The Institute of Chartered Accountants in England and Wales

AUDIT AND ASSURANCE

For exams from 2015

Study Guide

www.icaew.com

Contents

Introduction

Audit and Assurance

Study guide

Syllabus and learning outcomes

17

Skills assessment guide

20

Key resources

23

Introduction
ACA Overview
The ICAEW chartered accountancy qualification, the ACA, is one of the most advanced learning and
professional development programmes available. Its integrated components provide you with an indepth 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 can understand and apply what you learn to your day-to-day work. The components are:

Professional development
ICAEW Chartered Accountants are known for their professionalism and expertise. Professional
development prepares you to successfully handle a variety of different situations that you'll encounter
throughout your career.
The ACA qualification improves your ability and performance in seven key areas:

Adding value
Communication
Consideration
Decision making
Problem solving
Team working
Technical competence.

Ethics and professional scepticism

Ethics is more than just knowing the rules around confidentiality, integrity, objectivity and
independence.
Its about identifying ethical dilemmas, understanding the implications and behaving appropriately. We
integrate ethics throughout the ACA qualification to develop your ethical capabilities so you will
always know how to make the right decisions and justify them.

3-5 years practical work experience

Practical work experience is done as part of a training agreement with one of our 2,850 authorised
training employers or authorised training principals around the world. You need to complete 450 days,
which normally takes between three and five years. The knowledge, skills and experience you gain as
part of your training agreement are invaluable, giving you the opportunity to put what you're learning
into practice.

15 accountancy, finance and business modules

You will gain in-depth knowledge across a broad range of topics in accountancy, finance and business.
There are 15 modules over three levels. These can be taken in any order with the exception of the Case
Study which has to be attempted last. You must pass every exam (or receive credit) there are no

Study Guide

options. This ensures that once qualified, all ICAEW Chartered Accountants have a consistent level of
knowledge, skills and experience.

Certificate Level
There are six modules that will introduce the fundamentals of accountancy, finance and business.
Each module is examined by a 1.5 hour computer-based assessment which can be sat at any time. You
may be eligible for credit for some modules if you have studied accounting, finance, law or business at
degree level or through another professional qualification.
These six modules also provide a stand-alone certificate, the ICAEW Certificate in Finance, Accounting
and Business (ICAEW CFAB). Once you have completed all six Certificate Level assessments, you can
apply for the ICAEW CFAB certificate of completion, visit icaew.com/cfab for more information.
The aim of the Assurance module is to ensure students understand the assurance process and
fundamental principles of ethics and are able to contribute to the assessment of internal controls and
gathering of evidence on an assurance engagement.

Professional Level
The next six modules build on the fundamentals and test your understanding and ability to use
technical knowledge in real-life scenarios. Each module has a 2.5 3 hour exam, which are available to
sit four times per year. These modules are flexible and can be taken in any order. The Business Planning:
Taxation and Business Strategy modules in particular will help you to progress to the Advanced Level.
The knowledge base put into place at Assurance is taken further in the professional level module, where
the aim will be to enable students to understand the critical aspects of managing an assurance
engagement. This includes acceptance, planning, managing, concluding and reporting.

Advanced Level
The Corporate Reporting and Strategic Business Management modules test understanding and strategic
decision making at a senior level. They present real-life scenarios, with increased complexity and
implications from the Professional Level modules.
The Case Study presents a complex business issue which challenges your ability to problem solve,
identify the ethical implications and provide an effective solution. The Case Study tests through
contextualisation the ability to apply your knowledge, skills and experience.
The Advanced Level exams are fully open book, so they replicate a real-life scenario where all the
resources are at your fingertips. The Corporate Reporting and Strategic Business Management exam will
consist of two scenario-based questions, forming a stepping stone to the Case Study. Access further
exam resources and support at icaew.com/dashboard.

