The Institute of Chartered Accountants in England and Wales

AUDIT AND ASSURANCE

For exams in 2016

Study Guide

www.icaew.com
Contents

1 Introduction 1

2 Audit and Assurance 2

3 Permitted texts 3

4 Study guide 4

5 Syllabus and learning outcomes 15

6 Skills assessment guide 18

7 Key resources 21
1 Introduction

ACA qualification
The ICAEW chartered accountancy qualification, the ACA, is a world-leading professional qualification in
accountancy, finance and business.
The ACA has integrated components that give you an in-depth understanding across accountancy,
finance and business. Combined, they help build the technical knowledge, professional skills and
practical experience needed to become an ICAEW Chartered Accountant.
Each component is designed to complement each other, which means that you can put theory into
practice and you can understand and apply what you learn to your day-to-day work. Progression
through all the elements of the ACA simultaneously will enable you to be more successful in the
workplace and exams.
The components are:
Professional development
Ethics and professional scepticism
3-5 years practical work experience
15 accountancy, finance and business modules
To find out more on the components of the ACA and what is involved in training, visit your dashboard
at icaew.com/dashboard

Study Guide 1
 2 Audit and Assurance
The full syllabus and technical knowledge grids can be found within the module study guide. Visit
icaew.com/dashboard for this and more resources.

2.1 Module aim

To develop candidates' understanding of the critical aspects of managing an assurance engagement
(including audit engagements): acceptance, planning, managing, concluding and reporting.

2.2 Method of Assessment

The Audit and Assurance module is examined using traditional paper-based exams. The paper-based
exam is 2.5 hours long. The exam tests each of the four syllabus areas in accordance with the
weightings set out in the specification grid.
Ethics and law may be tested in any of the questions and candidates may use the open book text.

2.3 Specification grid

This grid shows the relative weightings of subjects within this module and should guide the relative
study time spent on each. Over time the marks available in the assessment will equate to the weightings
below, while slight variations may occur in individual assessments to enable suitably rigorous questions
to be set.
Weighting
Syllabus area (%)
1 Legal and other professional regulations, ethics and current issues 20
2 Accepting and managing engagements 15
3 Planning engagements 40
4 Concluding and reporting on engagements 25
100

Your exam will consist of

Part one 6 short form questions 20 marks
(worth between 2 and 4 marks each)
Part two 3 questions 80 marks
(2 worth around 20 marks and 1 worth around 40 marks)

2 Audit and Assurance

3 Permitted Texts
At the Professional and Advanced Levels there are specific texts that you are permitted to take into your
exams with you. All information for these texts, the editions that are recommended for your
examinations and where to order them from, is available on www.icaew.com/permittedtexts.

Professional Level Examinations Permitted Text

Audit and Assurance

Financial Accounting and Reporting
Tax Compliance
Business Strategy
Financial Management
Business Planning: Taxation No restrictions

Advanced Level Examinations

Corporate Reporting No restrictions

Strategic Business Management No restrictions
Case Study No restrictions

Business Planning: Taxation and the Advanced Level exams have no restrictions so you may take any
hard copy materials in to these exams that you wish, subject to practical space restrictions.
Although the examiners use the specific editions listed to set the assessment, you may use a different
edition of the text at your own risk. If you use a different edition within your exams, you should note
this inside your answer booklet, at the beginning of the question.
This information, as well as what to expect and what is and is not permitted in your exams is available in
the Instructions to Candidates. You will be sent this with your exam admission details and it is also
available on our website; www.icaew.com/exams.

