo
w s
tand
ards
in
thi
s co
ntex
t ca
n le
ad t
o in
corr
ect
audi
t re
port
s be
ing
prod
uced
and
co
uld
leav
e th
e au
dito
r op
en t
o p
rofe
ssio
nal d
isci
plin
e an
d cr
imin
al
char
ges.
This
cha
pte
r lo
oks
at a
udit
evid
ence
, th
e so
urce
s an
d m
eans
of o
btai
ning
it.
At
this
leve
l it
is u
nlik
ely
that
an
exam
que
stio
n w
ill t
est
the
deta
il of
an
indi
vidu
al IS
A, h
owev
er y
ou c
ould
be
req
uire
d to
sta
te t
he a
udit
proc
edur
es y
ou w
ould
per
form
in a
gi
ven
situ
atio
n so
you
mus
t be
fa
mili
ar w
ith a
ll as
pect
s of
thi
s to
pic.
A
gain
thi
s is
like
ly t
o be
com
bine
d w
ith a
ccou
ntin
g is
sues
.
The
sect
ion
on a
naly
tical
pro
cedu
res
is p
artic
ular
ly im
port
ant
so w
ork
thro
ugh
this
car
eful
ly a
nd a
ttem
pt
the
Inte
ract
ive
que
stio
ns.
(The
Ap
pen
dix
to t
his
chap
ter
pro
vide
s re
visi
on o
f mat
eria
l cov
ered
in
you
r p
revi
ous
stud
ies.
)
Wor
k th
roug
h th
e Se
lf-te
st q
uest
ions
. Th
ese
req
uire
som
e kn
owle
dge
of
Cor
por
ate
Rep
ortin
g.
Col
lect
ion
of b
asic
aud
it ev
iden
ce h
as a
lread
y be
en
cove
red
in t
he A
ssur
ance
m
anua
l with
em
pha
sis
pla
ced
on k
now
ledg
e of
the
rel
evan
t IS
As.
At
the
Adv
ance
d St
age
ther
e w
ill b
e a
grea
ter
emp
hasi
s on
you
r ab
ility
to
app
ly t
his
know
ledg
e to
co
mp
lex
busi
ness
sce
nario
s.
This
cha
pte
r th
eref
ore
pro
vide
s a
sum
mar
y of
the
key
ISA
s an
d de
velo
ps
thes
e to
add
ress
key
is
sues
.
Esse
nti
al p
oin
t
Ana
lytic
al p
roce
dure
s
Aud
it a
nd
Ass
uran
ce
11
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
6 To
war
ds t
he e
nd o
f the
aud
it, t
he
audi
tor
will
stil
l be
colle
ctin
g a
udit
evid
ence
con
cern
ing
the
finan
cial
st
atem
ents
. How
ever
, tha
t ev
iden
ce
norm
ally
rel
ates
to
spec
ific
audi
t ob
ject
ives
suc
h as
a g
oing
con
cern
re
view
rat
her
than
dire
cted
at
spec
ific
asse
rtio
ns.
Sto
p a
nd
th
ink
You
may
not
hav
e be
en in
volv
ed in
au
dit
com
ple
tion;
how
ever
, you
may
w
ant
to c
onsi
der
how
err
ors
disc
over
ed
on a
udit
assi
gnm
ents
cou
ld b
e ca
rrie
d fo
rwar
d an
d im
pac
t on
the
aud
it op
inio
n.
Aud
it cl
osed
own
and
repo
rtin
g is
im
por
tant
for
audi
tors
; any
err
or in
th
e au
dit
opin
ion
can
lead
to
pers
onal
liab
ility
for
the
audi
t pa
rtne
r an
d ad
vers
e p
ublic
ity fo
r th
e au
dit
firm
.
This
cha
pter
on
revi
ew a
nd r
epor
ting
conc
lude
s th
e au
dit
proc
ess.
The
re
view
sta
ge o
f the
aud
it is
mor
e lik
ely
to b
e ex
amin
ed a
t th
is le
vel a
s it
is o
ne o
f the
key
dec
isio
n m
akin
g st
ages
of t
he a
udit
whe
re ju
dgem
ent
will
nee
d to
be
appl
ied.
Rea
d th
roug
h th
is s
ectio
n ca
refu
lly in
clud
ing
sect
ion
1.3.
6 w
hich
con
side
rs IS
A 4
50
Eval
uatio
n of
Mis
stat
emen
ts Id
entif
ied
Dur
ing
an A
udit.
Inte
rnal
rep
ortin
g re
mai
ns im
port
ant
at t
his
leve
l. En
sure
you
are
fam
iliar
with
ISA
265
C
omm
unic
atin
g D
efic
ienc
ies
in In
tern
al
Con
trol
to
Thos
e C
harg
ed W
ith
Gov
erna
nce.
You
will
be
exp
ecte
d to
hav
e a
thor
ough
und
erst
andi
ng o
f the
UK
audi
t re
port
. Thi
s is
cov
ered
in
sect
ion
6. A
lso
note
ISA
s 80
0, 8
05
and
810.
Wor
k th
roug
h th
e In
tera
ctiv
e an
d Se
lf-te
st q
uest
ions
. Th
e Se
lf-te
st q
uest
ions
req
uire
som
e kn
owle
dge
of C
orp
orat
e Re
por
ting.
Aud
it co
mp
letio
n an
d re
por
ting
has
alre
ady
been
co
vere
d in
the
Ass
uran
ce a
nd
the
Aud
it an
d A
ssur
ance
m
anua
ls a
t th
e Pr
ofes
sion
al
stag
e. A
t th
e A
dvan
ced
stag
e th
ere
will
be
a gr
eate
r em
pha
sis
on y
our
abili
ty t
o ap
ply
this
kno
wle
dge
to m
ore
com
ple
x bu
sine
ss s
cena
rios.
