ACCA

Strategic Professional

Advanced Audit
and Assurance –
International
(AAA – INT)

Revision Notes

For exams in September

2024, December 2024,
March 2025 and June 2025

HB2024

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 Contents
Introduction
Revision of essential skill areas to be successful in Advanced Audit and Assurance –
International (AAA – Int) iv

Chapter 1: International regulatory environments for audit and assurance services 1

Chapter 2: Code of ethics and conduct 3
Chapter 3: Fraud and professional liability 4
Chapter 4: Quality management 5
Chapter 5: Obtaining and accepting professional appointments 6
Chapter 6: Planning and risk assessment 8
Chapter 7: Evidence 10
Chapter 8: Evaluation and review – matters relating to specific accounting issues 12
Chapter 9: Group audits and transnational audits 13
Chapter 10: Completion 15
Chapter 11: Reporting 17
Chapter 12: Audit-related services and other assurance services 18
Chapter 13: Prospective financial information (PFI) 20
Chapter 14: Forensic audits 21
Chapter 15: Social, environmental and public sector auditing 22
Chapter 16: Current issues 23

HB2024

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 Revision of essential skill areas to be successful in
Advanced Audit and Assurance – International (AAA –
Int)
We think there are three areas you should develop in order to achieve exam success in AAA – INT:
(a) Knowledge application
(b) Professional skills
(c) Exam success skills

Knowledge application
In the September 2022 examiner's report, the need for students to be specific in their answers and
tailor them to the scenario was emphasised. This continues to be something that should be
emphasised for students attempting the AAA exam. The examiner’s report included the following:

Some candidates continued to produce very vague answers which were not tailored to the
specific scenario and, therefore, did not achieve high technical or professional skills marks.
This exam requires candidates to demonstrate both technical knowledge but also, they need to
be able to apply this knowledge to a specific scenario. Generic responses with speculative
risks not evident from the detail provided in the scenario will gain little credit. Candidates
should use the specific information provided within the scenario demonstrating both
knowledge and application of skills to pass each requirement.
You should take note of this advice about applying your knowledge when considering how to
answer AAA questions. Let’s now think about the skills you will need to display, which are shown in
the diagram below.

cess skills
Exam suc

r planning
Answe

sional skills C
n Profes o
tio
rr req
a

ec ui
of
m

t i rem
or

nt
inf

erp ents
ng

reta
agi

Communication Analysis and

Man

evaluation
tion

Professional
Exam
l y si s

scepticism and
Go od

Readiness
judgement
ana
ti m

c al

Commercial
em

e ri

acumen
an

um
ag

tn
em

en

en
t ci
Effi
Effe cti
ve writing
a nd p r
esentation

Professional skills
From the September 2022 exam onwards, 20 marks will be available for demonstrating
'professional skills' that would be expected from a proficient senior financial professional.
There are four professional skills, which are introduced gradually in a series of skills checkpoints in
the Advanced Audit and Assurance – International (AAA – INT) Course Book. The fifth skills
checkpoint in the AAA – INT Course Book will bring these professional and exam success skills

HB2024 iv Advanced Audit and Assurance – International (AAA – INT)

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 together and consider them in the context of the CBE where you can also demonstrate
employability and technology skills.
The four professional skills are:
(a) Analysis and evaluation (covered in skills checkpoint 1)
(b) Communication (covered in skills checkpoint 2)
(c) Professional scepticism and judgement (covered in skills checkpoint 3)
(d) Commercial acumen (covered in skills checkpoint 4)
In section A of the exam, which is a single 50-mark case study, 10 of the 50 marks will be
allocated to demonstrating professional skills. All of the professional skills will be examined in
Section A.
Section B will consist of two compulsory scenario-based 25-mark questions. Each section B
question will allocate five marks to professional skills, so 10 marks in total will be available for
professional skills marks in Section B.
Each Section B question will contain a minimum of two professional skills: Analysis and evaluation
plus Professional scepticism and judgement and/or Commercial acumen. Professional skills will
apply to the whole question and not any of the individual requirements. Just like the technical
marks available for each question, you can also expect a certain amount of headroom in the
marking scheme for the demonstration of professional skills. In Section A, Question 1 will include 10
professional skills marks but the mark scheme will have up to 14 marks available for demonstrating
professional skill in all four categories, although the weighting of marks across each skill will not
always be the same. Each Section B question worth 25 marks will have up to seven professional
skills marks available, this time split across two or three of the professional skills, depending on the
question, and will be capped at five marks in line with the requirement.
The following table introduces these skills briefly with some examples of each:

ACCA professional skill: Definition Three aspects of each professional

skill
Analysis and evaluation Consider the meaning of data
To appraise information objectively and to Assess impact on stakeholders
draw logical conclusions from both Apply analysis to the company in the question
quantitative and qualitative information,
recognising the impact on relevant
stakeholders and prioritising issues
appropriately.

Communication Inform target audience using clear format

To express yourself clearly, concisely and Persuade with logical argument
convincingly through an appropriate medium, Appropriate use of technology
while being sensitive to the needs of the
intended audience.

Professional scepticism and judgement Question the validity of approaches

To probe, question and challenge information Challenge opinions
and views presented to you, in order to fully Make informed decisions in the context of the
understand business issues, establish facts engagement
objectively and reach appropriate conclusions
based on ethical values and professional
standards.

Commercial acumen Practical considerations

To show awareness of the wider business and Recognise constraints
external factors affecting business and use Awareness of alternative opportunities to
commercially sound judgement and insight to those suggested
resolve issues and exploit opportunities.

HB2024
Introduction v

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 You should refer to each of the Skills Checkpoints in the Advanced Audit and Assurance –
International (AAA – INT) Course Book for more information on how to apply each skill and earn
the professional marks on offer.
Note. You will also find a number of interactive and audio-visual resources on the ACCA website
that explain how professional skills marks can be earned. Within the 'Students' section of
accaglobal.com, select 'Study resources', 'ACCA qualification' and then 'Advanced Audit and
Assurance (AAA)' and, as well as a host of other important resources, you will also find content on
professional skills.

HB2024 vi Advanced Audit and Assurance – International (AAA – INT)

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 Exam success skills
Passing the AAA exam requires more than applying syllabus knowledge and demonstrating the
specific AAA skills; it also requires the development of excellent exam technique through question
practice.
We consider the following six skills to be vital for exam success. The Skills Checkpoints in the
Advanced Audit and Assurance – International (AAA – INT) Course Book show how each of these
skills can be applied specifically to the AAA exam. You will also find details on how to apply these
skills in the context of the CBE and Syllabus Area H 'Employability and technology skills'.