Audit and Assurance

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 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
(%)
20
15
40
25
100

Syllabus area
1 Legal and other professional regulations, ethics and current issues
2 Accepting and managing engagements
3 Planning engagements
4 Concluding and reporting on engagements
Your exam will consist of
Part one

6 short form questions

(worth between 2 and 4 marks each)

20 marks

Part two

3 questions
(2 worth around 20 marks and 1 worth around 40 marks)

80 marks

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.

Study Guide

Study guide

3.1 Help yourself study for your ACA exams

The right approach
1

Develop the right attitude

Believe in yourself

Yes, there is a lot to learn. But thousands have succeeded

before and you can too.

Remember why you're doing it

You are studying for a good reason: to advance your

career.

Focus on the exam

Read through the Syllabus in this
guide

This tells you what you are expected to know.

The right method

See the whole picture

Use your own words

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.

Give yourself cues to jog your

memory

The Study Manual uses bold to highlight key points.

Try colour coding with a highlighter pen.

Write key points on cards.

The right recap

Review, review, review

Take notes.
Answer the questions in each chapter.
Draw mindmaps.
Try 'teaching' a subject to a colleague or friend.

Audit and Assurance

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.

3.2 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
Step 1
Topic list
Step 2
Introduction

Activity
This topic list is shown in the contents for each chapter and helps you navigate
each part of the book; each numbered topic is a numbered section in the
chapter.
The practical significance and working context sections for each chapter, set
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

Section overviews give you a quick summary of the content of each of the
main chapter sections. They can also be used at the end of each chapter to
help you review each chapter quickly.

Step 4
Explanations

Proceed methodically through each chapter, particularly focusing on areas

highlighted as significant in the chapter introduction or study guide.

Step 5
Note taking

Take brief notes, if you wish. Don't copy out too much. Remember that being
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
Examples

Work through the examples very carefully as they illustrate key knowledge and
techniques.

Step 7
Answers

Check yours against the suggested solutions, and make sure you understand
any discrepancies.

Step 8
Chapter summary

Review it carefully, to make sure you have grasped the significance of all the
important points in the chapter.

Step 9
Self-test
Step 10
Learning objectives

Use the Self-test to check how much you have remembered of the topics
covered.
Ensure you have ticked off the 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.

3.3 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

Audit and Assurance

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

In the recent past, the services

provided by accounting practices in
the UK were mainly restricted to
accounts preparation, audit and tax.
Audits were virtually the only
assurance engagements in existence
and nearly all companies required
an audit. Consequently, most
accountants worked on audits at
some point in their careers.
More recently there have been
developments which have tended to
split the 'traditional' view that
assurance firms provide audit and
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.

If you are training in practice, you are

likely to spend some training time
working in an assurance department
and being involved in work on audits
or other assurance engagements. If
you work in industry, you might be
involved from the other side!

Read through Chapter 1 of the Study

Manual quickly to revise the
background knowledge which you
should have from studying Assurance.
Work through the self-test and
interactive questions carefully to
ensure that you have grasped the main
points in the chapter.

This chapter revises key concepts

from your Assurance paper.

Due Date

This chapter is revision of what you

have previously been examined on in
your Assurance paper.
You will need an understanding of
what assurance services are, and in
particular, audit, brought forward from
your lower level paper to answer any
questions at this level.
Essential points in this chapter are the
definitions of audit and assurance.

Stop and think

Why is assurance more widely
required in the modern world?

Study Guide

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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.

Read sections 1 and 2 of Chapter 2

and learn the distinction between the
responsibilities of assurance providers
and management.

Specific syllabus references for this

chapter are: 1a, b, c, d, g, h, j, 3l.

Stop and think

Why might a lack of understanding
result in a breakdown in the
relationship?

Audit and Assurance

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.

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.

Due Date

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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 midtier 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.

Read quickly through Chapter 3 which

covers a topic less likely to be
examined in detail than Chapter 4.

The syllabus references relevant to

this chapter are 1d, e, f, i.

Stop and think

Why is convergence important?

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:

All members of ICAEW, and trainees,

are required to comply with the
ethical rules of ICAEW.

Stop and think

Why are professional ethics
important?