Esse
nti
al p
oin
ts
Subs
eque
nt e
vent
s
Goi
ng c
once
rn
The
audi
t re
por
t
Stud
y gu
ide
12
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
7 M
ost
assu
ranc
e fir
ms
pro
vide
a r
ange
of
ser
vice
s be
side
s au
dit.
It
is t
here
fore
im
port
ant
to k
now
wha
t se
rvic
es a
re
avai
labl
e an
d to
be
fam
iliar
with
tho
se
serv
ices
.
In p
ract
ical
ter
ms,
kno
wle
dge
of
addi
tiona
l ser
vice
s m
ay e
nabl
e yo
u to
p
rovi
de b
ette
r cl
ient
ser
vice
, esp
ecia
lly
whe
re t
hose
ser
vice
s ca
n be
re
com
men
ded
to a
clie
nt.
Sto
p a
nd
th
ink
Can
you
thi
nk o
f any
exa
mpl
es o
f si
tuat
ions
whe
re y
ou id
entif
ied
that
a
clie
nt m
ay r
equi
re a
dditi
onal
ass
uran
ce
serv
ices
? If
so,
how
did
you
rea
ct a
nd
wou
ld y
ou b
e ab
le t
o p
rovi
de a
bet
ter
resp
onse
aft
er c
ompl
etin
g th
is c
hapt
er?
The
prov
isio
n of
add
ition
al a
ssur
ance
se
rvic
es m
ay r
equi
re a
dditi
onal
kn
owle
dge,
eith
er o
f the
ser
vice
or
of
the
firm
’s s
peci
fic p
roce
dure
s in
re
spec
t of
tho
se s
ervi
ces.
Thi
s ch
apte
r do
es p
rovi
de a
n in
trod
uctio
n bu
t no
te t
hat
addi
tiona
l tra
inin
g is
lik
ely
to b
e re
qui
red
befo
re t
hose
se
rvic
es c
an b
e pe
rfor
med
in p
ract
ice.
You
have
bee
n in
trod
uced
to
the
conc
ept
of a
ssur
ance
bef
ore,
how
ever
th
e A
dvan
ced
stag
e lo
oks
at t
his
topi
c in
muc
h m
ore
deta
il. Y
ou w
ill b
e ex
pec
ted
to h
ave
a m
ore
deta
iled
unde
rsta
ndin
g of
the
indi
vidu
al
assu
ranc
e se
rvic
es a
nd o
ther
ser
vice
s p
rovi
ded
by t
he p
rofe
ssio
nal
acco
unta
nt t
oget
her
with
the
rel
ated
te
chni
cal g
uida
nce.
Mak
e su
re y
ou u
nder
stan
d th
e di
ffere
nce
betw
een
a re
ason
able
as
sura
nce
enga
gem
ent
and
a lim
ited
assu
ranc
e en
gage
men
ts a
nd w
hen
thes
e w
ould
ap
ply
. Als
o no
te t
he
revi
sed
guid
ance
on
com
pila
tion
enga
gem
ents
.
Wor
k th
roug
h th
e In
tera
ctiv
e an
d
Self-
test
que
stio
ns t
o en
sure
tha
t yo
u ca
n ap
ply
your
kno
wle
dge.
The
conc
ept
of a
ssur
ance
is
cove
red
in t
he A
ssur
ance
and
A
udit
and
Ass
uran
ce p
aper
. Th
e pr
ovis
ion
of a
dditi
onal
se
rvic
es is
a n
ew t
opic
in t
he
Adv
ance
d st
age.
Esse
nti
al p
oin
t
Pros
pec
tive
finan
cial
in
form
atio
n
Due
dili
genc
e
Aud
it a
nd
Ass
uran
ce
13
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
8 A
s st
ated
in t
he p
revi
ous
chap
ter,
mos
t as
sura
nce
firm
s p
rovi
de a
ran
ge o
f se
rvic
es b
esid
es a
udit.
It
is t
here
fore
im
port
ant
to k
now
wha
t se
rvic
es a
re
avai
labl
e an
d at
leas
t in
out
line
how
th
ose
serv
ices
are
per
form
ed t
o be
fa
mili
ar w
ith t
hose
ser
vice
s.
Sto
p a
nd
th
ink
Whe
n re
view
ing
com
pany
ann
ual
repo
rts
can
you
rem
embe
r se
eing
any
ad
ditio
nal e
nviro
nmen
tal o
r so
cial
in
form
atio
n? I
f so
was
thi
s au
dite
d?
Look
at
the
exam
ple
s in
thi
s ch
apte
r an
d th
en r
evie
w o
ther
com
pany
ac
coun
ts t
o be
com
e m
ore
fam
iliar
with
th
e st
yle
and
cont
ent
of t
his
typ
e of
re
por
t.
The
prov
isio
n of
soc
ial a
nd
envi
ronm
ent
audi
t se
rvic
es d
oes
req
uire
add
ition
al k
now
ledg
e, e
ither
of
the
ser
vice
or
of t
he fi
rm’s
sp
ecifi
c pr
oced
ures
in r
espe
ct o
f tho
se
serv
ices
. Th
is c
hap
ter
does
pro
vide
an
intr
oduc
tion
but
note
tha
t ad
ditio
nal t
rain
ing
is r
equi
red
befo
re
thos
e se
rvic
es c
an b
e pe
rfor
med
in
pra
ctic
e.
This
cha
pter
dea
ls w
ith
envi
ronm
enta
l and
soc
ial a
udits
. Thi
s is
ver
y to
pic
al a
t th
e m
omen
t an
d is
be
com
ing
incr
easi
ngly
imp
orta
nt
par
ticul
arly
to
larg
er o
rgan
isat
ions
. Re
ad t
hrou
gh t
he c
hapt
er p
ayin
g pa
rtic
ular
att
entio
n to
the
ext
ract
fr
om t
he s
usta
inab
ility
rep
ort.
Thi
s w
ill h
elp
you
to s
ee h
ow t
his
issu
e is
de
alt
with
in p
ract
ice.
