Paper P7: Advanced Audit and Assurance - Study text 2016

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ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Paper P7 Advanced Audit and Assurance (International) Study Text for exams from September 2015 to 31 August 2016 Free access to our Exam Success site Look inside ACCA APPROVED CONTENT PROVIDER As the irst accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for producing exceptional study materials for students and tutors alike Our Study Texts, Practice & Revision Kits and i-Passes (for ACCA F1/FIA FAB, ACCA F2/FIA FMA, ACCA F3/ FIA FFA and ACCA F4) are reviewed by the ACCA examining team and are written by our in-house authors with industry and teaching experience who understand what is required for exam success EXAM SUCCESS SITE To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA resources Our Exam Success site provides you with access to a free digital version of this publication, as well as extra resources designed to focus your efforts on exams and study methods To access the Exam Success site, please email learningmedia@bpp.com with the subject line “Access to Exam Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie ACCA F7 Study Text) for your access code Once you have received your code, please follow the instructions below: To access the BPP ACCA Exam Success site for this material please go to: www.bpp.com/ExamSuccessSite n Create a user account if you don’t already have one Make sure you reply to the conirmation email n Log in using your registered username and password Select the paper you wish to access n Enter the code you received when prompted You will only have to this once for each paper you are studying S T U D Y PAPER฀P7฀ T E X T ADVANCED฀AUDIT฀AND฀ ASSURANCE฀ (INTERNATIONAL)฀ BPP Learning Media is an ACCA Approved Content Provider This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam In this ACCA examination-team reviewed Study Text, we:        H the in the syllabus and the how each chapter links to the syllabus and the Study Guide lots of demonstrating what is expected of you in the exam in regular in in our in our BPP's Practice & Revision Kit also supports this paper ฀ you need First edition 2007 Eighth edition April 2015 ISBN 9781 4727 2685 (Previous ISBN 9781 4727 1091 8) e-text ISBN 9781 4727 2763 A catalogue record for this book is available from the British Library All our rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless where otherwise stated BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia RICOH UK Limited Unit Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources © BPP Learning Media Ltd 2015 ii Contents Page Introduction Helping you to pass v Studying P7 vii The exam paper xiii Syllabus and study guide xvi Part A Regulatory environment International regulatory environments for audit and assurance services Part B Professional and ethical considerations Code of ethics and conduct 35 Professional liability 69 Part C Practice management Quality control 99 Obtaining and accepting professional appointments 113 Part D Audit of historical financial information 10 11 Planning and risk assessment 137 Evidence 185 Evaluation and review (I) 221 Evaluation and review (II) – matters relating to specific accounting issues 255 Evaluation and review (III) – matters relating to specific accounting issues 281 Group audits and transnational audits 321 Part E Other assignments 12 13 14 15 16 Audit-related services and other assurance services 355 Prospective financial information (PFI) 385 Forensic audits 399 Social, environmental and public sector auditing 411 Internal audit and outsourcing 441 Part F Reporting 17 Reporting 459 Part G Current issues and developments 18 Current issues 485 List of articles by the examining team 501 Practice question and answer bank 505 Index 587 Review form Contents iii A note about copyright Dear Customer What does the little © mean and why does it matter? 