Professional standards

AAA – L3 – Q33 – Engagement Letters

State six items that could be included in an audit engagement letter per ISA 210.

Question

(a) ISA 210 Agreeing the Terms of Audit Engagements explains the content and use of engagement letters.

Required

State SIX items that could be included in an engagement letter. (b)

ISA 500 Audit Evidence explains types of audit evidence that the auditor can obtain.

Required

State, and briefly explain, four types of audit evidence that can be obtained by the auditor. (c) ISA 705 Modifications to the Opinion in the Independent Auditor’s Report explains the form and content of modified audit opinions.

Answer

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Tags: Audit Evidence, Audit Planning, Engagement Letters, ISA 210, Professional standards
Level: Level 3

Topic: Audit Evidence

AAA – L3 – Q17 – Professional responsibility and liability

Explain five methods to reduce an audit firm's exposure to litigation claims for negligence.

Question

You are responsible for providing direction to more junior members of the audit department of your firm on technical matters. Several recent recruits have asked for guidance in the area of auditor’s liability. They are keen to understand how an audit firm can reduce its exposure to claims of negligence. They have also heard that in some countries, it is possible to restrict liability by making a liability limitation agreement with an audit client.

Required:

Explain five methods that may be used by an audit firm to reduce exposure to litigation claims.

Answer

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Tags: Auditor Liability, Litigation risk, Negligence claims, Professional standards, Quality management
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – Q12 – Professional responsibility and liability

Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

Question

Increasingly, the auditing profession is finding itself on the receiving end of large negligence suits.

Answer

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Tags: Auditor Liability, Legal Claims, Negligence, Professional standards, Risk Management
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – Q4 – Practice management

Explain why a quality management system is necessary for Sowa Accountants Ltd.

Question

A. To: All employees of Sowa Accountants Ltd.
From: New partner
Date:
Subject: Quality management (i) Why a system of quality management is necessary

(ii) Components that must be addressed by a system of quality management (iii) Engagements for which an engagement quality review is compulsory B.

Queries from the question and answer session

(i) Difference between a hot review and a cold review (ii) Why all audit reasons and justifications need to be documented in the audit working papers (iii) Reasons for standardised audit working papers

Answer

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Tags: Audit risks, Firm reputation, ISA 220, ISQM 1, Professional standards, Quality management
Level: Level 3

Topic: Practice management

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AAA – L3 – Q33 – Engagement Letters

State six items that could be included in an audit engagement letter per ISA 210.

AAA – L3 – Q17 – Professional responsibility and liability

Explain five methods to reduce an audit firm's exposure to litigation claims for negligence.

AAA – L3 – Q12 – Professional responsibility and liability

Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

AAA – L3 – Q4 – Practice management

Explain why a quality management system is necessary for Sowa Accountants Ltd.

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AAA – L3 – Q33 – Engagement Letters

State six items that could be included in an audit engagement letter per ISA 210.

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AAA – L3 – Q17 – Professional responsibility and liability

Explain five methods to reduce an audit firm's exposure to litigation claims for negligence.

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AAA – L3 – Q12 – Professional responsibility and liability

Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

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AAA – L3 – Q4 – Practice management

Explain why a quality management system is necessary for Sowa Accountants Ltd.

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