Wor
k th
roug
h th
e In
tera
ctiv
e an
d Se
lf-te
st q
uest
ions
as
thes
e w
ill g
ive
you
an id
ea o
f how
thi
s m
ight
be
exam
ined
.
The
pro
visi
on o
f soc
ial a
nd
envi
ronm
enta
l aud
its is
a n
ew
top
ic in
the
Adv
ance
d st
age.
Esse
nti
al p
oin
ts
Imp
licat
ions
for
audi
t an
d as
sura
nce
Stud
y gu
ide
14
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
9 In
man
y co
mpa
nies
with
an
inte
rnal
au
dit
depa
rtm
ent,
the
ext
erna
l aud
itor
may
dec
ide
to p
lace
som
e re
lianc
e on
th
e w
ork
of t
he in
tern
al a
udito
r fo
r th
e au
dit
of t
he fi
nanc
ial s
tate
men
ts.
How
ever
, the
re is
oth
er w
ork
that
the
in
tern
al a
udito
r al
so p
erfo
rms
whi
ch
may
not
be
revi
ewed
or
cons
ider
ed b
y th
e ex
tern
al a
udito
r. T
his
sect
ion
pro
vide
s an
ove
rvie
w o
f the
ran
ge o
f w
ork
of t
he in
tern
al a
udit
depa
rtm
ent.
Sto
p a
nd
th
ink
Hav
e yo
u w
orke
d at
a c
lient
tha
t m
aint
aine
d an
inte
rnal
aud
it de
part
men
t? I
f so,
did
you
fully
un
ders
tand
the
wor
k of
tha
t de
par
tmen
t? I
f not
, thi
s ch
apte
r m
ay
assi
st in
pro
vidi
ng t
he b
igge
r p
ictu
re o
f th
e w
ork
of t
hat
dep
artm
ent.
Inte
rnal
aud
itors
are
an
impo
rtan
t p
art
of t
he c
orp
orat
e go
vern
ance
st
ruct
ure
with
in a
bus
ines
s an
d is
one
of
the
mea
ns b
y w
hich
the
m
anag
emen
t ca
n de
mon
stra
te t
hat
it is
mee
ting
its o
blig
atio
ns t
o op
erat
e ef
fect
ive
inte
rnal
con
trol
.
This
cha
pte
r lo
oks
at t
he is
sue
of
inte
rnal
aud
it as
a d
isci
plin
e in
its
own
right
rat
her
than
from
the
p
ersp
ectiv
e of
the
ext
erna
l aud
itor’
s re
lianc
e on
inte
rnal
aud
it w
ork.
Not
ice
ther
efor
e, t
hat
you
need
to
be
prep
ared
to
take
on
diffe
rent
rol
es.
You
will
not
alw
ays
be a
dop
ting
the
role
of t
he e
xter
nal a
udito
r in
an
exam
inat
ion
que
stio
n.
Read
thr
ough
the
cha
pter
car
eful
ly
taki
ng n
ote
of t
he II
A e
thic
al
guid
ance
and
inte
rnal
aud
it st
anda
rds
as y
ou w
ill n
ot h
ave
com
e ac
ross
th
ese
befo
re. H
owev
er, a
lso
bear
in
min
d th
at m
any
aspe
cts
of t
he
inte
rnal
aud
itor’
s w
ork
are
sim
ilar
to
thos
e of
the
ext
erna
l aud
itor
and
may
be
rel
evan
t w
hen
atte
mp
ting
a q
uest
ion.
Try
the
Self-
test
que
stio
n.
The
wor
k of
inte
rnal
aud
itors
w
as d
iscu
ssed
in y
our
pro
fess
iona
l sta
ge s
tudi
es fr
om
the
per
spec
tive
of t
he im
pac
t th
eir
wor
k m
ight
hav
e on
the
ex
tern
al a
udit.
At
the
Adv
ance
d St
age
you
may
be
req
uire
d to
con
side
r th
e w
ork
of t
he in
tern
al a
udit
depa
rtm
ent
with
in t
he c
onte
xt
of t
he b
usin
ess
itsel
f.
Esse
nti
al p
oin
ts
Att
ribut
e an
d p
erfo
rman
ce
stan
dard
s
Aud
it a
nd
Ass
uran
ce
15
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
10
This
cha
pte
r is
one
of t
he m
ost
pra
ctic
al a
reas
of t
he s
ylla
bus.
Fr
aud
is a
maj
or b
usin
ess
expe
nse
if no
t p
reve
nted
or
dete
cted
. Fo
r au
dito
rs it
ca
n al
so h
ave
cost
imp
licat
ions
if n
ot
dete
cted
– a
law
sui
t or
, wor
se, t
he
dem
ise
of t
he fi
rm.
Cha
pter
3 G
over
nanc
e ha
s al
read
y in
trod
uced
you
to
the
Enro
n sc
anda
l. Re
mem
ber
the
cost
of:
• La
ck o
f tra
nspa
renc
y in
the
ac
coun
ts
• In
effe
ctiv
e co
rpor
ate
gove
rnan
ce
arra
ngem
ents
•
Inad
equa
te s
crut
iny
by t
he
audi
tors
•
Info
rmat
ion
asym
met
ry
• Ex
ecut
ive
com
pens
atio
n m
etho
ds
In c
ompa
ny fa
ilure
s, it
is c
omm
on fo
r au
dit
firm
s to
be
accu
sed
of n
eglig
ence
fo
r no
t ha
ving
iden
tifie
d th
e fr
aud.
A
udit
firm
s th
eref
ore
need
to
care
fully
co
nsid
er t
he r
isk
of fr
aud
and
mon
ey
laun
derin
g ta
king
pla
ce in
a c
lient
’s
busi
ness
com
mun
ity a
s w
ell a
s kn
owin
g ho
w t
o ad
equa
tely
rep
ort
susp
icio
ns a
nd a
ctua
l fra
uds
whe
ther
to
the
clie
nt's
man
agem
ent
team
or
to
third
par
ties.