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BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv Helping you to pass BPP Learning Media – Approved Content Provider As ACCA's Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team's comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the 'PER alert' feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your online My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the Text, the purposes of which are explained fully on the Chapter features page, will help you while studying and improve your chances of exam success Developing exam awareness Our Study Texts are completely focused on helping you pass your exam Our advice on Studying P7 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics have been examined, or how they might be examined in the future Using the Syllabus and Study Guide You can find the Syllabus and Study Guide on page xvii to xxviii of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference Tells you what you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study guide Links the chapter content with ACCA guidance Exam guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points Tell you when and how specific topics have been examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt This is a new feature that gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Introduction Question Essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Practice Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P7 As the name suggests, this paper examines advanced audit and assurance topics Paper P7 is one of the professional level Options papers and as such candidates must consider carefully whether they have the required competencies The P7 examination team The examination team expects you to demonstrate a highly professional approach to all questions – not just presenting information in a professional manner, but also integrating knowledge and understanding of topics from across the syllabus The examination team is also very keen for students to demonstrate evidence of wider reading and to demonstrate an understanding of current issues as they affect audit and assurance At the absolute minimum you should read Student Accountant The examination team often examines topics that it has written about in Student Accountant Syllabus update The P7 syllabus has been updated for the September 2015 sitting onwards The full syllabus and Study Guide can be found in this Study Text on pages xvii to xxviii What P7 is about The aim of the syllabus is to analyse, evaluate and conclude on the assurance engagement and other audit and assurance issues in the context of best practice and current developments The paper builds on the topics covered in Paper F8 Audit and Assurance but as an advanced paper it tests much more than just your knowledge of ISAs and your ability to list standard audit procedures You must be able to apply your knowledge to more complex audit and assurance scenarios, identifying and formulating the work required to meet the objectives of audit and non-audit assignments and to evaluate the findings and results of work performed Accounting knowledge examined in Paper P2 Corporate Reporting is also assumed Therefore, candidates studying for P7 should refer to the Accounting Standards listed under P2 The syllabus is divided into seven main sections: (a) Regulatory environment This section introduces the legal and regulatory environment including corporate governance issues It also examines the topics of money laundering and the consideration of laws and regulations (b) Professional and ethical considerations The details of the various ethical codes should be familiar to you from your earlier studies, however the importance of this topic should not be underestimated The examination team has indicated that ethical and professional issues are likely to feature in every sitting This section also covers fraud and professional liability, both of which are topical issues (c) Practice management This part of the syllabus covers quality control, tendering and professional appointments It also covers advertising, publicity, obtaining professional work and fees (d) Audit of historical financial information This is the largest section of the syllabus looking in detail at the procedures involved in a range of audit and assurance assignments The examination team has indicated that evidence gathering is a key part of the syllabus and is likely to feature at each sitting Requirements are likely to focus on specific assertions, balances or transactions (e) Other assignments This section also covers a range of audit-related and assurance services The examination team has stressed the need for candidates to be able to tackle these types of scenario Introduction vii (f) Reporting The detail of audit reports should be familiar to you from your earlier studies At this level you will be expected to apply this knowledge to more complex scenarios The examination team has also stressed the importance of the relationship between financial reporting and auditing This will be particularly important when forming an appropriate audit opinion This section of the syllabus also includes reports to management and other reports (g) Current issues and developments Current