Study Guide 3
 4 Study guide
4.1 Help yourself study for your ACA exams
The right approach
1 Develop the right attitude
Believe in yourself
Remember why you're doing it
2 Focus on the exam
Read through the Syllabus in this
guide
3 The right method
See the whole picture
Use your own words
Give yourself cues to jog your
memory
4 The right recap
Review, review, review
4 Audit and Assurance
Yes, there is a lot to learn. But thousands have succeeded
before and you can too.
You are studying for a good reason: to advance your
career.
This tells you what you are expected to know.
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.
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.
The Study Manual uses bold to highlight key points.
Try colour coding with a highlighter pen.
Write key points on cards.
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.
4.2 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 This topic list is shown in the contents for each chapter and helps you navigate
Topic list each part of the book; each numbered topic is a numbered section in the
chapter.
Step 2 The practical significance and working context sections for each chapter, set
Introduction 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 give you a quick summary of the content of each of the
Section overviews main chapter sections. They can also be used at the end of each chapter to
help you review each chapter quickly.
Step 4 Proceed methodically through each chapter, particularly focusing on areas
Explanations highlighted as significant in the chapter introduction or study guide.
Step 5 Take brief notes, if you wish. Don't copy out too much. Remember that being
Note taking 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 Work through the examples very carefully as they illustrate key knowledge and
Examples techniques.
Step 7 Check yours against the suggested solutions, and make sure you understand
Answers any discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of all the
Chapter summary important points in the chapter.
Step 9 Use the Self-test to check how much you have remembered of the topics
Self-test covered.
Step 10 Ensure you have ticked off the Learning objectives.
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.

4.3 Detailed study guide

Use this schedule and your exam timetable to plan the dates on which you will complete each study
period that follows.
Revision phase your revision should be centred around using the questions in the ICAEW Question
Bank.

Study Guide 5
Study
Period Practical significance Working context Approach Syllabus references and exam context Due Date

1 In the recent past, the services If you are training in practice, you are Read through Chapter 1 of the Study This chapter revises key concepts
provided by accounting practices in likely to spend some training time Manual quickly to revise the from your Assurance paper.
the UK were mainly restricted to working in an assurance department background knowledge which you
accounts preparation, audit and tax. This chapter is revision of what you
and being involved in work on audits should have from studying Assurance.
Audits were virtually the only have previously been examined on in
or other assurance engagements. If Work through the self-test and
assurance engagements in existence your Assurance paper.
you work in industry, you might be interactive questions carefully to
and nearly all companies required
involved from the other side! ensure that you have grasped the main You will need an understanding of
an audit. Consequently, most
points in the chapter. what assurance services are, and in
accountants worked on audits at
some point in their careers. particular, audit, brought forward from
More recently there have been your lower level paper to answer any
developments which have tended to questions at this level.
split the 'traditional' view that Essential points in this chapter are the
assurance firms provide audit and definitions of audit and assurance.
other services in one 'package'.
Factors such as
The restriction on which
companies are legally required to
have audits
Pressure to maintain auditor
independence post-Enron, and
The growth in other types of
assurance service being
requested from, and offered by,
accounting practices
mean that there are now many
more assurance services being
carried out in the UK and the more
general concept of assurance is a
very important issue for practices
indeed. Now trainees might train in
an assurance department but never
actually attend an audit.
Stop and think

Why is assurance more widely

required in the modern world?