Sto
p a
nd
th
ink
Apa
rt fr
om E
nron
, can
you
thi
nk o
f any
ca
ses
whe
re a
n au
dito
r ha
s be
en fo
und
to b
e ne
glig
ent?
Or
any
high
pro
file
frau
d ca
ses?
A w
orki
ng k
now
ledg
e of
ISA
240
The
Au
dito
r’s
Resp
onsi
bilit
ies
Rela
ting
to
Frau
d in
an
Audi
t of
Fin
anci
al
Stat
emen
ts is
impo
rtan
t to
fulfi
l the
au
dito
r’s
oblig
atio
ns.
Als
o, a
kn
owle
dge
of p
rofe
ssio
nal
resp
onsi
bilit
ies
with
res
pect
to
mon
ey
laun
derin
g is
imp
orta
nt.
All
pro
fess
iona
l adv
iser
s, in
clud
ing
tax
advi
sers
and
acc
ount
ants
are
re
spon
sibl
e by
law
to
com
ply
with
th
e m
oney
laun
derin
g re
gula
tions
an
d he
nce
a go
od w
orki
ng
know
ledg
e of
the
rel
evan
t le
gisl
atio
n is
req
uire
d.
This
cha
pte
r co
vers
frau
d an
d au
dito
r lia
bilit
y an
d is
an
imp
orta
nt p
art
of
the
sylla
bus
as it
is s
igni
fican
t to
the
w
ork
of t
he a
udito
r in
pra
ctic
e. N
ote
in p
artic
ular
the
impo
rtan
ce o
f ris
k as
sess
men
t in
the
aud
itor’
s ap
pro
ach
to fr
aud.
The
cha
pte
r do
es c
onta
in a
lo
t of
tec
hnic
al d
etai
l so
atte
mp
t th
e In
tera
ctiv
e qu
estio
ns t
o en
sure
tha
t yo
u ha
ve u
nder
stoo
d th
e ke
y p
oint
s.
You
shou
ld a
lso
atte
mpt
the
Sel
f-te
st
ques
tions
.
Frau
d an
d m
oney
laun
derin
g w
ere
cove
red
in t
he
pro
fess
iona
l sta
ge A
udit
and
Ass
uran
ce m
anua
l. Th
e A
dvan
ced
stag
e w
ill in
volv
e lo
okin
g at
com
ple
x sc
enar
ios
from
an
audi
t m
anag
er's
pers
pect
ive.
Whi
lst
know
ing
the
rele
vant
tec
hnic
al
refe
renc
e m
ater
ial i
s im
por
tant
, a p
ract
ical
co
mm
onse
nse
app
roac
h to
id
entif
ying
the
ris
k of
frau
d w
ill
be v
ital b
oth
in t
he e
xam
hal
l an
d in
the
rea
l com
mer
cial
w
orld
.
Als
o no
te t
he r
elev
ance
of c
ivil
law
(co
ntra
ct a
nd t
ort)
, em
plo
ymen
t la
w a
nd h
ealth
an
d sa
fety
reg
ulat
ions
. You
will
ha
ve c
over
ed t
hese
in d
etai
l in
your
ear
lier
law
stu
dies
.
Esse
nti
al p
oin
ts
Aud
it ap
pro
ach
to fr
aud
Frau
d ris
k fa
ctor
s
Aud
itor
liabi
lity
Mon
ey la
unde
ring
Stud
y gu
ide
16
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
11
It is
ver
y ra
re t
o fin
d a
busi
ness
whi
ch
does
not
use
a c
ompu
ter
for
par
t of
its
acco
untin
g re
cord
s. R
egar
dles
s of
the
si
ze o
f the
ent
ity, i
t is
imp
orta
nt t
hat
adeq
uate
con
trol
s ex
ist
over
the
sy
stem
.
The
diffi
culty
in a
uditi
ng in
a
com
pute
rised
env
ironm
ent
can
be a
la
ck o
f aud
it tr
ail,
so a
udit
staf
f nee
d to
re
sear
ch t
he s
yste
m t
horo
ughl
y in
or
der
to h
ave
a go
od u
nder
stan
ding
of
how
it o
per
ates
.
Sto
p a
nd
th
ink
Can
you
thi
nk o
f the
typ
es o
f con
trol
s w
hich
exi
st o
ver
the
com
pute
rs in
you
r of
fice?
All
acco
unta
nts
will
hav
e cl
ient
s w
ith
com
put
eris
ed r
ecor
ds a
nd m
any
audi
t fir
ms
now
hav
e pa
perle
ss
offic
es.
This
cha
pte
r co
nsid
ers
the
issu
e of
au
ditin
g in
an
IT e
nviro
nmen
t. In
p
ract
ice
this
is h
ighl
y lik
ely
to a
pp
ly
to a
ll au
dits
. Ens
ure
that
you
un
ders
tand
the
key
ris
ks a
ssoc
iate
d w
ith c
omp
uter
ised
sys
tem
s an
d th
e im
pac
t on
con
trol
s.
E-co
mm
erce
is a
lso
very
rel
evan
t in
p
ract
ice.
You
mus
t be
fam
iliar
with
th
e im
pact
thi
s w
ill h
ave
on t
he w
ay
a bu
sine
ss o
pera
tes
and
ther
efor
e on
th
e au
dit.
IT s
yste
ms
and
cont
rols
hav
e be
en c
over
ed in
you
r ea
rlier
st
udie
s. A
t th
e A
dvan
ced
Stag
e, t
his
area
is li
kely
to
form
p
art
of a
wid
er s
cena
rio r
athe
r th
an b
eing
tes
ted
in is
olat
ion.
Esse
nti
al p
oin
ts
Con
trol
s
E-co
mm
erce
Aud
it a
nd
Ass
uran
ce
17
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
12
Fair
valu
e is
of d
aily
pra
ctic
al
sign
ifica
nce.