Exam success skill 1

Managing information
Questions in the exam will present you with a lot of information. The skill is how you handle this
information to make the best use of your time. The key is determining how you will approach the
exam and then actively reading the questions.
Advice on developing managing information
Approach
The exam is 3 hours 15 minutes long. There is no designated 'reading' time at the start of the
exam, however, one approach that can work well is to start the exam by spending time carefully
reading through all of the questions to familiarise yourself with the exam.
Once you feel familiar with the exam, consider the order in which you will attempt the questions;
always attempt them in your order of preference. For example, you may want to leave to last the
question you consider to be the most difficult.
If you do take this approach, remember to adjust the time available for each question
appropriately – see Exam success skill 6: Good time management.
If you find that this approach doesn’t work for you, don't worry – you can develop your own
technique.
Active reading
You must take an active approach to reading each question. Focus on the requirement first,
highlighting key verbs such as 'prepare', 'comment', 'explain', 'discuss', to ensure you answer the
question properly. Then read the rest of the question, highlighting and using the scratchpad for
important and relevant information, and making notes of any relevant technical information you
think you will need.
The CBE
At first glance, the CBE is quite daunting as the screenshot of the workspace below illustrates:
Advanced Audit and Assurance - International (AAA - INT)
1 of 3

It is 1 July 20X5. You are a 1. Partner’s email k Group (the Group),

which has a financial year of
1. Partner’s email 1 of 1

The Group, a listed entity, d 2. Background information

2. Background information
1 of 1
The following exhibits, available
3. Selected financial information

3. Selected financial information

4. Component auditor 1.-Partner’s email
2.-Background information
1 of 1
5. Potential new subsidiary 3.-Selected financial information 5. Potential new subsidiary
Briefing notes
1 of 1

Requirements (50 marks)

Paragraph 2
3

The Group is planning the acquisition of a new foreign subsidiary, Michonne Co, which is located
Briefing notes in Farland. The negotiations are at an advanced stage, and it is likely that the acquisition will take
let’s see how this works place in October 20X5.
Spreadsheet
The Group is planning the audit
The Group's audit committee has suggested that if the acquisition goes ahead, due to the distant
an advanced stage, and it is
location of the company and the fact that Atlanta & Co has no offices in Farland, a joint audit
could be performed with Michonne Co's current auditors, Lucille Associates, a small local firm of
Chartered Certified Accountants.

? Help Previous Navigator Next

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Introduction vii

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 Managing this information is quite a challenge – however, on the left-hand side of the screen is all
the information you need:
• The exhibits (for Question 1 of the AAA exam, the partner's email will usually outline the
requirements so is a good place to start)
• The requirement (for other questions, you will find the requirements here)
• The response options (in most cases you will just need the word processing document but if
presented with more complex financial statements extracts, the spreadsheet option may be of
use)
You will also note that the various windows can be re-sized and moved around the screen to help
you navigate each of the exhibits as you make sense of the question.
Note. There are resources on the ACCA website that will help you apply sound exam technique in
the CBE. Within the 'study support resources' for AAA, select the section marked 'CBE exam
technique – how to apply your knowledge and maximise marks in the exam'.

HB2024 viii Advanced Audit and Assurance – International (AAA – INT)

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 Exam success skill 2
Correct interpretation of the requirements
The active verb used often dictates the approach that written answers should take (eg 'explain',
'discuss', 'evaluate'). It is important you identify and use the verb to define your approach. The
correct interpretation of the requirements skill means correctly producing only what is being
asked for by a requirement. Anything not required will not earn marks.
Advice on developing correct interpretation of the requirements
This skill can be developed by analysing question requirements and applying this process:
Step 1 Read the requirement
Firstly, read the requirement a couple of times slowly and carefully and highlight the
active verbs. Use the active verbs to define what you plan to do. Make sure you identify
any sub-requirements.
Step 2 Read the rest of the question
By reading the requirement first, you will have an idea of what you are looking out for as
you read through the case overview and exhibits. This is a great time saver and means
you don't end up having to read the whole question in full twice. You should do this in an
active way – see Exam success skill 1: Managing Information.
Step 3 Read the requirement again
Read the requirement again to remind yourself of the exact wording before starting to
produce your answer. This will capture any misinterpretation of the requirements or any
missed requirements entirely. This should become a habit in your approach and, with
repeated practice, you will find the focus, relevance and depth of your answer plan will
improve.
The CBE
The workspace allows you to copy and paste as you would normally do within any word
processing package – you could copy the requirement into your response option (such as the
briefing note shown in the screenshot) and it will then be there to remind you what the question is
asking for.
There is a 'flag for review' function within the CBE which can be used to highlight areas that you
may wish to revisit later in the exam.

HB2024
Introduction ix

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 Exam success skill 3
Answer planning: Priorities, structure and logic
This skill requires the planning of the key aspects of an answer which accurately and completely
responds to the requirement.
Advice on developing answer planning: priorities, structure and logic
Everyone will have a preferred style for an answer plan. For example, it may be a mind map,
bullet-pointed lists or simply annotating the question. Choose the approach that you feel most
comfortable with, or, if you are not sure, try out different approaches for different questions until
you have found your preferred style.
For a discussion question, annotating the question is likely to be insufficient. It would be better to
draw up a separate answer plan in the format of your choosing (eg a mind map or bullet-pointed
lists). For a risk question, you should annotate the scenario, noting which areas present the type
of risk being examined and explain why. Remember that you can use the scratch pad for any of
these planning activities.
The CBE
In the screenshot below, you can see that some of the text has been highlighted:
Advanced Audit and Assurance - International (AAA - INT)
1 of 3

It is 1 July 20X5. You are a 1. Partner’s email k Group (the Group),

which has a financial year of
1. Partner’s email 1 of 1

The Group, a listed entity, d 2. Background information

2. Background information
1 of 1
The following exhibits, available
3. Selected financial information

3. Selected financial information

4. Component auditor 1.-Partner’s email
2.-Background information
1 of 1
5. Potential new subsidiary 3.-Selected financial information 5. Potential new subsidiary
Briefing notes
1 of 1

Requirements (50 marks)

Paragraph 2
3

The Group is planning the acquisition of a new foreign subsidiary, Michonne Co, which is located
Briefing notes in Farland. The negotiations are at an advanced stage, and it is likely that the acquisition will take
let’s see how this works place in October 20X5.
Spreadsheet
The Group is planning the audit
The Group's audit committee has suggested that if the acquisition goes ahead, due to the distant
an advanced stage, and it is
location of the company and the fact that Atlanta & Co has no offices in Farland, a joint audit
could be performed with Michonne Co's current auditors, Lucille Associates, a small local firm of
Chartered Certified Accountants.