issues and developments includes a wide range of topics including the IAASB clarity project, professional, ethical and corporate governance, information technology, going concern, transnational audits and social and environmental auditing The examination team has indicated that this is likely to be examined at each sitting, and that candidates are expected to have read around the issues for themselves You will need to be able to discuss current issues topics in the context of a client scenario Skills you have to demonstrate 2.1 Knowledge and application Even with exams you've previously taken, you'll remember that passing didn't only mean reproducing knowledge You also had to apply what you knew At Professional level, the balance is tilted much more towards application You will need a sound basis of technical knowledge The exams will detect whether you have the necessary knowledge However, you won't pass if you just spend your time acquiring knowledge Developing application skills is vital 2.2 Application skills  A thorough understanding of the relevant audit, assurance and financial reporting regulations that fall within the syllabus  The ability to apply knowledge to specific client scenarios  The ability to have an independent opinion, backed by reasoned argument  An appreciation of commercial factors which influence practice management  An appreciation of fast-moving developments in audit and assurance practices The P7 examination team made very similar comments in a number of recent examiner's reports which is so important that we will quote it here These pitfalls tend not to change from year to year: 'Similar factors as detailed in previous examiner's reports continue to contribute to the unsatisfactory pass rate:      Failing to answer the specific question requirements Not applying knowledge to question scenarios Not explaining or developing points in enough detail Lack of knowledge on certain syllabus areas Illegible handwriting' 'As seen in previous sittings, what makes the difference between a pass and a fail script is usually the level of application skills which have been demonstrated Candidates who answer the specific question requirement, and tailor their answers to the scenarios provided are likely to well.' (Examiner's Report, June 2011) viii Introduction (b) (i) (ii) Selective revaluation of premises Generally mark an implication/comment thereon Ideas  Materiality assessed  Not pervasive  Adjusting event (IAS 10)  Non-compliance IAS 16  Reversal of revaluation adjustments or  Qualified 'except for' material misstatement (IAS 16)  Change in accounting policy (next year)  Impairment (IAS 36) – Insufficient evidence inability to obtain sufficient appropriate audit evidence 'except for' – Sufficient evidence misstatement 'except for' Ten-year guarantee Generally mark an implication/comment thereon Ideas  Matter is material  Present obligation … probable … etc  Not a contingent liability  Best estimate – how determinable  'Except for' material misstatement non-compliance IAS 37 Max Max 17 (a) (i) (ii) (iii) (iv) A 'qualified opinion' on the financial statements is expressed when the auditor concludes that an unmodified opinion cannot be expressed but that the effect of any material misstatement or inability to obtain sufficient appropriate audit evidence is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion A 'disclaimer of opinion' is expressed when the possible effect of a limitation on the scope of the audit (inability to obtain sufficient appropriate audit evidence) is so material and pervasive that the auditor is unable to express an opinion on the financial statements An 'Emphasis of Matter paragraph' is used in an auditor's report to highlight a matter affecting the financial statements which is appropriately presented or disclosed, for example in a note to the financial statements, that is of such importance that it is fundamental to users' understanding of the financial statements The addition of such an Emphasis of Matter paragraph(s) does not affect the auditor's opinion on the financial statements The auditor may also modify the auditor's report by using an Emphasis of Matter paragraph(s) to report matters other than those affecting the financial statements An 'Other Matter paragraph' is a paragraph included in the auditor's report that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's judgement, is relevant to users' understanding of the audit, the auditor's responsibilities or the auditor's report These four terms can be distinguished from each other as follows An Emphasis of Matter paragraph or an Other Matter paragraph does