Sta
ting
asse
ts, l
iabi
litie
s an
d co
mp
onen
ts o
f eq
uity
at
fair
valu
e is
mor
e co
mp
licat
ed a
nd in
volv
es a
hi
gher
ele
men
t of
sub
ject
ive
judg
emen
t th
an s
tatin
g th
ese
item
s at
co
st.
Fair
valu
e m
akes
intu
itive
sen
se
and
man
y ac
coun
ting
situ
atio
ns a
re
now
req
uirin
g th
e st
atem
ent
of it
ems
at fa
ir va
lue
and
so t
he a
udito
r ha
s to
be
abl
e to
aud
it fa
ir va
lue
amou
nts.
Sto
p a
nd
th
ink
Can
you
thi
nk o
f a s
ituat
ion
whe
re it
is
very
diff
icul
t to
wor
k ou
t th
e fa
ir va
lue
of a
n ite
m?
Doe
s th
is m
ean
that
fair
valu
e is
just
an
exp
ensi
ve w
aste
of
reso
urce
for
both
com
pan
ies
and
audi
tors
?
Fair
valu
e is
now
req
uire
d by
man
y fin
anci
al r
epor
ting
stan
dard
s an
d so
it
is e
ssen
tial t
hat
audi
tors
can
aud
it fa
ir va
lue.
Nee
dles
s to
say
tha
t au
dito
rs
have
to
be a
ble
to a
ccou
nt fo
r fa
ir va
lue
too.
This
cha
pter
on
the
audi
t of
fair
valu
es is
ver
y im
port
ant.
Thi
s is
be
caus
e m
any
of t
he fi
nanc
ial
repo
rtin
g st
anda
rds
intr
oduc
ed a
t th
e A
dvan
ced
Stag
e in
clud
e th
e us
e of
fa
ir va
lues
. It
is v
ery
likel
y th
eref
ore
that
you
will
nee
d to
con
side
r th
e au
ditin
g co
nseq
uenc
es o
f the
ac
coun
ting
trea
tmen
t. In
add
ition
the
ch
apte
r co
vers
ISA
540
Aud
iting
Ac
coun
ting
Estim
ates
, Inc
ludi
ng F
air
Valu
e Ac
coun
ting
Estim
ates
, and
Re
late
d D
iscl
osur
es a
nd IA
PN 1
000
Spec
ial C
onsi
dera
tions
in A
uditi
ng
Fina
ncia
l Ins
trum
ents
whi
ch y
ou h
ave
not
stud
ied
befo
re, s
o re
ad t
hrou
gh
thes
e se
ctio
ns c
aref
ully
. Als
o no
te t
he
impa
ct o
f der
ivat
ives
cov
ered
in
sect
ion
3.
Not
ice
that
you
will
nee
d to
hav
e a
soun
d fin
anci
al r
epor
ting
know
ledg
e to
und
erst
and
man
y of
the
issu
es
addr
esse
d in
thi
s ch
apte
r so
me
of
whi
ch a
re c
ompl
ex e
g fin
anci
al
inst
rum
ents
. You
may
nee
d to
ref
er
to t
he r
elev
ant
sect
ion
of t
he
Adv
ance
d St
age
Cor
pora
te R
epor
ting
man
ual.
You
shou
ld w
ork
thro
ugh
the
Self-
test
q
uest
ions
at
the
end
of t
he c
hap
ter.
Th
ese
req
uire
som
e kn
owle
dge
of
Cor
por
ate
Rep
ortin
g an
d Bu
sine
ss
Ana
lysi
s.
Your
und
erst
andi
ng o
f the
au
dit
issu
es s
urro
undi
ng fa
ir va
lue
and
finan
cial
inst
rum
ents
w
ill b
e de
pen
dent
on
your
kn
owle
dge
of t
he a
ccou
ntin
g tr
eatm
ent
of t
hese
item
s. T
he
acco
untin
g is
sues
are
ad
dres
sed
in t
he A
dvan
ced
Stag
e C
orp
orat
e Re
por
ting
man
ual.
Esse
nti
al p
oin
ts
Aud
iting
fair
valu
e es
timat
es
and
disc
losu
res
Fina
ncia
l ins
trum
ents
Stud
y gu
ide
18
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
13
The
smal
l com
pan
y au
dit
thre
shol
d ha
s ch
ange
d a
num
ber
of t
imes
in t
he p
ast
deca
de. T
he t
hres
hold
is n
ow h
igh,
so
man
y fa
mily
com
pan
ies
are
now
ex
empt
from
req
uirin
g an
aud
it. T
his
has
affe
cted
the
wor
k of
aud
it fir
ms
who
sp
ecia
lise
in t
his
typ
e of
clie
nt.
Smal
l com
pany
aud
it as
sura
nce
is
diffe
rent
in n
atur
e to
tha
t of
larg
er
com
pani
es a
s co
ntro
ls a
re o
ften
la
ckin
g, a
nd t
he r
isks
of t
he a
ssig
nmen
t ca
n be
diff
eren
t in
nat
ure.
Sto
p a
nd
th
ink
Wha
t ar
e th
e im
plic
atio
ns fo
r th
e st
akeh
olde
rs in
a s
mal
l bus
ines
s of
the
ex
empt
ion
from
an
audi
t re
quire
men
t?
Alth
ough
the
cos
t of
an
audi
t ca
n be
hi
gh, t
he in
put
of a
pro
fess
iona
l ac
coun
tant
is v
ery
valu
able
, as
the
finan
cial
sta
tem
ents
hav
e m
ore
cred
ibili
ty t
o be
use
d to
obt
ain
finan
ce, a
nd t
he a
ccou
ntan
t ca
n ad
vise
on
tax
issu
es a
nd s
avin
gs.