? Help Previous Navigator Next

You can use a variety of colours to highlight different parts of the exhibits to address separate
aspects of the requirements.
There is a 'scratch pad' that you can also use to organise your thoughts and make rough
workings. You can copy and paste content from the scratch pad into your response option, but
the scratch pad itself is not submitted for marking at the end of the exam. The answer space can
also be used for rough workings.

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 Exam success skill 4
Efficient numerical analysis
This skill aims to maximise the marks awarded by making clear to the marker the process of
arriving at your answer. This is achieved by laying out an answer such that, even if you make a
few errors, you can still get some credit for your calculations. It is vital that you do not lose marks
purely because the marker cannot follow what you have done.
Advice on developing efficient numerical analysis
This skill can be developed by applying the following process:
Step 1 Explain your workings where relevant
Materiality calculations or other forms of analytical procedure should have a brief
explanation of their purpose so the examining team can understand what your
calculations are trying to tell them. Remember, for AAA, calculations are just a way of
quantifying a part of your answer (such as a form of risk assessment or when
considering going concern indicators). Remember that explaining and justifying your
materiality assessment will also earn professional skills marks.
Step 2 Show your workings
Keep your workings as clear and simple as possible and ensure they are cross-
referenced to the main part of your answer. Where it helps, provide brief narrative
explanations to help the marker understand the steps in the calculation. This means that
if a mistake is made you should not lose any subsequent marks for follow-on
calculations.
Step 3 Keep moving!
It is important to remember that, in an exam situation, it is difficult to get every number
100% correct. The key is therefore ensuring you do not spend too long on any single
calculation. If you are struggling with a solution then make a sensible assumption, state
it and move on. It's also important to remember that for AAA, you will not be expected to
generate a large number of calculations; usually, only key ratios or calculations will be
required.
The CBE
Although the spreadsheet function exists to help you perform calculations more quickly and
efficiently than using the onscreen calculator, there may not always be enough of them to merit
using the spreadsheet function. It is probably best to practise using the CBE software as part of
your revision so you can settle on a style that you feel comfortable with.

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 Exam success skill 5
Effective writing and presentation
Answers should be presented so that the marker can clearly see the points you are making,
presented in the format specified in the question. The skill is to provide efficient written answers
with sufficient breadth of points that answer the question, in the right depth, in the time available.
Advice on developing effective writing and presentation
Step 1 Use headings
Using the headings and sub-headings from your answer plan will give your answer
structure, order and logic. This will ensure your answer links back to the requirement and
is clearly signposted, making it easier for the marker to understand the different points
you are making. Underlining your headings will also help the marker.
Step 2 Write your answer in short, but full, sentences
Use short, punchy sentences with the aim that every sentence should say something
different and generate marks. Write in full sentences, ensuring your style is professional.
Step 3 Do your calculations first and explanation second
Questions often ask for an explanation with suitable calculations, such as materiality.
The best approach is to prepare the calculation first but present it on the bottom half of
the page of your answer, or on the next page. Then add the explanation before the
calculation. Performing the calculation first should enable you to explain what you have
done.
The CBE
Within the workspace, the response option does allow you to format your answer as you would in
any word processing package: eg bold, underline or italics. These will help you provide emphasis
on different parts of your answer (and in the case of Question 1, will help you earn the
communication professional marks by use of sub-headings etc).
Advanced Audit and Assurance - International (AAA - INT)
1 of 3

It is 1 July 20X5. You are a 1. Partner’s email k Group (the Group),

which has a financial year of
1. Partner’s email 1 of 1

The Group, a listed entity, d 2. Background information

2. Background information
1 of 1
The following exhibits, available
3. Selected financial information

3. Selected financial information

4. Component auditor 1.-Partner’s email
2.-Background information
1 of 1
5. Potential new subsidiary 3.-Selected financial information 5. Potential new subsidiary
Briefing notes
1 of 1

Requirements (50 marks)

Paragraph 2
3

The Group is planning the acquisition of a new foreign subsidiary, Michonne Co, which is located
Briefing notes in Farland. The negotiations are at an advanced stage, and it is likely that the acquisition will take
let’s see how this works place in October 20X5.
Spreadsheet
The Group is planning the audit
The Group's audit committee has suggested that if the acquisition goes ahead, due to the distant
an advanced stage, and it is
location of the company and the fact that Atlanta & Co has no offices in Farland, a joint audit
could be performed with Michonne Co's current auditors, Lucille Associates, a small local firm of
Chartered Certified Accountants.

? Help Previous Navigator Next

Tables and bullets can also be introduced into your response (although you should only be using
these if you feel it still helps you to address the requirement fully).

HB2024 xii Advanced Audit and Assurance – International (AAA – INT)

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 Exam success skill 6
Good time management
This skill means planning your time across all the requirements so that all tasks have been
attempted at the end of the 3 hours 15 minutes available and actively checking on time during
your exam. This is so that you can flex your approach and prioritise requirements which, in your
judgement, will generate the maximum marks in the available time remaining.
Advice on developing good time management
The exam lasts 195 minutes; this equates to 1.95 minutes per mark.
Approximately 20% of your time should be allocated to planning (including reading and thinking)
to ensure that you are able to assimilate the key features of the scenario before starting to write
or type.
• For a 50-mark question, planning time should be 50 marks × 1.95 × 20% = approximately 20
minutes.
• For a 25-mark question, planning time would be 25 marks × 1.95 × 20% = approximately 10
minutes per question.
The time spent typing your answer should reflect the number of technical marks for each
requirement. Typing time can be calculated by multiplying the technical mark allocation for each
requirement by 1.95 minutes – you could think of it as having already spent the time for
professional marks on your plan, leaving the rest of the time for producing the technical
requirements of your answer.
So, time management for a 25-mark question with 12 marks for part (a) and 8 marks for part (b)
plus the 5 professional skills marks should be as follows:
• Total time: 25 marks x 1.95 minutes per mark = 49 minutes
• Planning time: 49 minutes x 20% = 10 minutes
• Typing time for part (a): 12 x 1.95 minutes per mark = 23 minutes
• Typing time for part (b): 8 x 1.95 minutes per mark = 16 minutes
Keep a note of when you started each part and when you should aim to finish so you don’t lose
track of time.
Keep an eye on the clock
Aim to attempt all requirements but be ready to be ruthless and move on if your answer is not
going as planned. The challenge for many is sticking to planned timings. Be aware this is difficult
to achieve in the early stages of your studies and be ready to let this skill develop over time.
If you find yourself running short on time and know that a full answer is not possible in the time
you have, consider recreating your plan in overview form and then add key terms and details as
time allows. Remember, some marks may be available, for example, simply stating a conclusion
which you don't have time to justify in full.
The CBE
Sitting this exam as a computer-based exam and practising as many exam-style questions as
possible in the ACCA CBE Practice Platform will be the key to passing this exam. You should
attempt questions under timed conditions and ensure you produce full answers to the discussion
parts as well as doing the calculations. Also ensure that you attempt all mock exams under exam
conditions.
ACCA have launched a free on-demand resource designed to mirror the live exam experience
helping you to become more familiar with the exam format. You can access the platform via the
Study Support Resources section of the ACCA website navigating to the CBE question practice
section and logging in with your myACCA credentials.