6 Audit and Assurance

Study
Period Practical significance
2 It is clearly important that all parties
to an assurance engagement
understand their responsibilities.
Law and professional standards
imply a number of responsibilities
into general assurance services, and
particularly into audits. It is
important that all parties understand
the nature and extent of these
responsibilities, or it could lead to a
breakdown in the relationship
between parties.
Stop and think
Why might a lack of understanding
result in a breakdown in the
relationship?
Working context
The issue of what a professional is
responsible for is clearly of vital
importance. However, the issues
discussed in this chapter will only be
relevant to you in practice if you
operate in an assurance department.
Bear in mind, however, if you work
elsewhere in practice, that other
people in your firm have to consider
these issues, and if they get it wrong,
it could impact on you, particularly if
you are by then a partner in the firm.
If you work in industry, you need to
know your own responsibilities and
also be aware of what you are getting
when you buy assurance services.
Approach
Read sections 1 and 2 of Chapter 2
and learn the distinction between the
responsibilities of assurance providers
and management.
The specific responsibilities of auditors
for the matters outlined in the rest of
this chapter are also important. Read
through each section and use the
section overviews as checklists for your
knowledge.
Attempt the self-test and interactive
questions.
Syllabus references and exam context Due Date
Specific syllabus references for this
chapter are: 1a, b, c, d, g, h, j, 3l.
Various areas of auditor responsibility
are covered regularly in the short form
section of the examination paper,
including fraud, responsibilities with
regard to a review of projected
information and compliance with laws
and regulations.
Essential points in this chapter are:
Distinction between responsibilities of
assurance providers and management
Auditor responsibilities with regard to:
Error
Fraud
Laws and regulations
Related parties
Money laundering
Bribery.
Study Guide 7
Study
Period Practical significance
3 Increasingly, assurance providers
and particularly auditors are being
asked to carry out their procedures
in a more globally recognised way,
The EU has recently adopted both
international financial reporting
standards (for listed companies) and
international auditing standards for
all statutory audits, so convergence
is an issue which is dominating
auditors lives in a practical way at
the moment.
Stop and think
Why is convergence important?
4 All members of ICAEW, and trainees,
are required to comply with the
ethical rules of ICAEW.
Stop and think
Why are professional ethics
important?
8 Audit and Assurance
Working context
In your working environment, you
may be more accustomed to dealing
with IFRSs than UK accounting
standards, although the reverse is
likely to be true if you work in a mid-
tier or smaller firm, or in industry in a
non-listed environment. If you work
in audit, you will now be dealing
with ISAs (UK and Ireland) rather
than the UKs own statements of
auditing standards which used to
exist. As noted above, convergence is
impacting on UK accountants in a
practical way.
Professional ethics are important to
all ICAEW members and trainees,
regardless of what field they work in.
Approach
Read quickly through Chapter 3 which
covers a topic less likely to be
examined in detail than Chapter 4.
Chapter 4 is all revision from Assurance,
but you should ensure that you are very
certain of the rules of professional ethics
and be prepared to apply them to
situations in the exam. Particularly read
carefully through section 4.
Work through the interactive questions
and the exam-style questions to practise
applying your knowledge of the rules.
Syllabus references and exam context Due Date
The syllabus references relevant to
this chapter are 1d, e, f, i.
While the content of auditing
standards will impact on your exam,
the details of who issues them and
how they are issued are likely to be of
less importance, hence the fact that
there are few interactive and other
questions in this chapter. Ethics, which
are covered in the next chapter, are
likely to be far more heavily examined
in the context of professional
standards.
Essential points:
The need for regulation
The roles of IAASB and FRC.
Specific syllabus references for this
chapter are: 1a, b, c, d.
As this is an important practical area,
you can expect it to be examined
regularly.
Essential points:
Fundamental principles
FRC Ethical Standard requirements.
Study
Period Practical significance Working context Approach Syllabus references and exam context Due Date

5 If you work in practice, you will be
subject to the types of quality
control procedures set out in this
chapter as they are a requirement of
audit firms.
Stop and think
Why is it important that audit firms
have quality control processes?
If you work in practice, you will soon
be accustomed to the types of quality
control procedures on individual
assignments. Your work will be
supervised and reviewed by the
people superior to you on the
assurance team, for example. You
might also be involved in more
general controls, such as confirming
that you do not own any shares that
would cause a barrier to
independence in relation to a
particular client.
Read sections 1 and 8 of Chapter 5
very carefully, particularly the worked
example, considering the practical
impact that quality standards have on
assurance work. Sections 2 to 7 cover
some of the detailed requirements, but
the general principles are most
important in this chapter. You should
work through the sample paper
question at the end of the chapter.
Specific syllabus references for this
chapter are: 2a, b, d, e, f, g.
This is an area of the syllabus that is
likely to be examined in conjunction
with other issues such as client
acceptance or ethics.
Essential points:
The need for quality standards
The basic principles and
procedures of quality control.

Even if you work outside of practice,

as an ICAEW member, you will be
required to verify that you have
undertaken continuing professional
development.