For
thes
e re
ason
s, m
any
smal
l co
mpa
nies
hav
e as
sura
nce
assi
gnm
ents
inst
ead
of a
full
audi
t.
Smal
l com
pany
rev
iew
s or
aud
its a
re
ofte
n ca
rrie
d ou
t by
sem
i sen
ior
audi
t st
aff,
so y
ou m
ay a
lread
y ha
ve
prac
tical
exp
erie
nce
in t
his
area
.
The
revi
sed
ISA
s (U
K an
d Ir
elan
d)
have
bee
n de
sign
ed t
o ap
ply
to
audi
ts o
f all
size
s of
bus
ines
s bu
t m
any
of t
he s
tand
ards
con
tain
se
ctio
ns t
hat
give
gui
danc
e re
ferr
ed
to a
s C
onsi
dera
tions
Sp
ecifi
c to
Sm
alle
r En
titie
s.
This
cha
pter
con
side
rs t
he s
mal
l bu
sine
ss. R
ead
thro
ugh
the
chap
ter
mak
ing
sure
tha
t yo
u un
ders
tand
the
na
ture
of s
mal
l ent
ities
and
the
p
artic
ular
issu
es t
his
rais
es b
oth
from
th
e bu
sine
ss’ p
oint
of v
iew
(eg
ob
tain
ing
finan
ce, r
emun
erat
ion
pac
kage
s) a
nd fo
r th
e au
dito
r in
the
ap
plic
atio
n of
ISA
s. A
lso
note
sec
tion
6 on
IFRS
for
SMEs
.
Wor
k th
roug
h al
l the
Inte
ract
ive
que
stio
ns a
nd t
he S
elf-
test
que
stio
ns.
The
circ
umst
ance
s su
rrou
ndin
g sm
all c
omp
anie
s gi
ve r
ise
to t
ax p
lann
ing
issu
es,
risk
man
agem
ent
issu
es,
finan
cial
con
stra
ints
, sca
rcity
of
reso
urce
s on
pla
nnin
g,
man
agin
g, m
arke
ting
etc.
Man
y of
the
se t
opic
s ar
e co
vere
d bo
th a
t Pr
ofes
sion
al
and
the
Adv
ance
d Le
vel.
Esse
nti
al p
oin
ts
Spec
ial c
onsi
dera
tions
in t
he
audi
t of
sm
alle
r en
titie
s
Obt
aini
ng fi
nanc
e
Aud
it a
nd
Ass
uran
ce
19
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
14
Busi
ness
ent
ities
may
be
stru
ctur
ed in
a
num
ber
of d
iffer
ent
way
s, s
ome
of
whi
ch m
ay b
e co
mpl
ex. T
hese
st
ruct
ures
are
usu
ally
driv
en b
y le
gal,
tax
or r
egul
ator
y re
qui
rem
ents
with
in
the
coun
try
in w
hich
the
ent
ity
oper
ates
. Bus
ines
s st
ruct
ures
are
als
o su
bjec
t to
cha
nge,
for
exam
ple
th
roug
h ac
quis
ition
. Fro
m t
he a
udit
per
spec
tive
the
natu
re o
f the
bus
ines
s st
ruct
ure
is a
crit
ical
issu
e w
hich
will
ha
ve a
sig
nific
ant
impa
ct o
n th
e au
dit,
an
d in
par
ticul
ar o
n ris
k. F
or e
xam
ple,
w
here
the
ent
ity is
a g
roup
of
com
pan
ies
the
par
ent
com
pan
y au
dito
r m
ay n
eed
to r
ely
on t
he w
ork
of o
ther
aud
itors
. Whe
re t
he g
roup
in
clud
es o
vers
eas
subs
idia
ries
ther
e m
ay b
e a
rang
e of
pra
ctic
al is
sues
to
cons
ider
as
wel
l as
issu
es s
urro
undi
ng
fore
ign
exch
ange
. A c
ritic
al p
art
of t
he
audi
t th
eref
ore,
will
be
to g
ain
an
unde
rsta
ndin
g of
the
bus
ines
s st
ruct
ure
and
to id
entif
y th
e sp
ecifi
c is
sues
and
ris
ks w
hich
thi
s ra
ises
.
Sto
p a
nd
th
ink
Wha
t m
ight
the
pra
ctic
al is
sues
be
in
the
audi
t of
a g
roup
of c
ompa
nies
?
Mos
t of
you
will
hav
e be
en in
volv
ed
in t
he a
udit
of a
gro
up. Y
ou m
ay
have
bee
n in
volv
ed in
the
aud
it of
a
subs
idia
ry c
ompa
ny o
r in
the
aud
it of
th
e co
nsol
idat
ion
itsel
f.
This
cha
pter
look
s at
bus
ines
s st
ruct
ures
and
glo
bal e
nter
pris
es. I
t is
a
very
imp
orta
nt c
hap
ter
as it
is li
kely
th
at t
he m
ajor
ity o
f the
sce
nario
s yo
u w
ill b
e fa
ced
with
in t
he e
xam
inat
ion
will
be
base
d on
an
entit
y co
mp
risin
g m
ore
than
one
com
pany
. Aga
in b
ear
in m
ind
the
pote
ntia
l for
inte
grat
ion
with
cor
pora
te r
epor
ting
and
in t
his
case
tax
as
wel
l.
Read
thr
ough
the
cha
pter
car
eful
ly
payi
ng p
artic
ular
att
entio
n to
the
di
ffere
nt r
isks
and
issu
es w
hich
aris
e de
pen
ding
on
the
natu
re o
f the
bu
sine
ss s
truc
ture
. You
sho
uld
also
be
fam
iliar
with
the
pro
visi
ons
of IS
A 6
00
Spec
ial C
onsi
dera
tions
– A
udits
of
Gro
up F
inan
cial
Sta
tem
ents
(In
clud
ing
the
Wor
k of
Com
pone
nt A
udito
rs).
N
ote
in p
artic
ular
the
res
pect
ive
resp
onsi
bilit
ies
in s
ectio
n 2.