not affect the auditor's opinion on the financial statements, whereas a qualified opinion and disclaimer of opinion A qualified opinion can result from a limitation on scope leading to an inability to obtain sufficient appropriate audit evidence, or from a disagreement as a result of which the financial statements are materially misstated A disclaimer of opinion results from a limitation on scope leading to an inability to obtain sufficient appropriate audit evidence that is so material and pervasive that the auditor cannot express an opinion on the financial statements 582 Practice answer bank (b) (i) Revaluation of properties In accordance with IAS 16 Property, plant and equipment, if a policy of revaluation is to be adopted, it must be applied to all the non-current assets in that class Therefore Petrie's management should have revalued all the properties, not just three of them The valuation of of the properties after the end of the reporting period represents an adjusting event in accordance with IAS 10 Events after the reporting period Hence these should be adjusted for as well as the properties valued by the end of the reporting period The increase in revaluation of 12 of the 15 properties amounts to $7.1 million, which represents 23.1% of total assets and is therefore very material to the statement of financial position If the management does not revalue all the properties for the year ended 31 March 20X2 then the financial statements would be qualified on the basis of a material misstatement (except for opinion), as tangible non-current assets would be materially understated in the accounts The management should therefore either revalue all the properties for the year or none of them, in order to avoid a qualification in the year ended 31 March 20X2 (ii) Warranty The sales of stainless steel cookware represent $18.2 million of revenue for the year which is 43% of total revenue and therefore are material to the accounts However, the warranty however was introduced three months into the year so would apply to approximately $13.6m which represents 32% of total revenue The conditions for recognising a provision in the financial statements in accordance with IAS 37 Provisions, contingent liabilities and contingent assets are that there is a present obligation as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation Petrie's management should recognise a provision in the financial statements for the year ended 31 March 20X2 if the conditions are met However, the disclosure in the accounts is as a contingent liability – but it is very unlikely that the company cannot make a reliable estimate of the obligation If a provision is not made for the warranty then the auditor's opinion would be qualified on the basis of a material misstatement ('except for') in respect of non-compliance with the requirements of IAS 37 Practice answer bank 583 584 Practice answer bank Index 585 586 Note Key Terms and their page references are given in bold A ACCA Technical Factsheet 145 Anti-money laundering for the accounting sector, 19 Accounting estimate, 257 Actuarial assumptions, 304 Adverse opinion, 466 Advertising and fees, 119 Advocacy, 38 Advocacy threat, 52 Agreed-upon procedures assignment, 369 Agriculture, 264 Analytical procedures, 173, 224 Anomaly, 189 Appropriateness, 188 Assertions, 186 Associate, 323, 332 Assurance engagement, 370 Attestation engagement, 370 Audit agreement, 130 Audit committees, 11 Audit firms, 348 Audit interrogation software, 193 Audit report, 462 Audit risk, 160 Audit sampling, 189 Auditor's expert, 208 Audit-related services, 356 B Borrowing costs, 303 Brands, 268 BS 7750 Environmental Management System, 419 Bulletin 2006/5 The Combined Code on Corporate Governance: Requirements of Auditors Under the Listing Rules of the Financial Services Authority, 16 Business risk, 163 C Capital, 224 Capping liability, 81 Cash-generating unit, 262 Civil Procedure Rules, 402 Client screening, 128 Close business relationships, 46 Cold review, 103 Comparative financial statements, 231 Comparative information, 230 Compliance risk, 163 Component, 334 Component auditor, 334 Component materiality, 334 Computer assisted audit techniques, 193, 194 Confidentiality, 37, 59 Conflicts of interest, 62 Contingent consideration, 323 Contingent fee, 47 Contract, 283 Contracting-out, 445 Control, 323, 325 Control risk, 160, 161 Corporate finance, 51 Corresponding figures, 231 Customer, 283 D Deferred taxation, 294 Deficiencies, 478 Deficiency in internal control, 477 Defined benefit liability, 305 Derivative, 269 Detection risk, 160, 162 Development costs, 267 Direct