Study Guide 9
Study
Period Practical significance Working context Approach Syllabus references and exam context Due Date

6 It is of practical significance to both
companies and assurance firms how
assurance engagements are
obtained and the processes that
assurance firms go through when
determining whether to accept
engagements, because companies
need assurance services, particularly
audits which are a statutory
requirement in many cases and
because assurance firms need to
generate income. A key issue for
firms to consider, as raised in the
previous chapter, is the risk
associated with that client or
potential client in terms of getting
the opinion wrong. In addition, they
need to consider ethics and
resources. Companies should bear in
mind when seeking auditors that
audit firms generally prefer to take
on clients which appear to have
integrity and commitment to
internal control.
Stop and think
If you work in practice, you may
become involved in the tender
process for a new client in some way
at some stage during your training. If
you work in industry, you may be
responsible for evaluating audit
tenders and recommending who to
appoint as auditors.
Chapter 6 is another chapter which
builds on the basic knowledge you
obtained in your Assurance paper.
Read all the sections carefully to note
the higher level points.
Use the worked example in section 2
to see how the theory applies in
practice, as you will be required to
apply your knowledge in this exam.
Use the summary as a checklist to think
through if client acceptance issues
come up in the exam.
Try both of the exam-style questions.
Specific syllabus references for this
chapter are: 1h, 2a, c, h, i, j.
You may be asked to apply the
principles discussed in this chapter to a
scenario question in the exam.
Essential points:
Process of obtaining engagements
Risk analysis
Legal issues
Engagement letters and
negotiating the terms of
engagements (other than audit).

What can a company do to make its

audit attractive to assurance firms
and why might it do so?

