Icaew Cfab Asr 2019 Study Guide

The Institute of Chartered Accountants in England and Wales
ASSURANCE
For exams in 2019
Study Guide
www.icaew.com
Contents
1 Key resources 1
2 Study guide 2
3 Syllabus and learning outcomes 19
4 Technical knowledge grid 22
5 Glossary of terms 28
The Assurance module ensures you understand the assurance process and fundamental
principles of ethics, and are able to contribute to the assessment of internal controls and
gathering evidence on an assurance engagement.
ii ICAEW 2019
1 Key resources
Whether you're studying the ACA qualification or ICAEW CFAB, with an employer, at university,
independently (self-studying), or via an apprenticeship, we provide a wide range of resources
and services to help you in your studies. They can be found on our website. Be sure to visit the
specific area for your qualification.
ACA students, you can access dedicated exam resources, guidance and information for the ACA
qualification via your dashboard at icaew.com/dashboard.
ICAEW CFAB students, you can find everything you need at icaew.com/cfabstudents.
Syllabus and technical knowledge grids
This gives you the full breakdown of learning outcomes for each module and how your technical
knowledge will grow throughout the qualification.
Study guide
This guides you through your learning process, putting each chapter and topic of the Study
Manual into context and showing what learning outcomes are attached to them.
Exam webinars
The pre-recorded webinars focus on how to approach each exam, plus exam and study tips.
Errata sheets
These are available on our website if we are made aware of a mistake within a Study Manual or
Question Bank once it has been published.
Student support team
Our dedicated student support team is here to help and advise you throughout your studies,
don't hesitate to get in touch. Email [email protected] or call +44 (0)1908 248 250 to
speak to an adviser.
ICAEW 2019 Study Guide 1

2 Study guide
2.1 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.
2 Focus on the exam
Read through the Syllabus in this This tells you what you are expected to know.
guide
3 The right method
See the whole picture 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 outcomes and Section overviews in
the study manual show you what you need to
grasp.
Use your own words 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.
Give yourself cues to jog your The Study Manual uses bold to highlight key points.
memory
 Try colour coding with a highlighter pen.
 Write key points on cards.
4 The right recap
Review, review, review 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.
2 Assurance ICAEW 2019

2.2 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
Topic list navigate 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,
Introduction 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 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
Note taking 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 Work through the examples very carefully as they illustrate key knowledge
Examples and techniques.
Step 7 Check yours against the suggested solutions, and make sure you
Answers understand any discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of all
Chapter summary the 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 outcomes.
Learning outcomes
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.
2.3 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 Due
Period Practical significance Working context Approach Syllabus references and exam context Date
1 Concept of and need for As an audit is a legal Read through Chapter 1 carefully. It is crucial to the whole syllabus that you understand the
assurance requirement for many Make sure you understand what concept of assurance, why it is required and the reason for
companies, many of you are an assurance engagement is and assurance engagements being carried out by appropriately
Users of financial and non-
likely to carry out a lot of your the different levels of assurance qualified professionals. You can therefore expect to see
financial information want to
practical training in audit. You which it can provide depending questions in the exam testing your understanding of the
have confidence that the
will also focus on audit when on the specific nature of the definition of assurance and the different levels of assurance.
information they are using is
you come to study for the engagement. You should also be
reliable and that they can In the sample paper, the first five questions relate to the
Audit and Assurance exam at familiar with the objective of an
draw valid conclusions as a subject matter you will cover in this chapter.
the Application stage of the audit and the meaning of 'true'
result of it. They want
exams. The broad principles and 'fair'. In the assessment, students may be required to:
assurance about the quality
of assurance services can be  define the concept of assurance;
of the information they are Attempt the Interactive questions
applied to many different
using to make decisions. and the Self-test questions to  state why users desire assurance reports and provide
engagements which may be
Provision of assurance confirm your understanding of the examples of the benefits gained from them such as to
carried out by your firm.
services is therefore a very topics covered in this chapter. assure the quality of an entity’s published corporate
important area of business responsibility or sustainability report;
for accountants. Accountants
are able to provide  compare the functions and responsibilities of the
assurance on a range of different parties involved in an assurance engagement;
matters because they are  compare the purposes and characteristics of, and levels
skilled business of assurance obtained from, different assurance
professionals. As accountants engagements;
are subject to strict ethical
 identify the issues which can lead to gaps between the
codes, they are perceived to
outcomes delivered by the assurance engagement and
be trustworthy, and therefore
the expectations of users of the assurance reports, and
users of information believe
suggest how these can be overcome; and
that the assurance they give
can be trusted. • define the concept of reasonable assurance.
Stop and think Specific syllabus references for this chapter are:
1a, b, c, d, e, h.
What other information
(financial and non-financial)
might users want assurance
in relation to?