Due Date

Professional ethics are important to

all ICAEW members and trainees,
regardless of what field they work in.

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.

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 Guide

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

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

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.

Stop and think

Why is it important that audit firms
have quality control processes?

Even if you work outside of practice,

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

10

Audit and Assurance

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.

Due Date

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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.

Specific syllabus references for this

chapter are: 1h, 2a, c, h, i, j.

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.

Due Date

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).

Stop and think

What can a company do to make its
audit attractive to assurance firms
and why might it do so?

Study Guide

11

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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.

Chapter 7 is largely revision so read

through it fairly quickly trying all the
interactive questions to apply your
knowledge.

Specific syllabus references for this

chapter are: 3h, i, o.

Stop and think

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.

Why does planning an audit

increase the chances of the correct
conclusion being drawn?

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?

12

Audit and Assurance

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.

Finish the chapter by trying the selftest questions and the sample paper
question.

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:

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.

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).

Due Date

Study
Period

Practical significance

Working context

Approach

Syllabus references and exam context

We have already focused on the

importance of risk to auditors.

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.

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.

Specific syllabus references for this

chapter are: 3d, f, g, k, p.

Finally try the self-test questions at the

end of the chapter.

Difference between business and

audit risk

Identifying risks in a given scenario.

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?

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.

Read through all the sections in this

chapter carefully. In particular section
4 covers new and important areas, and
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

Due Date

Risk assessment is a very important

area for your exam.
Essential points:

Specific syllabus references for this

chapter are: 3h, j.
In the exam, you could be asked to
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 Guide

13

Study
Period

11

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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.

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.

Specific syllabus references for this

chapter are: 3m, n, o.

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.

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.

Stop and think

Complex auditing requirements

relating to specialised entities are not
examinable.
Essential point:

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?

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:

14

Audit and Assurance

Overall review
Going concern
Subsequent events.

Due Date

Study
Period

13

Practical significance

Working context

Approach

Syllabus references and exam context

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.

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.

Read through section 1 of Chapter 13

and ensure that you know what issues
should be covered in a letter to those
charged with governance.

Specific syllabus references for this

chapter are: 4e, f, i, j.

Read quickly through section 2 and

familiarise yourself with the example
report so that you are aware of the
differences between it and an audit
report.

Essential points:

Stop and think

How should assurance providers
ensure that their reports are not
misunderstood?

Section 3 should be revision from

Assurance, so read it quickly, but
remember that you do need to know
the detail that goes into an audit
report.

Due Date

This is an important area for the exam.

Reporting to those charged with

governance

Modified audit reports and which

one to use when.

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.

Study Guide

15

16

Audit and Assurance

4 Syllabus and learning outcomes

Covered
in chapter

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.

(d) Discuss the purposes and consequences of UK laws and other regulatory requirements
surrounding assurance work.
(e)

2, 4
2, 3, 4

Explain the standard-setting process used by national and international (IAASB) bodies
and the authority of the national and international standards.

Explain, in non-technical language, significant current assurance issues being dealt with
by the national standard-setting body and the IAASB.

(g) Explain, using appropriate examples, the main ways in which national legislation affects
assurance.

(f)

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).
(i)

(j)

2, 6

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.

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.

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.

(b) Identify the sources of liability (including professional negligence) arising from an
assurance engagement and their impact upon the conduct of the engagement.
(c)

Discuss the issues which underlie the agreement of the scope and terms of an assurance
engagement (new or continuing).

5, 6
5
6

(d) Formulate the approach suitable for management of the assurance engagement.

(e)

Discuss the principles and purposes of quality control of assurance engagements.

Study Guide

17

(f)

Demonstrate how the assurance function within an organisation can be monitored.

(g) Describe how quality can be monitored and controlled through procedures external to
the organisation.

5
5

Audit engagements
(h) Discuss the process by which an auditor obtains an audit engagement.
(i)

(j)

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.

Identify the legal, professional and ethical considerations that an individual auditor or
audit firm must consider before accepting a specified audit engagement.