10 Audit and Assurance

Study
Period Practical significance
7 Planning is an important aspect of
the quality control processes relating
to an assurance assignment and it is
key in determining whether the
work carried out is capable of
supporting a correct conclusion. It is
therefore of crucial importance.
Stop and think
Why does planning an audit
increase the chances of the correct
conclusion being drawn?
8 It is vital that assurance providers
have a good understanding of the
entity they are providing assurance
to and the environment in which it
operates, or their work could be
meaningless. For example, if they
misunderstand the nature of the
business, they could miss key risks
and items in the financial statements
could be seriously misstated. In
addition, if they do not understand
their client's business, they will be
incapable of carrying out an audit in
accordance with auditing standards,
which could lead to negligence
claims.
Stop and think
Why is it so important to understand
the entities in relation to which
assurance is being given?
Working context
If you work in practice, you may
become involved in planning
assignments, particularly as you
progress, if you have worked on a
client in the previous year and
acquired a degree of knowledge of
the business.
If you work in industry, you may be
involved in the other side of
planning, providing auditors with
necessary planning information, such
as budgets and draft financial
information.
If you work in practice, this area will
be an important area for you and you
are likely to undertake a lot of work
to obtain knowledge about your
clients before using that knowledge
to assess risks. If you work in industry,
you are likely to be at the opposite
end of that process, providing
information about your business to
your assurance providers, so that they
can provide you with a good service,
as may some of your non-financial
colleagues.
Approach
Chapter 7 is largely revision so read
through it fairly quickly trying all the
interactive questions to apply your
knowledge.
Finish the chapter by trying the self-
test questions and the sample paper
question.
Chapter 8 is another revision chapter.
Read section 1 carefully though,
particularly the worked example, so
that you really understand the
importance of understanding the
entity. In section 3, ensure you
understand the importance of know
your client in relation to the money
laundering regulations.
Syllabus references and exam context Due Date
Specific syllabus references for this
chapter are: 3h, i, o.
A question which deals with planning
in the exam is also very likely to deal
with risks, which we shall look at in
more detail in the next chapter, hence
the question practice given in this
chapter is limited and more practice
will be given in the next chapter.
Essential points:
Definition and practical impact of
materiality
Benefits and limitations of
analytical procedures.
Specific syllabus references for this
chapter are: 3a, b, c, e.
Understanding the entity is a key
component of risk assessment. Risk
assessment is the subject of chapter 9,
which is big exam topic.
Essential points:
The need for understanding the
entity
The link with money laundering
(know your client).
Study Guide 11
Study
Period Practical significance
9 We have already focused on the
importance of risk to auditors.
Stop and think
Reflect on why risk assessment is
important to auditors before
commencing your study of this
chapter.
10 The importance of audit approach is
two-fold:
It is important for an audit firm
that its audits are carried out in
accordance with professional
standards
How the tests used impact on
audit cost.
Stop and think
Why would a firm want to rely on
the clients systems and internal
auditors?
12 Audit and Assurance
Working context
If you work in audit, you will carry
out risk assessment procedures at
some point in your career. If you
work in industry, you should see this
in practice, as assurance providers
carry out risk assessment procedures
in your business.
While training in practice, trainees
are unlikely to be involved in the
judgements going into audit
approach. However, as you progress
in your career, you may become
more involved in making such
judgements. If you work in industry,
you will see the impact of the
approach the auditors are using from
the other side.
Approach
Read through Chapter 9 carefully
working through all the examples and
interactive questions. This chapter
covers an area of important practical
significance, and it is therefore of
importance for your exam also.
Finally try the self-test questions at the
end of the chapter.
Read through all the sections in this
chapter carefully. In particular section
4 covers new and important areas, and
In the exam, you could be asked to
you should try all the interactive
questions in this section.
Use the exam-style question to bring
various sections of the chapter
together in a practical way.
Syllabus references and exam context Due Date
Specific syllabus references for this
chapter are: 3d, f, g, k, p.
Risk assessment is a very important
area for your exam.
Essential points:
Difference between business and
audit risk
Identifying risks in a given scenario.
Specific syllabus references for this
chapter are: 3h, j.
identify risks and then justify an
approach towards those risks.
Essential points:
Obtaining audit confidence
Use of:
Internal auditors
Experts
Other auditors (in a group
situation).
Study
Period Practical significance
11 Although all companies are unique,
many are fairly standard for audit
purposes, and would be described
as non-specialised. However, some
entities and companies have
specialised requirements which add
complexity to the audit being
carried out.
Stop and think
Why might certain entities have
special audit requirements?
12 Completion is a very critical stage of
the audit because the partner is
required to make the important
judgements of whether sufficient
evidence has been obtained to
support the audit opinion and what
that opinion should be.
Stop and think
How does an audit partner
determine whether there is sufficient
audit evidence?
Working context
Many firms have specialisms within
their audit departments, so if you
work in practice, you may find you
specialise in the audit of certain
specialised entities or not-for-profit
entities. You may work for an audit
firm such as the National Audit Office
that undertakes public sector audit
work. Alternatively, you do not audit
one of these entities at all.
If you work in practice, you may be
involved in any part of audit
completion. The more senior you
become in the firm, the more likely
you are to be involved in completing
the memorandum to the audit
partner.
Approach
Read through sections 1 and 2 quickly.
Then work through section 3 carefully,
identifying the key differences between
specialised audits and other audits, and
using the interactive questions to try to
consolidate this understanding.
Read through this whole chapter
carefully, but in particular, the issues of
going concern and subsequent events
in section 4. Work through the
interactive questions in these areas.
Syllabus references and exam context Due Date
Specific syllabus references for this
chapter are: 3m, n, o.
Complex auditing requirements
relating to specialised entities are not
examinable.
Essential point:
The differences between audits of
non-specialised profit-making
entities and other entities, such as
charities or public sector
organisations.
Specific syllabus references for this
chapter are: 4a, b, c, d, g, h.
The reviews carried out at the end of
the audit, such as going concern and
subsequent events reviews are
extremely important so could easily be
examined in a short form or a long
form question in the exam.
Candidates will be able to conclude
and report on assurance engagements
in accordance with the terms of the
engagements and appropriate
standards.
Essential points:
Overall review
Going concern
Subsequent events.
Study Guide 13
Study
Period Practical significance
13 The report is the last aspect of the
assurance process. It is the purpose
of the assurance process it
communicates the assurance
provider's conclusion on the subject
matter to the users. It is therefore of
critical practical significance.
Unfortunately, historically, problems
with the wording of reports have
contributed largely to the
expectations gap.
Stop and think
How should assurance providers
ensure that their reports are not
misunderstood?
14 Audit and Assurance
Working context
If you work in practice, you are more
likely to be involved in carrying out
disclosure checklists on the financial
statements (as discussed in the
previous chapter) than drafting the
audit report. However, you should be
aware when a modified audit report
might be required, so that you can
highlight that fact to senior audit
staff members.
Approach Syllabus references and exam context Due Date
Read through section 1 of Chapter 13 Specific syllabus references for this
and ensure that you know what issues chapter are: 4e, f, i, j.
should be covered in a letter to those
charged with governance. This is an important area for the exam.
Read quickly through section 2 and Essential points:
familiarise yourself with the example
report so that you are aware of the Reporting to those charged with
differences between it and an audit governance
report.
Modified audit reports and which
Section 3 should be revision from one to use when.
Assurance, so read it quickly, but
remember that you do need to know
the detail that goes into an audit
report.
Section 4 on modifications is new
material so read through it carefully
and familiarise yourself with the
example reports. Use figure 13.3 to
learn when an audit report might be
modified and try exam-style questions
3 and 4 to put this skill into practice.
5 Syllabus and learning outcomes
Covered
in chapter
1 Legal and other professional regulations, ethics and current issues
Candidates will be able to understand and advise on the regulatory, professional and ethical
issues relevant to those carrying out an assurance engagement.
In the assessment, candidates may be required to:
All assurance engagements
(a) Identify and advise upon the professional and ethical issues that may arise during an
assurance engagement. 2, 4
(b) Recognise the professional and ethical issues that may arise during an assurance
engagement, explain the relevance and importance of these issues and evaluate the
relative merits of different standpoints taken in debate. 2, 4
(c) Judge when to raise legal and ethical matters arising from assurance work with senior
colleagues for review and possible referral to external parties. 2, 4
(d) Discuss the purposes and consequences of UK laws and other regulatory requirements
surrounding assurance work. 2, 3, 4
(e) Explain the standard-setting process used by national and international (IAASB) bodies
and the authority of the national and international standards. 3
(f) Explain, in non-technical language, significant current assurance issues being dealt with
by the national standard-setting body and the IAASB. 3
(g) Explain, using appropriate examples, the main ways in which national legislation affects
assurance. 2
Audit engagements
(h) Explain the main ways in which national legislation and other regulations affect the
scope and nature of the audit and the appointment and removal of auditors (including
the relationship between the law and auditing standards). 2, 6
(i) Explain the principles behind different auditing requirements in different jurisdictions and
describe how national and international bodies are working to harmonise auditing
requirements, including requirements to report on internal controls. 3
(j) Describe the principal causes of audit failure and their effects and the gap between
outcomes delivered by audit engagements and the expectations of users of audit reports. 2