assistance, 213 Direct engagement, 370 Disclaimer of opinion, 466 Disclaimers, 76 Discontinued operations, 311 Dividend cover, 225 Due diligence, 366 Duty of care, 71, 72 Duty of confidence, 59 E Earnings per share, 309 Eco-audit, 419 Eco-labelling, 419 Embedded audit facilities, 194 Emphasis of matter, 464 Emphasis of Matter paragraph, 464 Engagement letter, 129 Environmental audits, 419 Environmental Impact Assessments (EIAs), 419 Environmental management system (EMS), 415 Environmental Quality Management (EQM), 419 Environmental SWOT analysis, 419 Equity method, 332 Expectations gap, 93 Index 587 Expert, 207, 208 Expert witness reports, 403 Exposure Draft of ISA 610 Using the Work of Internal Auditors, 488 F Fair value, 256, 269, 323 Familiarity, 38, 53 Family and personal relationships, 47 Fidelity guarantee insurance, 79 Financial asset, 265, 270 Financial instrument, 268, 269 Financial interest, 44 Financial liability, 270, 271 Financial Reporting Council, Financial risks, 163 Financial statement assertions, 186 Forecast, 387 Forensic accounting, 400 Forensic auditing, 400 Forensic investigation, 400 Fraud, 82 G Gifts and hospitality, 47 Going concern, 237 Going concern assumption, 241 Goodwill, 267 Governance, 475 Government grants and assistance, 290 Group, 334 Group audit, 334 Group-wide controls, 342 H Hedge accounting, 270, 271 Hot review, 103 I IAASB ED: Proposed changes to ISAs – addressing disclosures in the audit of financial statements, 495 IAASB Paper Financial reporting on the internet: responsibilities of directors and management, 461 IAASB Practice Alert Audit Considerations in Respect of Going Concern in the Current Economic Environment, 486 IAASB Practice Alert Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment, 487 588 Index IAASB Q&A Paper Auditor Considerations Regarding Significant, Unusual or Highly Complex Transactions, 487 IAASB Q&A Paper Professional scepticism in an Audit of Financial Statements, 488 IAASB Q&A paper XBRL: The Emerging landscape, 487 IAPN 1000 Special considerations in auditing financial instruments, 268 IAS Presentation of financial statements, 364 IAS Statements of cash flows, 312 IAS Accounting policies, changes in accounting estimates and errors, 316 IAS 10 Events after the reporting period, 237 IAS 12 Income taxes, 294 IAS 17 Leases, 291 IAS 19 Employee benefits, 303 IAS 20 Accounting for government grants and disclosure of government assistance, 290 IAS 23 Borrowing costs, 303 IAS 31 Interests in joint ventures, 333 IAS 33 Earnings per share, 309, 472 IAS 37 Provisions, contingent liabilities and contingent assets, 298 IAS 38 Intangible assets, 266, 267 IAS 40 Investment property, 274 IAS 41 Agriculture, 264 IESBA Code of Ethics for Professional Accountants, 36 IESBA Responding to a Suspected Illegal Act, 61 IFRS Share-based payment, 306 IFRS Business combinations, 266 IFRS Non-current assets held for sale and discontinued operations, 311 IFRS Operating segments, 308 IFRS 15 Revenue from contracts with customers, 282 Impairment review, 263 Income, 283 Inconsistency, 235 Incorporation, 80 Independence, 39 Independence in appearance, 41 Independence of mind, 41 Inherent risk, 160 Insider dealing, 71 Insolvency, 70 Insourcing, 445 Insurance claims, 401 Integrated Test Facility (ITF), 194 Integrity, 37 Internal audit, 211, 448 Internal auditors, 14 Internal control effectiveness, 16 International Auditing and Assurance Standards Board, Intimidation, 38, 55 Investment, 323 Investment property, 274 ISA 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with international standards on auditing, 139, 159 ISA 210 Terms of audit engagements, 128 ISA 220 Quality control for an audit of financial statements, 104, 222 ISA 230 Audit documentation, 216 ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements, 83 ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements, 286 ISA 250 Consideration of laws and regulations in an audit of financial statements, 24, 423 ISA 260 Communication with those charged with governance, 474 ISA 300 Planning an audit of financial statements, 139 ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment, 84 ISA 330 The auditor's responses to assessed risks, 142 ISA 402 Audit considerations relating to entities using service organisations, 450 ISA 450 Evaluation of misstatements identified during the audit, 159 ISA 501 Audit evidence – additional considerations for specific items, 300 ISA 510 Initial engagements – opening balances, 228 ISA 520 Analytical procedures, 173 ISA 520 Analytical procedures, 194 ISA 520 Analytical procedures, 224 ISA 540 Auditing accounting estimates, including