Question practice
Question practice is a core part of learning new topic areas. When you practice questions, you
should focus on improving the Exam success skills – personal to your needs – by obtaining
feedback or through a process of self-assessment.

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Introduction xiii

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HB2024 xiv Advanced Audit and Assurance – International (AAA – INT)

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 Chapter 1: International regulatory environments for audit and
assurance services

International regulatory environments for audit and assurance services

International Money laundering

regulatory
environment

• International Money laundering ACCA guidance Risk-based approach

Federation of offences • Internal controls and • Secrecy over
Accountants (IFAC) • Acquiring, using, policies, including transactions
• International Auditing possessing, dealing Money Laundering • Transfers via several
and Assurance with or concealing Reporting Officer jurisdictions
Standards Board criminal property (MLRO) role (Money • High value
– ISAs • Failure to report Laundering transactions not in line
– ISREs knowledge or Compliance Principal with business model
– ISAEs suspicion or MLCP in the UK) • Excessive use of wire
– ISRSs • Tipping off and training transfers
• Concealing the true • Client identification • Patterns between
origin and ownership (identity, ownership deposits and transfers
of the proceeds of and cash flows) via • Transactions of great
crime CDD or KYC value
• Consists of three • Record keeping – at • Repeated transactions
stages: least five years below monitoring
– Placement • Recognition of threshold on same day
– Layering suspicion – more than
– Integration speculation but falling
• Financial Action Task short of firm proof
Force role • Reporting suspicious
transactions
• Tipping off should not
be done, even by
accident

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 ISA 250 (revised) Consideration of Laws and Regulations
in an Audit of Financial Statements

• Non-compliance with laws and regulations • If NOCLAR is discovered, the following steps should
(omission, commission, deliberate, accidental) is take place:
sometimes referred to as NOCLAR – The auditor must understand the matter fully and
• Management is responsible for operational document their findings
compliance and also for prevention and detection – They must report cases of NOCLAR to the
of non-compliance appropriate level of management or those
• Auditors are responsible for the impact of any charged with governance (TCWG) unless
non-compliance on the financial statements, and prohibited by law
for assessing the risk of material misstatement due – If management and/or TCWG are suspected of
to the following: involvement in NOCLAR, the auditor may report
– Those that have a direct effect on the financial to next most higher level of authority (eg audit
statements (eg compliance with enacted laws) committee or regulator)
require evidence of compliance – They may need to disclose to others in the
– Those that have a material (but not direct) effect public interest
on the financial statements (eg compliance with – In all cases, especially when reporting or
an operating licence) require evidence of any disclosing NOCLAR, legal advice should be
non-compliance sought due to the need for confidentiality
– Those that have neither a direct nor material • If NOCLAR has not been addressed by a client, the
effect on the financial statements require an auditor may withdraw from the engagement, but
awareness of any NOCLAR and an appropriate this should not be seen by auditors as a suitable
response way of responding to NOCLAR without any further
• Auditors need a general understanding of the legal action being taken
and regulatory framework in place (see ISA 315) • Material NOCLAR can lead to a modified audit
including environmental/public health and safety, opinion:
fraud, corruption, bribery, data protection or other – Failure to comply with a requirement could lead
financial crime (such as money laundering) to a misstatement
– An obstruction by the client or poor record
keeping could lead to insufficient or
inappropriate audit evidence

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 Chapter 2: Code of ethics and conduct

Code of ethics and conduct

Sources of The fundamental The conceptual Current

regulation principles framework issues

• IESBA and ACCA • Integrity • Threats to compliance Ethical implications of

guidance substantially (straightforward, with the fundamental one firm providing both
harmonised honest or TRUE) principles: internal and external
• Supports the public • Objectivity (no bias – Self interest audit services
interest or conflicts of interest – Self-review • Advantages:
– FAIR) – Advocacy – Good working
• Professional – Familiarity relationship
competence and due – Intimidation – Efficiencies in
care (knowledge, approach
skills, CPD etc) – Reduced combined
• Confidentiality (no Responding to threats fees
personal advantage) • Eliminate the • Disadvantages:
• Professional behaviour circumstances – Significant
(no discredit to the • Apply safeguards self-review threat
profession) • Decline the
engagement
Professional scepticism
Challenge and scrutinise
Public interest entities sufficiently to obtain the
• More stringent than right evidence
other entities
• Either listed or
regulated as though Management
listed responsibility
Firms cannot accept
any management
responsibilities

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 Chapter 3: Fraud and professional liability

Fraud and professional liability

ISA 240 The Auditor's Responsibilities Relating to Auditors'

Fraud in an Audit of Financial Statements liability

Definitions Audit approach Principles

• An intentional act involving the • Act with professional • Duty of care exists
use of deception to obtain an scepticism • Duty of care was breached
unjust or illegal advantage • Assess risks due to fraud • Loss arose from that breach
• Two main types: • Fraud risk factors • Not too remote
– Fraudulent financial – An incentive or pressure to
reporting (eg Enron) commit fraud (motive)
– Misappropriation of assets – Opportunity to commit fraud The client
(eg security guard stealing – Ability to rationalise such Following auditing standards will
from warehouse) actions (dishonesty) support automatic duty of
• Respond to risk at F/S level reasonable care to clients
(assignment and supervision;
Responsibilities accounting policies; introduce
• Primary responsibility for unpredictability; reviewing Third parties
prevention and detection rests nature, timing and extent of Not guaranteed but may be
with management audit procedures) present from situations in
• Auditor should obtain • Respond to risk at assertion the scenario – need to know
reasonable assurance that the level (sensitive controls; case law
F/S are free from material journals; estimates; significant
misstatement whether caused transactions)
by fraud or error • Reporting or withdrawing if Disclaimers
necessary
• Bannerman connection
• Need to be used if felt it will
protect auditor's liability
• Discouraged by ACCA as seen
to devalue the auditor's report