2 Accepting and managing engagements

Candidates will be able to understand the processes involved in accepting and managing
assurance engagements and how quality assurance processes mitigate the risks to those
conducting the engagement.
In the assessment, candidates may be required to:
All assurance engagements
(a) Identify the legal, professional and ethical considerations that an individual or firm must
consider before accepting a specified assurance engagement. 5, 6
(b) Identify the sources of liability (including professional negligence) arising from an
assurance engagement and their impact upon the conduct of the engagement. 5
(c) Discuss the issues which underlie the agreement of the scope and terms of an assurance
engagement (new or continuing). 6
(d) Formulate the approach suitable for management of the assurance engagement. 5
(e) Discuss the principles and purposes of quality control of assurance engagements. 5

Study Guide 15
 (f) Demonstrate how the assurance function within an organisation can be monitored. 5
(g) Describe how quality can be monitored and controlled through procedures external to
the organisation. 5
Audit engagements
(h) Discuss the process by which an auditor obtains an audit engagement. 6
(i) Discuss the issues and risks that an individual auditor or audit firm must consider with
regard to the acceptance of an audit engagement (new or continuing) with a client,
including terms of engagement and their documentation. 6
(j) Identify the legal, professional and ethical considerations that an individual auditor or
audit firm must consider before accepting a specified audit engagement. 6