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.

(b) Identify ways of gaining an understanding of a clients business.

(c)

Recognise the circumstances under which it may be necessary to bring in expertise from
other parties to support assurance processes.

(d) Identify the risks arising from, or affecting, a given set of business processes and
circumstances and assess their implications for the engagement.
(e)
(f)

8
8
8
9

Identify the risks arising from error, fraud and non-compliance with law and other
regulations and assess their implications for the engagement.

Assess significant business risks identified for their potential impact upon an organisation,
in particular their potential impact on performance measurement.

(g) Identify the components of risk for a specified assurance engagement.

(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.

9
7, 10

(i)

Discuss the benefits and limitations of analytical procedures at the planning stage.

(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

The nature and extent of client-generated information

The probable number, timing, staffing and location of assurance visits

The assurance of entities published sustainability and corporate responsibility reports.

Audit engagements
(k)

18

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.

Audit and Assurance

(l)

Outline the aspects of employment and social security law which are relevant to statutory
audit.

(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

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.

(d) Draw conclusions on the ability to report on an assurance engagement which are
consistent with the results of the assurance work.
(e)

(f)

12
12

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

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.
(i)

(j)

12

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

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

19

5 Skills assessment guide

5.1

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.

Audit and
Assurance

Advanced
Level

The International Auditing and Assurance Standards Board

The Authority Attaching to Standards Issued by the International Auditing and Assurance
Standards Board

Topic

Assurance

Assurance and Audit

The Authority Attaching to Practice Statements Issued by the International Auditing and
Assurance Standards Board

Discussion Papers

Working Procedures

International Standards on Auditing (UK and Ireland)

200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing

20

210 Agreeing the Terms of Audit Engagements

220 Quality Control for an Audit of Financial Statements

230 Audit Documentation

240 The Auditors Responsibilities Relating to Fraud in an Audit of Financial Statements

Audit and Assurance

Advanced
Level

250 A Consideration of Laws and Regulations in an Audit of Financial Statements

Audit and
Assurance

Assurance

Topic

250 B The Auditors Right and Duty to Report to Regulators in the Financial Sector

260 (Revised October 2012) Communication with Those Charged with Governance

265 Communicating Deficiencies in Internal Control to Those Charged with Governance and
Management

300 Planning an Audit of Financial Statements

315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the
Entity and its Environment

320 Materiality in Planning and Performing an Audit

330 The Auditors Responses to Assessed Risks

402 Audit Considerations Relating to an Entity Using a Service Organisation

450 Evaluation of Misstatements Identified during the Audit

500 Audit Evidence

501 Audit Evidence Specific Considerations for Selected Items

505 External Confirmations

510 Initial Audit Engagements Opening Balances

520 Analytical Procedures

530 Audit Sampling

540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates and Related
Disclosures

550 Related Parties

560 Subsequent Events

570 Going Concern

705 (Revised October 2012) Modifications to the Opinion in the Independent Auditors
Report

706 (Revised October 2012) Emphasis of Matter Paragraphs and Other Matter Paragraphs in
the Independent Auditors Report

710 Comparative Information Corresponding Figures and Comparative Financial Statements

720 A (Revised October 2012) The Auditors Responsibility Relating to Other Information in
Documents Containing Audited Financial Statements

720 B The Auditors Statutory Reporting Responsibility in Relation to Directors Reports

Study Guide

21

580 Written Representations

600 Special Considerations Audits of Group Financial Statements (including the Work of
Component Auditors)
610 (Revised June 2013) Using the Work of Internal Auditors

620 Using the Work of an Auditors Expert

700 (Revised June 2013) The Independent Auditors Report on Financial Statements

Advanced
Level

Audit and
Assurance

Assurance

Topic

International Standards on Auditing

800 Special Considerations Audits of Financial Statements prepared in Accordance with
Special Purpose Frameworks

805 Special Considerations Audits of Single Financial

Statements and Specific Elements, Accounts or items of a Financial Statement

810 Engagements to Report on Summary Financial Statements

International Auditing Practice Note (IAPN)