Limiting auditors' liability The expectation gap

Insurance against losses Managing liability • Due to misunderstanding of

• Professional indemnity • Avoid litigation by performing auditor's responsibilities
insurance (PII) for civil claims quality audits • Educate users – auditor's
from clients and third parties • Incorporation report wording seeks to close
• Fidelity guarantee insurance • Limited liability Partnerships the expectation gap
(FGI) for losses due to fraud by (LLPs) • Extend auditor's responsibilities
firm employees • Proportionate and capping • Caps vs 'reckless knowledge'
liability (UK CA 2006) offence

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 Chapter 4: Quality management

Quality management

ISQM 1 Quality Management for Firms that Perform

Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements

Components of a firm's system of quality management

The firm’s risk assessment process Engagement performance

• Manages the link between quality objectives, • All engagement personnel understand their
risks to their achievement and appropriate responsibilities for quality
responses • Direction, supervision and review, plus
• Quality risks are driven by factors relating to suitable application of professional judgement
both the firm and its engagements and scepticism
• Policies and procedures on consultation,
differences of opinion and documentation
Governance and leadership responsibilities for • Engagement quality reviews of
quality within the firm appropriateness of significant judgements
• Assign management responsibility so that and conclusions for listed and other risky
commercial considerations do not override entities undertaken by suitable individual as
quality per ISQM 2 Engagement Quality Reviews
• Ultimate responsibility for quality from senior
management down
• Quality to be a cultural factor within the firm Resources
• Firms shall ensure they have sufficient
personnel with the capabilities, competence
Relevant ethical requirements and commitment to ethical principles
• Firm's policy shall emphasise the fundamental • Technological resources (eg data analytics
principles: software) and intellectual resources (eg
– Leadership methodologies for undertaking certain types
– Education & Training of engagement)
– Monitoring • Service providers who may provide human,
– Dealing with non-compliance technological or intellectual resources for the
• Annual confirmation by staff of independence firm
compliance
Information and communication
Acceptance and continuance of client • The use of suitable information technology to
relationships and specific engagements allow communication within the firm to
• Consider: support appropriate levels of quality
– Integrity of client • Any networks, network firms or networks
– Firm's ability to perform the engagement in services must also comply with ISQM 1
accordance with applicable laws,
regulations and professional standards
Monitoring and remediation
– Firm's ethical compliance
• Aim is to ensure that professional standards
have been adhered to and that quality
management systems have worked
• 'Cold ("post-issuance") reviews' carried out to
identify any deficiencies in the firm's system
of quality management once the audit is
completed

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 Chapter 5: Obtaining and accepting professional appointments

Obtaining and accepting professional appointments

Reasons why entities Advertising, publicity and obtaining

change their auditors professional appointments

• Fee is too high or audit is no longer value for • Firms are allowed to advertise…
money • …but should comply with advertising
• Auditor no longer large enough to service a standards and not discredit the work of
growing client another member, firm or the profession
• Auditor may resign due to not making enough • Fees must not be misleading
profit or independence issues
• Breakdown in relationship
Advertising fees
Needs to explain fees clearly and what clients
will get in return

Tendering

Do they want the work? Criteria which might be used to evaluate

• Risks – what could change? the tender
• Enough time and staffing? • Location
• Logistics and expertise? • Knowledge of partners and staff
• Nature of work? • Prior experience of industry
• Why approached? • Matching service offered to needs of business
• Cost effective and deadlines? • Communication
• Development of effective relationship

Content of the proposal document

• Fee UK Companies Act 2006 requirements for
• Client requirements tendering
• How firm will address requirements Statement of circumstances
• Assumptions
• Proposed approach
• Outline of firm and staff

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 Fees Acceptance and continuance

• Should be fair and reasonable • Necessary technical competence?

• Commission OK only if disclosed • Sufficient resources to complete the work?
• No contingent fees for audits • Ethical or independence issues?
• Obtained references for entity directors
(PEPs?)
Lowballing • Obtained clearance from outgoing auditors?
• Practice of setting the initial fee low in order • Agreed and discussed the terms of the
to win the client engagement prior to acceptance?
• Not unethical but may affect quality and ISQM 1 has further details (Essential reading
competition found in the digital edition of this Course Book)
• Auditor may need to retain the client in
subsequent years in order to recover initial
losses (self-interest threat)

Terms of audit engagements Descriptions of practising firms

• Contractual terms and conditions in At least 50% of partners are ACCA and have at
engagement letter (ISA 210) least 51% of voting rights
• Pre-conditions for an audit present?

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 Chapter 6: Planning and risk assessment

Planning and risk assessment

ISA 200 - ISA 300 - ISA 315 (Revised 2019)

audit objectives audit planning - risk assessment

Overall objectives of the • Audit strategy (high Objectives of ISA 315 (Revised 2019)
audit level) vs audit plan • Identify and assess risk of material misstatement at
• Reasonable assurance (more detailed) F/S level (all assertions)
that F/S are free from • Focus on important • Identify and assess risk of material misstatement at
material misstatement areas assertion level (class of transactions, account
• Ethics, professional • Identify and resolve balance or disclosure)
scepticism, potential problems • Inherent risks assessed along a spectrum
professional • Engagement is determined by likelihood and magnitude
judgement properly organised • Inherent risks at higher end of spectrum considered
• Sufficient appropriate and managed to be significant risks and prioritised
audit evidence to • Proper assignment of • Control risk assessment considers operating
reduce audit risk to work effectiveness
acceptable level • Facilitates direction,
supervision and review
• Assists in The auditor's approach under ISA 315 (Revised 2019)
Audit risk and risk of co-ordination of others
• Typical procedures include enquiry, analytical
material misstatement (eg Internal Audit,
procedures, observation and inspection
component auditors or
• AR = (IR x CR) x DR • Acceptance and continuance information and
experts)
• Risk of Material discussions among audit team members
Misstatement = IR x CR • Use of automated tools and techniques (including
• Inherent Risk = data analytics)
susceptibility • Understand requirements of applicable financial
• Control Risk = not reporting framework
prevented, detected or • Consider the entity and its environment (eg industry,
corrected ownership, strategies, accounting policies etc)
• Consider internal controls (control environment,
information systems, risk assessment process,
monitoring and control activities)

Scepticism, scalability and standing back

• Professional scepticism - critical assessment of
evidence in rapidly changing environment
• Professional judgement required (eg interpreting
data analytics)
• Scalability - ISA 315 (Revised 2019) applicable
regardless of size or complexity
• Understand requirements of applicable financial
reporting framework
• Risk identification and assessment is iterative and
responsive, allowing opportunity to stand back and
reflect

Additional information required?