fair value accounting estimates and related disclosures, 257 ISA 540 Auditing accounting estimates, including fair value accounting estimates, and related disclosures, 268 ISA 550 Related parties, 195 ISA 560 Subsequent events, 237 ISA 570 Going concern, 241 ISA 580 Written representations, 204 ISA 600 Special considerations – audit of group financial statements (including the work of component auditors), 343 ISA 610 Using the work of internal auditors, 211 ISA 620 Using the work of an expert, 208 ISA 700 Forming an opinion and reporting on financial statements, 463 ISA 705 Modifications to the opinion in the independent auditor's report, 463 ISA 706 Emphasis of matter paragraphs and other matter paragraphs in the independent auditor's report, 463, 464 ISA 720 The auditor's responsibility in relation to other information in documents containing audited financial statements, 235 ISAE 3400 The examination of prospective financial information, 386 ISQC Quality control for firms that perform audits and reviews of financial statements, and other assurance and related services engagements, 58, 124 ISRE 2400 Engagements to review financial statements, 358 ISRE 2410 Review of interim financial information performed by the independent auditor of the entity, 362 ISRS 4400 Engagements to perform agreed upon procedures regarding financial information, 369 ISRS 4410 Compilation engagements, 378 J Joint arrangement, 323, 333 Joint audit, 347 Joint control, 323, 333 Joint venture, 323, 333 K Key audit partner, 55 Know your client, 128 Knowledge, 23 L Leases, 291 Legal action, 129 Legal liability, 70 Liabilities, 291 Limited assurance, 390 Limited assurance engagement, 371 Limited liability partnerships, 80 Litigation avoidance, 77 Loans and guarantees, 47 Lowballing, 49, 122 M Management's expert, 208, 274 Management's point estimate, 258 Material inconsistency, 235 Material misstatement, 467 Materiality, 155 Money laundering, 18, 269 Index 589 N S Negligence, 71, 401 Non-sampling risk, 189 Sampling, 155 Sampling risk, 189 Sampling units, 189 Sarbanes-Oxley Act, 50 Segment reporting, 308 Self-interest, 38 Self-interest threat, 44 Self-review, 38, 49 Service auditor, 450 Service organisation, 450 Share-based payment, 306 Significant component, 337 Significant deficiency in internal control, 477 Significant influence, 323, 332 Significant risk, 142 Social audits, 418 Statements of cash flows, 312 Statistical sampling, 189 Stratification, 189 Subject matter information, 374 Subsequent events, 237 Subsidiaries, 332 Subsidiary, 323 Sufficiency, 188 Supplier audits, 419 Suspicion, 23 Systems Control and Review File (SCARF), 194 O Objectivity, 37 Opening balances, 228 Operational risks, 163 Other information, 235 Other Matter paragraph, 464 Outsourcing, 445 Overdue fees, 47 P Peer review, 103 Pension costs, 303 Performance information, 427 Performance materiality, 155 Performance obligation, 283 Pervasiveness, 467 Politically exposed persons, 128 Population, 189 Preconditions for an audit, 128 Preface to International Standards on Quality Control, Auditing, Assurance and Related Services, Price/Earnings (P/E) ratio, 226 Professional behaviour, 37 Professional competence and due care, 37 Professional indemnity insurance, 79 Professional scepticism, 41, 139 Projection, 387 Proportionate liability, 81 Prospective financial information, 386 Provisions and contingencies, 298 Public interest entity, 41 Q Qualified opinion, 466 R Reasonable assurance engagement, 371 Recognised Supervisory Bodies, Recoverable amount, 262 Related party, 196 Revenue, 283 Review engagements, 357 Risk assessment, 379 Risk of material misstatement, 167 Risk-based auditing, 145 ROCE, 224 Royal Bank of Scotland v Bannerman Johnstone Maclay and Others, 76 590 Index T Tendering, 122 Terrorist financing, 402 Test data, 194 The Forum of Firms, 348 Those charged with governance, 475 Tolerable misstatement, 189 Tolerable rate of deviation, 189 Top-down approach, 146 Transaction price, 283 Transnational audit, 349 Transnational Auditors Committee, 348 Trend analysis, 177 Type report, 450 Type report, 450 U Uncorrected misstatements, 226 Underlying subject matter, 374 User auditor, 450 User entity, 450 V W Valuation, 50 Valuation of non-current assets, 260 Value in use, 262 Working papers, 217 Written representations, 204 Index 591 592 Index Notes Notes Review Form – Paper P7 (International) Advanced Audit and Assurance (04/15) Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Address: Name: During the past six months you recall seeing/receiving any of the following? 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