3 Planning engagements
Candidates will be able to plan assurance engagements in accordance with the terms of the
engagements and appropriate standards.
In the assessment, candidates may be required to:
All assurance engagements
(a) Explain, in the context of a given scenario, why it is important to have an understanding
of the business when planning an engagement. 8
(b) Identify ways of gaining an understanding of a clients business. 8
(c) Recognise the circumstances under which it may be necessary to bring in expertise from
other parties to support assurance processes. 8
(d) Identify the risks arising from, or affecting, a given set of business processes and
circumstances and assess their implications for the engagement. 9
(e) Identify the risks arising from error, fraud and non-compliance with law and other
regulations and assess their implications for the engagement. 8
(f) Assess significant business risks identified for their potential impact upon an organisation,
in particular their potential impact on performance measurement. 9
(g) Identify the components of risk for a specified assurance engagement. 9
(h) Assess the impact of risk and materiality on the engagement plan, including the nature,
timing and extent of assurance procedures, for a given organisation. 7, 10
(i) Discuss the benefits and limitations of analytical procedures (including audit data
analytics) at the planning stage. 7
(j) Determine an approach appropriate for an engagement for a specified organisation
which addresses: 10
Possible reliance on controls (including those within IT systems)
Possible reliance on the work of internal audit
Possible reliance on the work of other experts
Possible reliance on the work of another auditor
Probable extent of tests of controls and of substantive procedures, including analytical
procedures and audit data analytics
The nature and extent of client-generated information, including reliability of clients reports
and underlying systems-generated data
The probable number, timing, staffing and location of assurance visits
The assurance of entities published sustainability and corporate responsibility reports.

16 Audit and Assurance

 Audit engagements
(k) Identify the components of audit risk for a specified audit engagement, including the
breakdown of audit risk into inherent risk, control risk and detection risk. 9
(l) Outline the aspects of employment and social security law which are relevant to statutory
audit. 2
(m) Discuss the differences between the audit of a non-specialised profit oriented entity and
the audit of a given specialised profit oriented entity. 11
(n) Discuss the differences between the audit of a non-specialised profit oriented entity and
the audit of a given not-for-profit entity. 11
(o) Specify and explain the steps necessary to plan, perform, conclude and report on the
audit of the financial statements of a non-specialised profit oriented entity in accordance
with the terms of the engagement including appropriate auditing standards. 7, 11
(p) Evaluate the impact of risk and materiality in preparing the audit plan, including the
nature, timing and extent of audit procedures. 7, 9

4 Concluding and reporting on engagements

Candidates will be able to conclude and report on assurance engagements in accordance with
the terms of the engagements and appropriate standards.
In the assessment, candidates may be required to:
All assurance engagements
(a) Describe the nature and timing of specific procedures designed to identify subsequent
events that may require adjustment or disclosure in relation to the matters being
reported on. 12
(b) Describe the nature and timing of specific procedures designed to identify the
appropriateness of the going concern assumption, including compliance with relevant
legal and regulatory requirements. 12
(c) Evaluate, quantitatively and qualitatively (including use of analytical procedures), the
results and conclusions obtained from assurance procedures. 12
(d) Draw conclusions on the ability to report on an assurance engagement which are
consistent with the results of the assurance work. 12
(e) Draft suitable extracts for an assurance report (including any report to the management
issued as part of the engagement) in relation to a specified organisation on the basis of
given information, including in the extracts (where appropriate) statements of facts, their
potential effects, and recommendations for action relevant to the needs and nature of
the organisation being reported upon. 13
(f) Advise on reports to be issued to those responsible for governance in accordance with
International Standards in Auditing, legislation, regulation and codes of corporate
governance. 13
(g) Judge when to refer reporting matters for specialist help. 12
Audit engagements
(h) Draw conclusions on the ability to report on an audit engagement, including the opinion
for a statutory audit, which are consistent with the results of the audit work. 12
(i) Explain the elements (both explicit and implicit) of the auditors report issued in
accordance with the International Standards on Auditing and statutory requirements and
recommend the nature of an audit opinion to be given in such a report. 13
(j) Draft suitable extracts for an audit report (including any report to the management
issued as part of the engagement) in relation to a specified organisation on the basis of
given information, including in the extracts (where appropriate) statements of facts, their
potential effects, and recommendations for action relevant to the needs and nature of
the organisation being reported upon. 13