3 an
d th
e tr
eatm
ent
of s
igni
fican
t co
mpo
nent
s.
You
shou
ld w
ork
thro
ugh
the
Self-
test
q
uest
ions
at
the
end
of t
he c
hap
ter.
Th
ese
req
uire
som
e kn
owle
dge
of
Cor
por
ate
Rep
ortin
g an
d Bu
sine
ss
Ana
lysi
s.
ISA
600
Spe
cial
Con
side
ratio
ns
– Au
dits
of G
roup
Fin
anci
al
Stat
emen
ts (
Incl
udin
g th
e W
ork
of C
ompo
nent
Aud
itors
)was
in
trod
uced
at
the
Prof
essi
onal
St
age
in A
udit
and
Ass
uran
ce.
At
the
Adv
ance
d St
age
you
will
be
exp
ecte
d to
ap
ply
you
r kn
owle
dge
to in
tegr
ated
sc
enar
ios,
incl
udin
g in
p
artic
ular
, mor
e co
mp
lex
finan
cial
rep
ortin
g is
sues
.
Esse
nti
al p
oin
ts
Cha
nges
in b
usin
ess
stru
ctur
e
Aud
it of
gro
ups
Con
trol
in m
ulti-
natio
nal
orga
nisa
tions
Risk
s in
glo
bal e
nter
pris
es
Stud
y gu
ide
20
Stud
y Pe
rio
d
Prac
tica
l sig
nif
ican
ce
Wo
rkin
g c
on
text
A
pp
roac
h
Sylla
bus
lin
ks a
nd
ess
enti
al p
oin
ts
Due
D
ate
15
Whe
n a
busi
ness
is in
tro
uble
, the
ac
coun
tant
and
/or
audi
tor
will
be
heav
ily in
volv
ed in
any
res
cue
pla
n.
If th
e au
dito
r se
es s
igns
of g
oing
co
ncer
n p
robl
ems
durin
g th
e ye
ar e
nd
audi
t, a
res
cue
plan
can
be
put
into
p
lace
. The
aud
itor
mus
t of
cou
rse
agre
e w
ith t
he u
se o
f the
goi
ng
conc
ern
basi
s.
The
audi
tor
need
s to
be
clea
r as
to
thei
r p
oten
tial l
iabi
lity
to s
hare
hold
ers
of in
solv
ent
com
pani
es.
Sto
p a
nd
th
ink
If yo
u w
ere
an in
vest
or in
a c
omp
any
who
is in
solv
ent,
is t
he a
udito
r in
any
w
ay r
espo
nsib
le fo
r th
e lo
ss o
f you
r in
vest
men
t?
Goi
ng c
once
rn m
ust
be c
onsi
dere
d an
d re
view
ed in
eve
ry s
tatu
tory
aud
it.
Inso
lven
cy p
roce
edin
gs a
re n
orm
ally
de
alt
with
by
a fir
m's
corp
orat
e fin
ance
dep
artm
ent.
This
cha
pte
r lo
oks
at t
he is
sue
of
inso
lven
cy. W
ork
thro
ugh
the
chap
ter
care
fully
pay
ing
part
icul
ar a
tten
tion
to t
he c
onne
ctio
n w
ith g
oing
co
ncer
n w
hich
was
cov
ered
in d
etai
l in
Cha
pter
6. A
lso
note
the
res
pec
tive
resp
onsi
bilit
ies
of d
irect
ors
and
audi
tors
on
inso
lven
cy.
Att
empt
the
Sel
f-te
st q
uest
ions
to
put
th
is t
opic
into
a p
ract
ical
con
text
.
Iden
tific
atio
n of
goi
ng c
once
rn
pro
blem
s ha
s be
en c
over
ed in
yo
ur p
revi
ous
stud
ies.
At
the
adva
nced
sta
ge, t
he e
mp
hasi
s is
on
the
role
and
liab
ility
of
the
audi
tor
durin
g in
solv
ency
p
roce
edin
gs.
Esse
nti
al p
oin
ts
Resp
ectiv
e re
spon
sibi
litie
s
Ord
er o
f pay
men
t on
in
solv
ency
Inso
lven
cy le
gisl
atio
n
Study guide 21
4 Skills assessment guide
4.1 Introduction As a Chartered Accountant in the business world, you will require the knowledge and skills to interpret financial and other numerical and business data, and communicate the underlying issues to your clients. In a similar way to the required knowledge, the ACA syllabus has been designed to develop your professional skills in a progressive manner. These skills are broadly categorised as:
• Assimilating and using information • Structuring problems and solutions • Applying judgement • Drawing conclusions and making recommendations
4.2 Assessing your professional skills Set out below is a pictorial representation of the different mix of knowledge and skills that will be assessed in the examinations that comprise the ACA qualification.
The work experience requirements for students provide a framework to develop appropriate work experience, completion of which is essential in order to qualify for membership. Work experience is also an essential component for examination preparation.
The work experience framework is built around five key skills:
• Business awareness – being aware of the internal and external issues and pressure for change facing an organisation and assessing an organisation’s performance.
• Technical and functional expertise – applying syllabus learning outcomes and where appropriate, further technical knowledge to real situations.
• Ethics and professionalism – recognising issues, using knowledge and experience to assess implications, making confident decisions and recommendations.
• Professional judgement – making recommendations and adding value with appropriate, targeted and relevant solutions.
• Personal effectiveness – developing, maintaining and exercising skills and personal attributes necessary for the role and responsibilities.
The examinations, and in particular the Advanced Stage, embrace all of these skills.
Audit and Assurance 22
4.3 Assessment grids The following pages set out the learning outcomes for Audit and Assurance that are addressed under each of the four skills areas. In addition, for each skills area, there is a description of:
• The specific skills that are assessed • How these skills are assessed
Using these grids will enable you to determine how the examination paper will be structured and to consider whether your knowledge of Audit and Assurance is sufficiently strong to enable you to apply it in the required manner.