Look for the gaps in the scenario and say what you
need and why you need it

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 ISA 330 - The business ISA 320 Materiality ISA 520
risk response risk approach in Planning Analytical
and Performing Procedures
an Audit

• Design and implement • Significant conditions • Materiality determines • Used as risk

appropriate responses that could adversely the relative identification and
to risk assessment affect the entity's significance or assessment
from ISA 315 (Revised ability to achieve its importance of a procedures
2019) objectives matter, depending on (PLANNING)
• Controls vs • Complements the its nature, value or • Used as substantive
substantive testing audit risk approach by impact procedures
helping to identify • Based on the auditor's (EVIDENCE)
areas at risk of professional • Carried out as part of
material misstatement judgement the overall review of
• Performance the audit
materiality < planning (COMPLETION)
Financial risk materiality levels
• Risks arising from the • Determines what to
company's financial examine, how much to
activities or the sample and what will
financial affect the audit
consequences of opinion
operations
• Examples: going
concern; overtrading;
credit risk; interest
risk; high cost of
capital; unrecorded
liabilities

Operational risk
• Examples: stock-outs;
physical disasters; loss
of key staff; poor
brand management;
loss of orders

Compliance risk
• Examples: breach of
data protection
legislation; litigation;
tax penalties; health
and safety breaches

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 Chapter 7: Evidence

Evidence

ISA 500 ISA 530 ISA 510 Initial Audit Engagements

Audit Evidence Audit Sampling – Opening Balances

• Evidence should be sufficient • Sample selection • Ensure that all b/fwd balances are
(enough) and appropriate (reliable methods: not misstated, are b/fwd correctly
and relevant) – Statistical and that accounting policies are
• Need evidence relevant to the – Non-statistical consistent
assertions: ACCA COPER • Evaluation of results • Prior period audited by another
• Evidence from tests of controls and takes cause and auditor:
substantive testing impact into account – Review predecessor's working
• Procedures: inspection; observation; papers, read report – modified?
enquiries, confirmation; • Prior period not audited (ie first year
recalculations; re-performance and of audit):
substantive analytical procedures – Additional procedures re: current
assets and liabilities
• Auditor's report implications
(insufficient and/or inappropriate
audit evidence or material
misstatement) plus OM paragraph if
audited by a previous auditor)

ISA 230 Audit ISA 620 Using the Work ISA 610 Using the Work
Documentation of an Auditor's Expert of Internal Auditors

• Repeat • May be required for: • Criteria for assessment:

• Record – Asset valuations – Organisational status (including
• Reasoning – Actuarial valuations objectivity)
– Inventory counts – Level of competence
– Stage of completion on contracts – Systematic and disciplined
where performance obligations are approach including quality
satisfied over time management
– Legal opinions
• Auditor should verify the credentials
of the expert to ensure they can be
trusted as an objective source of
audit evidence

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 ISA 550 Outsourcing and ISA 402 Audit
Related Considerations Relating to an
Parties Entity Using a Service Organisation

• IAS 24 requires entities to disclose • Planning becomes difficult due to

who they are related to (related lack of direct relationship, so need to
parties) and how they have assess significance of service
interacted (related party organisation and their relevance to
transactions). the audit
• The auditor therefore has an • Audit procedures include evidence
obligation to obtain evidence on from site visits and/or service
all related parties and associated organisation's auditor (plus Type 1
transactions and ensure they are and Type 2 reports using ISAE 3402
all disclosed in the F/S (they are in Chapter 12)
material by their nature not
their size).

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 Chapter 8: Evaluation and review – matters relating to specific
accounting issues

Evaluation and review – matters relating to specific accounting issues

The importance of financial The audit of

reporting standards to the auditor deferred tax

• Materiality • IAS 12 Income taxes

• Risk of misstatement presented • Full provision basis
• Relevant accounting Standards • Amounts due to temporary differences
• Audit evidence and procedures • Recalculation as audit evidence

Payroll and other expenses Financial instruments

• Consider the audit approach required in each case • IAS 32, IFRS 7 and IFRS 9
• Agree work done, numbers of employees, rates of • Valuation of instruments
pay due and payments made • Treatment of changes in value

The audit of revenue The audit of leases

• IFRS 15 Revenue from Contracts with Customers • IFRS 16 Leases

• 5 step process: • Valid right-of-use asset?
– Step 1 – Identify contracts • Authorised lease?
– Step 2 – Identify performance obligations • Any excluded assets (including low value or short
– Step 3 – Determine transaction prices term leases?)
– Step 4 – Allocate prices to performance • Verify existence of asset
obligations • Recalculate depreciation, lease liability and
– Step 5 – Recognise revenue on satisfaction of interest values
a performance • Ensure that disclosure is satisfactory

The audit of ISA 540 (Revised) Auditing Accounting

retirement benefits Estimates and Related Disclosures

• IAS 19 Employee Benefits • Auditor needs to assess inherent risks associated

• Defined contribution and defined benefit schemes with accounting estimates
• Fund assets are valued by the market (FV) • Specific consideration of complexity, subjectivity
• Fund liabilities depend on a number of variables – and estimation uncertainty as well as any
assessment by actuary evidence of management bias
• Assessment of any gains or losses on fund – • Audit approach:
amounts posted to other comprehensive income – Looking at events after the end of the reporting
• Fund in surplus or deficit – balance on statement period
of financial position – Testing how management made their own point
estimate
– Looking at relevant controls
– Developing an auditor's point estimate to
compare against

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 Chapter 9: Group audits and transnational audits

Group audits and transnational audits

Why group audits are Aggregation risk ISA 600 (Revised) Special
different compared to and performance Considerations – Audits of Group
other audit engagements materiality Financial Statements (Including
the Work of Component Auditors)

