Auditing and Assurance KASNEB Notes

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CPA INTERMEDIATE LEVEL NOTES

AUDITING AND ASSURANCE UNIT DESCRIPTION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to conduct the audit of an entity.

AUDITING AND ASSURANCE LEARNING OUTCOMES

A candidate who passes this paper should be able to:
• Demonstrate an understanding of the regulatory framework governing the external audit of financial statements
• Demonstrate an understanding of International Standards on Auditing where appropriate and the International Code of Ethics for Professional Accountants (including International Independence Standards)
• Implement the process of planning an audit, prepare audit programs and effectively conduct an audit
• Undertake audit risk assessments (excluding group accounts)
• Apply the risk based audit approach to audit of limited companies
• Prepare non – complex audit reports for audit engagements.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Describe the nature and purpose of auditing
  • Describe the regulatory framework governing the external audit of financial statements, including an understanding of International Standards of Auditing where appropriate and Professional Ethics and codes of conduct
  • Describe the rights, duties and professional obligations of an auditor
  • Explain the process of planning an audit and the necessity for an appropriate audit programme taking into account audit evidence and audit risk (excluding group accounts)
  • Explain the risk based approach to audit of limited companies; describe the audit evidence required in specified situations
  • Describe the audit work required at the final review and report stage of an audit
  • Explain the role of internal audit.

CONTENT

Assurance and non- assurance engagements

  • Definition and objectives
  • Elements of an assurance engagement
  • Types of assurance engagements
  • Levels of assurance and reports
  • Non-assurance engagements

Nature and purpose of an audit

  • Nature and objectives
  • Audit as an assurance engagement
  • Development of audit (early audit and modern audit)
  • Types of audit and limitations

Audit legal and professional framework

  • Regulatory framework within which external audits take place
  • Statutory regulations; auditors’ liability, appointment, removal, remuneration, resignation, rights and duties of auditors
  • International standards on auditing and other regulations
  • Professional ethics/code of ethics for professional accountants
  • Fundamental principles, threats and safeguards; other professional guidelines on audit fees, conflict of interest, advertising and opinion shopping

Planning and risk assessment

  • Obtaining ,accepting and retention of an audit engagement
  • Assessing audit risks
  • Understanding the entity and its environment
  • Audit planning, audit strategy, audit programmes and documentation
  • Assessing audit risks
  • Fraud, laws and regulation

Overview of forensic accounting

  • Nature, purpose and scope of forensic accounting
  • Types of forensic investigations: corruption, asset misappropriation, financial statement fraud, others
  • Fraud prevention and deterrence

Internal control systems

  • Internal controls theory and practice
  • The use and evaluation of internal control systems by auditors
  • Tests of controls on specific control environment
  • Communication on internal control systems (management letter)
  • Information technology threats and control

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Audit evidence

  • Financial statement assertions and audit evidence
  • Audit evidence procedures/techniques
  • Audit sampling and other means of testing
  • The audit of specific items (income/expenses/assets/liabilities)
  • Using the work of others (internal audit and experts)
  • Computer assisted audit techniques

Overall audit review

  • Subsequent events review
  • Going concern review
  • Contingencies and commitments
  • Management representations
  • Quality control and reviews
  • Audit investigations

Audit reports

  • Legal provisions on audit reports
  • Basic elements and key audit matters
  • Types of audit reports and different aspect of reporting
  • Features of audit reports

Auditing in the public sector

  • Introduction to auditing in the public sector; regulatory provisions
  • Framework of public sector audit
  • Objective and scope of public sector audit
  • Categories of public sector audit (compliance audit, performance, financial)
  • Audit report of the auditor general
  • Role of internal audit function in public entities
  • Relationship between external and internal auditors in the public sector
  • International Standards on Supreme Auditing Institutions

Emerging issues and trends

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