Study guide 23
Audit and Assurance 24
5 Technical knowledge The table contained in this section shows the technical knowledge covered in the ACA syllabus by module.
For each individual standard the level of knowledge required in the relevant Professional Stage module and the Advanced Stage is shown.
The knowledge levels are defined as follows:
Level D
An awareness of the scope of the standard.
Level C
A general knowledge with a basic understanding of the subject matter and training in its application sufficient to identify significant issues and evaluate their potential implications or impact.
Level B
A working knowledge with a broad understanding of the subject matter and a level of experience in the application thereof sufficient to apply the subject matter in straightforward circumstances.
Level A
A thorough knowledge with a solid understanding of the subject matter and experience in the application thereof sufficient to exercise reasonable professional judgement in the application of the subject matter in those circumstances generally encountered by Chartered Accountants.
Key to other symbols:
→ the knowledge level reached is assumed to be continued
Study guide 25
ASSURANCE AND AUDIT
Professional Stage
Title
A
ssur
ance
A
udit
&
A
ssur
ance
Adv
ance
d St
age
The International Auditing and Assurance Standards Board D C The Authority Attaching to Standards Issued by the International Auditing and Assurance Standards Board C A
The Authority Attaching to Practice Statements Issued by the International Auditing and Assurance Standards Board A
Discussion Papers C Working Procedures C International Standards on Auditing (UK and Ireland) 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing
B A →
210 Agreeing the Terms of Audit Engagements B → 220 Quality Control for an Audit of Financial Statements B → 230 Audit Documentation B A 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements
B A
250 A Consideration of Laws and Regulations in an Audit of Financial Statements B
A
250 B The Auditor’s Right and Duty to Report to Regulators in the Financial Sector C 260 Communication with Those Charged with Governance B A 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
B A
300 Planning an Audit of Financial Statements B A → 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment
C A →
320 Materiality in Planning and Performing an Audit C A → 330 The Auditor’s Responses to Assessed Risks B A 402 Audit Considerations Relating to an Entity Using a Service Organisation C B 450 Evaluation of Misstatements Identified during the Audit C A 500 Audit Evidence B A → 501 Audit Evidence - Specific Considerations for Selected Items B A 505 External Confirmations B B A 510 Initial Audit Engagements - Opening Balances B A 520 Analytical Procedures B A A 530 Audit Sampling B B A 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures
C B
A
550 Related Parties B A 560 Subsequent Events B A 570 Going Concern A → 580 Written Representations C B A 600 Special Considerations – Audits of Group Financial Statements (including the Work of Component Auditors)
C A
610 Using the Work of Internal Auditors C A 620 Using the Work of an Auditor’s Expert C A 700 The Auditor’s Report on Financial Statements B A → 705 Modifications to the Opinion in the Independent Auditor’s Report A → 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
A →
710 Comparative Information – Corresponding Figures and Comparative Financial Statements
B A
Audit and Assurance 26
Professional Stage
Title
A
ssur
ance
A
udit
&
A
ssur
ance
Adv
ance
d St
age
720 A The Auditor’s Responsibility Relating to Other Information in Documents Containing Audited Financial Statements
B A
720 B The Auditor’s Statutory Reporting Responsibility in Relation to Directors’ Reports
A
→
International Standards on Auditing 800 Special Considerations – Audits of Financial Statements prepared in Accordance with Special Purpose Frameworks
B
805 Special Considerations – Audits of Single Financial Statements and Specific Elements, Accounts or items of a Financial Statement
B A
810 Engagements to Report on Summary Financial Statements B A International Auditing Practice Note (IAPN) 1000 Special Considerations in Auditing Financial Instruments C
International Standards on Review Engagements (ISREs) 2400 Engagements to Review Financial Statements C B 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity
B
International Standards on Assurance Engagements (ISAEs) 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information
C B
3400 The Examination of Prospective Financial Information C B 3402 Assurance Reports on Controls at a Service Organisation C A
International Standards on Related Services (ISRSs) 4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information
B
4410 Engagements to Compile Financial Statements B IFAC Statements ISQC1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements
C B
APB Bulletins 2010/2 Compendium of illustrative Auditor’s Reports on UK Private Sector Financial Statements
B B
Study guide 27
Ethics Codes and Standards
Ethics Codes and Standards
Level
Professional Stage modules
IFAC Code of Ethics for Professional Accountants (parts A, B and C and Definitions)
A
ICAEW Code of Ethics
A
Assurance Business and Finance Law Principles of Taxation Audit and Assurance Business Strategy Financial Reporting Taxation
APB Ethical Standards 1-5 (revised) Provisions Available to Small Entities (revised)
A Assurance Audit and Assurance
6 Key resources
STUDENT SUPPORT TEAM T +44 (0)1908 248 250 E [email protected] STUDENT WEBSITE icaew.com/students student homepage icaew.com/exams exam applications, deadlines, regulations and more icaew.com/cpl credit for prior learning/exemptions icaew.com/examresources examiners comments, syllabus, past papers, study guides and more icaew.com/examresults exam results TUITION If you are receiving structured tuition, make sure you know how and when you can contact your tutors for extra help. If you aren’t receiving structured tuition and are interested in classroom, online or distance learning tuition, take a look at our tuition providers in your area on icaew.com/exams ONLINE STUDENT COMMUNITY The online student community allows you to ask questions, gain study and exam advice from fellow ACA and CFAB students and access our free webinars. There are also regular Ask an Expert and Ask a Tutor sessions to help you with key technical topics and exam papers. Access the community at icaew.com/studentcommunity THE LIBRARY & INFORMATION SERVICE (LIS) The Library & Information Service (LIS) is ICAEW's world-leading accountancy and business library. You have access to a range of resources free of charge via the library website, including the catalogue, LibCat. icaew.com/library
Audit and Assurance 28