• A group is a collection of • Aggregation risk is the • The revised ISA now reflects
entities (eg subsidiaries or probability that the aggregate recent updates to auditing
associates) or business units of uncorrected and undetected standards including quality
(eg regions, divisions or misstatements exceeds management, audit
branches) known as materiality (this risk is always documentation and risk
components. Group F/S are present in an audit but more assessment
then prepared by group likely in a group audit due to • Leadership responsibility for
management using each the way that group F/S are quality rests with group
individual set of component compiled) engagement partner
F/S • Group performance • Acceptance and continuance
• The parent company auditor materiality is the amount set includes changes, contextual
becomes group auditor (GA) by the group auditor below factors and whether sufficient
and determines which materiality to manage and appropriate audit
components require an audit. aggregation risk for the group evidence is available (if not,
It may be necessary to F/S to an appropriately low need to consider impact on
differentiate the group level auditor's report)
engagement partner (GEP) • Component performance • Group audit strategy and
from the GA for quality materiality is assessed and group audit plan:
management purposes appropriate levels are set – Planning and materiality
• If a component's audit is not below group performance – Engagement performance
undertaken by the GA, the firm materiality to help manage and the involvement of the
that performs this is called the aggregation risk (these levels component auditor
component auditor and their can vary for different – Understanding the group, its
audit work can be used as a components or even certain environment, the applicable
source of evidence, although transactions, balances or FR framework and system of
they would need to be disclosures depending on the internal control
assessed for quality and risks they present and the – Responding to assessed risks
reliability amount of audit work that of material misstatement
• Need to consider issues such should be performed) • Communication across the
as non-coterminous year-ends • Professional judgement is group audit team (including
(<3 months = adjust for required by the group auditor the component auditor), group
significant events only; >3 (eg for determining component management and TCWG
months = interim F/S) and part performance materiality levels • Documentation to allow an
ownership and the extent of any unconnected auditor to
• As the size and/or complexity component auditor understand the work done and
of the group increases, so does involvement) along with any conclusions reached
the risk of material professional scepticism to
misstatement in the group F/S apply scalability to a group
due to the need to aggregate audit
the information from all of the
relevant sets of component
F/S, which leads to
aggregation risk

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 Issues arising when a The correct classification Consolidation
component is located abroad of investments audit procedures

• Different accounting policies • Control = subsidiary • Calculation of goodwill and

• Cultural problems • Significant influence = any impairments
• Language problems associate • Cancellation of any
• Country specific problems • Auditor must look for evidence inter-company balances
of who is actually in control • Provisions for unrealised profits
(eg board minutes, • Fair Value (FV) adjustments
correspondence etc) • Retranslation of F/S from
overseas components
• Correct value of components in
parent F/S

Implications for the auditor's Joint Transnational

report where a subsidiary's audits audits
report has been modified

• Group auditor must assess • Why? • Audits where the F/S may be
materiality for the group as – New acquisition relied on in a different country
a whole – Dispersed location to where the entity is based
• The degree of modification – Foreign subsidiaries • Different approaches and
(material or pervasive) may – Client choice regulations have led to varying
be different in the component • Need to consider standards levels of audit quality
auditor's report than for the and experience of other firm • Forum of Firms (Big Four plus
group • Joint liability others)
• Group auditor uses judgment • Impacts on the profession? • IAASB – Transnational Auditors
to decide whether or not there Committee (TAC):
is a material impact or a lack – Identifying audit practice
of sufficient/appropriate audit issues
evidence – Discussing best practice
– Membership of IFAC
committees
– Formal conduit for promoting
interaction between firms

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 Chapter 10: Completion

Completion

Overall review of ISA 580 ISA 560

financial statements Written Representations Subsequent Events

• ISA 220 (Revised): Overall • Objectives of auditor under • Period up to auditor's report
review of work undertaken to ISA 580: • Period after report is signed
confirm compliance with – Obtain written
standards, laws and representations from
regulations. Application of management (or those
ISQM 1 and 2 by engagement charged with governance)
partner, including engagement that they have fulfilled their
quality review (EQR) if required responsibilities for preparing
• ISA 520: Final analytical F/S and supplying all
procedures to confirm necessary information
consistency with audit – Support audit evidence
evidence obtained by written
• ISA 450: Evaluation of representations if more
misstatements identified detail is required (eg related
during the audit – consider parties, subsequent events,
uncorrected misstatements fraud, NOCLAR, uncorrected
(especially their aggregate misstatements etc)
impact on the F/S) and – Respond appropriately when
establish which are factual, representations are provided
judgmental and projected (or when they are not but
misstatements should be!)
• For more guidance on both
going concern and completing
the audit, please refer to the
examining team's technical
articles.

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 ISA 570 ISA 710 Comparative ISA 720 The Auditor's
Going Information – Corresponding Responsibilities Relating
Concern Figures and Comparative to Other Information
Financial Statements

• Responsibilities? • Corresponding figures • Material inconsistencies

– Management: Assess ability • Comparative financial between (i) items audited
to continue as a going statements within F/S, (ii) items presented
concern. outside the F/S and not
– Auditor: Consider audited ('Other Information')
appropriateness of use of and/or (iii) the auditor's
going concern basis of knowledge obtained during
accounting – if uncertainties the course of the audit – which
exist but are disclosed, the one needs correction?
auditor's report should be • Discuss with management to
modified (see overleaf). establish whether there is
material misstatement or if the
auditor's understanding of the
Indicators of going concern entity needs to be updated:
problems (i) Amendment required to
• Financial F/S? Consider further audit
• Operational procedures and possible
• Other modified opinion if not
amended
(ii) Amendment required to
'Other Information'?
Understand, request
revision – if not corrected,
either withdraw or modify
report (see overleaf)
(iii) Auditor's understanding
inadequate? Respond in
line with ISAs (such as
ISA 315).

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 Chapter 11: Reporting

Reporting

ISA 700 – Standard unmodified report

an overview with unmodified opinion

• ISA 700 Forming an Opinion and Reporting on Key contents:

Financial Statements • Title – independent auditor's report
• ISA 701 Communicating Key Audit Matters in the • Addressee
Auditor's Report Outside of F/S • Opinion
• ISA 720 The auditor's responsibilities relating to • Basis for opinion
other information • Key audit matters
• Other information
• Responsibilities
• Legal and regulatory
• Signature
• Date

ISA 260 Communication with those Charged with

Governance
• ISA 260 addresses points made in the report to
management – matters of audit importance
(eg adjustments required, disagreements over
treatment)
• ISA 260 also defines those charged with
governance (TCWG) at engagement stage

ISA 265 Communicating Deficiencies in Internal

Control to those Charged with Governance
ISA 265 ensures that any specific internal control
weaknesses identified during the audit are brought
to the attention of those charged with governance
and not subject to management bias.