1000 Special Considerations in Auditing Financial Instruments

International Standards on Review Engagements (ISREs)

2400 (Revised September 2012) Engagements to Review Historical Financial Statements

2410 Review of Interim Financial Information Performed by the Independent Auditor of the
Entity

International Standards on Assurance Engagements (ISAEs)

3000 Assurance Engagements Other than Audits or Reviews of Financial Information

3400 The Examination of Prospective Financial Information

3402 Assurance Reports on Controls at a Service Organisation

3410 Assurance Engagements on Greenhouse Gas Statements

International Standards on Related Services (ISRSs)

4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information

4410 Compilation Engagements (Revised March 2012)

IFAC Statements
ISQC1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements,
and Other Assurance and Related Services Engagements

2010/2 (Revised March 2012) Compendium of illustrative Auditors Reports on UK Private

Sector Financial Statements

FRC Briefing Paper

Professional Scepticism establishing a common understanding and reaffirming its central role
in delivering audit quality

Other Guidance

22

Audit and Assurance

6 Key resources
Student support team
Our student support team are here to help you as much as possible, providing full support throughout
your studies.
T +44 (0)1908 248 250
F +44 (0)1908 248 069

E studentsupport@icaew.com
Student website
The student area of our website provides you with information on exam applications, deadlines, results
and regulations as well as applying for credit for prior learning (CPL). The study resources section
includes advice from the examiners, module syllabi, past papers and sample papers, webinars and study
guides. The study guides are designed to help put the learning for each module into context and
highlight the practical significance of what youll learn. They also include the syllabus, technical
knowledge grids and learning outcomes for each module, enabling you to gain an overview of how
your learning links to the qualification. Visit icaew.com/dashboard for these resources and more.
If you are studying for the ICAEW CFAB qualification, you can access exam resources and support at
icaew.com/cfab

Online student community

The online student community is a forum to ask questions, gain study and exam advice from fellow ACA
and ICAEW CFAB students and access our free webinars. There are also regular Ask a Tutor sessions to
help you with key technical topics and exam papers. Access the community at
icaew.com/studentcommunity

Tuition
The ICAEW Partner in Learning scheme recognises tuition providers who comply with our core principles
of quality course delivery. If you are receiving structured tuition with an ICAEW Partner in Learning,
make sure you know how and when you can contact your tutors for extra help. If you are not receiving
structured tuition and are interested in classroom, online or distance learning tuition, take a look at our
recognised Partner in Learning tuition providers in your area, on our website icaew.com/dashboard

Faculties and Special Interest Groups

Faculties and special interest groups support and develop members and students in areas of work and
industry sectors that are particular interest.
Our seven faculties provide knowledge, events and essential technical resources. They cover Audit and
Assurance, Corporate Finance, Finance and Management, Financial Reporting, Financial Services,
Information Technology and Tax. As an ACA or ICAEW CFAB student, you are entitled to register to
receive either complimentary factsheets from the Financial Reporting Faculty or an e-newsletter from
one faculty of your choice each year throughout your studies.
Our 12 special interest groups provide practical support, information and representation within a range
of industry sectors including Charity and Voluntary, Entertainment and Media, Farming and Rural
Business, Forensic and Expert Witness, Healthcare, Insolvency and Restructuring, Interim Management,
Solicitors, Tourism and Hospitality, Public Sector, Valuation and Non-Executive Directors. As an ACA
student you can receive free provisional membership of one group each year throughout your studies,
apart from the Public Sector group, where a subscription charged is required.
Find out more about faculties and special interest groups at icaew.com/facultiesandsigs

The Library & Information Service

The Library & Information Service is ICAEWs world-leading accountancy and business library. You have
access to online and print facilities which include company information, country and sector resources,
economic forecasts and eBooks, with services that include book loans, document delivery and help with
research queries. Visit icaew.com/library for more information.

Study Guide

23

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Audit and Assurance