Study Guide 17
 6 Skills assessment guide
6.1 Technical knowledge
The tables contained in this section show the technical knowledge covered in the ACA syllabus by
module.
For each technical topic, the level of knowledge required in the relevant Certificate or Professional Level
module and at the Advanced Level 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
thereof 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.

Assurance and Audit

Assurance

Assurance
Audit and

Advanced
Topic

Level
The International Auditing and Assurance Standards Board D C
The Authority Attaching to Standards Issued by the International Auditing and Assurance C A
Standards Board
The Authority Attaching to Practice Statements Issued by the International Auditing and A
Assurance Standards Board
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 B A
Accordance with International Standards on Auditing
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 Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements B A

18 Audit and Assurance

 Assurance

Assurance
Audit and

Advanced
Topic

Level
250 A Consideration of Laws and Regulations in an Audit of Financial Statements B A
250 B The Auditors Right and Duty to Report to Regulators in the Financial Sector C
260 (Revised October 2012) Communication with Those Charged with Governance B A
265 Communicating Deficiencies in Internal Control to Those Charged with Governance and B A
Management
300 Planning an Audit of Financial Statements B A
315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the C A
Entity and its Environment
320 Materiality in Planning and Performing an Audit C A
330 The Auditors 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 C B A
Disclosures
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 C A
Component Auditors)
610 (Revised June 2013) Using the Work of Internal Auditors C B A
620 Using the Work of an Auditors Expert B A
700 (Revised June 2013) The Independent Auditors Report on Financial Statements B A
705 (Revised October 2012) Modifications to the Opinion in the Independent Auditors A
Report
706 (Revised October 2012) Emphasis of Matter Paragraphs and Other Matter Paragraphs in A
the Independent Auditors Report
710 Comparative Information Corresponding Figures and Comparative Financial Statements B A
720 A (Revised October 2012) The Auditors Responsibility Relating to Other Information in B A
Documents Containing Audited Financial Statements
720 B The Auditors Statutory Reporting Responsibility in Relation to Directors Reports A

Study Guide 19
 Assurance

Assurance
Audit and

Advanced
Topic

Level
International Standards on Auditing
800 Special Considerations Audits of Financial Statements prepared in Accordance with B
Special Purpose Frameworks
805 Special Considerations Audits of Single Financial B A
Statements and Specific Elements, Accounts or items of a Financial Statement
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 (Revised September 2012) Engagements to Review Historical Financial Statements C B
2410 Review of Interim Financial Information Performed by the Independent Auditor of the B
Entity
International Standards on Assurance Engagements (ISAEs)
3000 (Revised) Assurance Engagements Other than Audits or Reviews of Financial C B
Information
3400 The Examination of Prospective Financial Information C B
3402 Assurance Reports on Controls at a Service Organisation C A
3410 Assurance Engagements on Greenhouse Gas Statements C
International Standards on Related Services (ISRSs)
4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information B
4410 Compilation Engagements (Revised March 2012) B
IFAC Statements
ISQC1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, C B
and Other Assurance and Related Services Engagements
Other Guidance
2010/2 (Revised March 2012) Compendium of illustrative Auditors Reports on UK Private B B
Sector Financial Statements
FRC Briefing Paper C B
Professional Scepticism establishing a common understanding and reaffirming its central role
in delivering audit quality

20 Audit and Assurance

7 Key resources
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The Library & Information Service

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The library provides access to thousands of resources online and a document delivery service, youll be
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icaew.com/library.

Study Guide 21
22 Audit and Assurance