Modified report with unmodified opinion Modified audit opinions

(ISAs 706 and 570) (ISA 705)

Emphasis of matter paragraph Insufficient or inappropriate audit evidence

• Opinion is unmodified • If material to F/S but not pervasive, issue a
• Draws attention to uncertainty disclosed in F/S Qualified opinion ('except for')
(not G/C) • If unable to form an opinion (both material and
pervasive) issue a Disclaimer of opinion ('we do not
express an opinion')
Going concern paragraph
• Opinion is unmodified
• Draws attention to going concern (G/C) issues only Material misstatement
• If material to F/S but not pervasive, issue a
Qualified opinion ('except for')
Other matter paragraph • If misstatement is so severe (both material and
• Opinion is unmodified pervasive) issue an Adverse opinion ('the F/S do
• Draws attention to issues outside of F/S not give a true and fair view')

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 Chapter 12: Audit-related services and other assurance services

Audit-related services and other assurance services

ISAE 3000 Assurance Engagements Reviews of historical

financial information

Acceptance, planning and Assurance and engagement ISRE 2400 Engagements to

completion types Review Financial Statements &
• Agree terms of engagement • Elements of an assurance ISRE 2410 Engagements to
• Planning – as an audit engagement: Review Interim Financial
• Assess appropriateness of – 3 party relationship Statements
subject matter and criteria – Subject matter • Report to directors
• Obtain sufficient appropriate – Criteria – Primarily enquiry and
evidence – Evidence analytical review
• Documentation – Written report • Limited assurance expressed
• Conclusion and reporting • Reasonable 'positive' negatively:
assurance: ('…in our opinion, – 'nothing has come to the
the F/S show a true and fair auditor's attention that the
view…') statements do not show a
• Limited 'negative' assurance: true and fair view'
('…nothing has come to our
attention to suggest the F/S
do not show a true and fair
view…')
• Attestation based – client
measures the subject matter
and the practitioner provides
a conclusion
• Direct reporting – the
practitioner both measures
the subject matter and
provides a conclusion

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 Other examples Audit-related services
of limited assurance

• ISAE 3400 The Examination of ISRS 4400 Agreed-upon Due diligence reviews
Prospective Financial Procedures • Provision of advice to
Information (see Chapter 13) • Factual findings purchasing company in a
• ISAE 3402 Assurance Reports • Examples are fraud transaction
on Controls at a Service investigations, verifications of – Financial
Organisation (see Chapter 7) claims for funding and forensic – Operational and IT
audits (see Chapter 14) – People
• No assurance given as the – Regulatory
practitioner just reports what – Environmental
they have done (ie performing • Ensures acquirer has all
the agreed-upon procedures) necessary facts
• Usually enquiry and analytical
review only
ISRS 4410 Compilations • Normally no assurance given
• Producing subject matter
information
• Examples are often accounts
preparation for smaller clients
• No assurance given as the
practitioner just reports what
they have done (effectively a
test of their skills)

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 Chapter 13: Prospective financial information (PFI)

Prospective financial information (PFI)

ISAE 3400 Matters to consider before accepting

The Examination of Prospective an engagement to report on
Financial Information prospective financial information

Distinction between: • Intended use

• A forecast (based on events and assumptions • General vs limited distribution
expected to occur) • Nature of assumptions
• A projection (based on expectations and • Information to be included
hypothetical assumptions) • Period covered by PFI
• A hypothetical illustration (based on decisions
not yet made eg 'flying kites')
• A target (based on possible future
performance of an entity)

Level of assurance provided Examination procedures

• Due to nature of engagement likely to be • Limited assurance comes from approach –

limited (negative) assurance usually enquiry and analytical review
'…nothing has come to our attention…' • Auditor should obtain sufficient appropriate
• An opinion (effectively reasonable positive evidence that:
assurance) that the forecast has been – Management assumptions are not
prepared in line with the assumptions and unreasonable
relevant reporting framework – Information is properly prepared on the
basis of the assumptions
– Information is properly presented and
assumptions disclosed
– PFI is prepared on basis consistent with
historical financial statements (eg
accounting policies; activity rates etc)

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 Chapter 14: Forensic audits

Forensic audits

Terminology Applications of forensic auditing

• Forensic auditing is the process of gathering, • Fraud investigations:

analysing and reporting on data, in a pre Used to quantify the possible amount lost,
defined context, for the purpose of finding for example.
facts and/or evidence in the context of • Negligence cases:
financial/legal disputes and/or irregularities To establish the standards of work actually
and giving preventative advice in this area. done.
• Forensic investigation applies similar • Verification of insurance claims:
procedures to a forensic audit but is carried In the event of dispute between claimant
out for specific civil or criminal cases. Such and company.
cases could involve fraud or asset tracing in
money laundering cases.
• Forensic accounting involves undertaking a The forensic accountant as expert witness
financial investigation in response to a The accountant's duty to help the court
particular event, where the findings of the overrides any duty owed to clients who may
investigation may be used as evidence in have paid for their services.
court or to otherwise help resolve disputes.

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 Chapter 15: Social, environmental and public sector auditing

Social, environmental and public sector auditing

Practical context Impact on practitioners

• Increased importance – why? • Affects auditors through:

– Social and environmental issues now politically – Application of environmental laws and
and economically important regulations
– Growth of ethical investors, consumers and – Potential pollution by client
employees – Contamination of land and buildings on
– Increase in social and environmental legislation statement of financial position
affecting businesses – Dependence on major market affected by
– Increased amounts of sustainability information environmental issues
being used to highlight growing climate crisis – Greater use of voluntary reporting to satisfy
stakeholders

Key ESG (environmental, social and governance)

issues that are important to entities General financial statement impacts
• Impacts that the entity has on ESG issues • No specific knowledge of environmental matters
• Dependencies that ESG issues have on entities required
• Physical risks (immediate climate issues) • Should obtain sufficient knowledge of the business
• Transition risks (how to switch to a low carbon to understand impact on audit
economy)
• Stranded assets (impaired in some way)
• TCFD (Task Force on Climate-related Financial Substantive procedures
Disclosures) • General: Board minutes, reports, media etc
• IFRS S1 and S2 (Sustainability Disclosure • Assets: Impairments and changes in asset usage
Standards) policy.
• Liabilities, provisions and contingencies:
Restructuring, fines and penalties, estimates
• Disclosure: Sufficient for stakeholders?

Assurance on The audit of public sector

integrated reports performance information

• Additional assurance engagements – no formal • Performance audit

structure for reports – Assessing value-for-money using quantitative
• Integrated reports use the six capitals: Financial; measures
Manufactured; Human; Intellectual; Natural; Social • Auditing performance information
– Using quantitative (non-financial) and qualitative
information as well to assess operational
Planning and performing an engagement to review
performance
an integrated report
• What are the problems?
• Types of measurement: – Does the information exist? How easily can it be
– Direct (eg kg emitted) measured and relied upon?
– Relative (eg kg per capita)
– Indexed (eg over a period)
– Aggregated
– Weighted
• Items for measurement include gas/liquid
emissions, waste amounts, staff turnover, customer
complaints and even donations to charity

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 Chapter 16: Current issues

Current issues

Current Current Current The examining Impact of

developments in developments in developments team's technical professional
auditing standards business practices in emerging articles and other changes and
and their impact and their impact technologies publications significant global
on the audit on the audit and their impact events on auditors
on the audit and their clients

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HB2024

These materials are provided by BPP

HB2024

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HB2024

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