Study Due
2 Process of assurance: During your training, you are Read through sections 1 and 2 of This is a fairly minor area for the exam, but you could expect
obtaining an engagement unlikely to be involved in Chapter 2 paying particular at least one question on the scope of the engagement (there
In practice, the matters obtaining clients or attention to the appointment was a question about engagement letters in the sample
covered in this chapter are determining whether an decision chart. You should also paper) and possibly another on the considerations of the
very important to assurance engagement is going to be attempt Interactive questions 1 assurance firm when deciding to accept engagements.
firms. It is important to know accepted. However, if you and 2.
In the assessment, students may be required to:
how to obtain clients and continue in your career to
Read through section 3 and make  define the assurance process, including:
therefore secure future higher levels, even
sure you understand the purpose
revenue. It is important to partnership, then these will – obtaining the engagement
of the engagement letter.
only accept clients which the be important practical issues – continuous risk assessment
firm is able to serve and for you. Complete all remaining Interactive – engagement acceptance
engagements which the firm and Self-test questions. – the scope of the engagement
However, you are the face of
has the resources to carry the assurance firm when
out. It is particularly The specific syllabus reference for this chapter is: 1f.
carrying out engagements,
important that all parties and you may be in a position
understand the nature of the where it is necessary to clarify
work that will be carried out, the scope of the work that
as this may prevent disputes you are carrying out to aid a
and problems later on. client's understanding. In
Another important area for such a case, it might be
practitioners is the increased necessary to refer to the
client awareness and terms of engagement
identification procedures between the firm and the
required to guard against client, and it will be important
involvement in money that you understand what you
laundering. are talking about, if asked.
Stop and think
Given the problems with
assurance noted in the
previous chapter, how can
assurance firms ensure that
their clients understand the
services they are being
offered?

Study Due
3 Process of assurance: As you become more senior Chapter 3 introduces a number of Planning and risk are key issues for assurance providers and
planning the assignment in your firm you are more important auditing concepts and you should expect this area to come up in your assessment.
likely to become involved in principles so work through it Ensure that you understand the definitions that are set out in
Every piece of assurance
planning work. However, you carefully. this chapter, since all could be examined. In addition, work
work carried out by a firm
may carry out risk assessment Read through section 1. Make sure through the examples and questions in the chapter
should be planned, therefore
procedures from an early you can distinguish between the identifying risks, as your assessment could include a question
this chapter covers an area of
stage. You will be involved in audit strategy and the audit plan. in such an area.
huge practical significance.
the required discussion You must also be familiar with the In the assessment students may be required to:
Stop and think relating to audit planning that ways in which the auditor will
must involve all members of obtain an understanding of the  define the assurance process, including:
Why do practitioners plan the audit team whenever you entity including the various – planning the engagement;
assurance work? are assigned to an audit. sources of information.
 recognise the need to plan and perform assurance
Section 2 introduces analytical engagements with an attitude of professional
procedures. Work through the scepticism and the exercise of professional judgement;
Worked example and make sure and
you attempt the Interactive
question on this topic.  recognise the characteristics of fraud and distinguish
between fraud and error.
Materiality is one of the key
concepts in auditing. You must be Specific syllabus references for this chapter are: 1f, g, i.
familiar with the definitions of
materiality and performance
materiality, and must understand
their impact on the audit overall.
Section 4 deals with audit risk,
another key concept. Look
carefully at the components of
audit risk and the way in which
they interact.
Complete all the Interactive and
Self-test questions.

Study Due
4 Process of assurance: While training, it is more likely Section 1 of Chapter 4 is Evidence is a very important topic for the exam, and half of
evidence and reporting that you will be involved in important as it introduces some of this Study Manual is dedicated to the collection of evidence.
evidence collection than in the basic definitions and principles Gathering evidence on an assurance engagement represents
Obtaining evidence is the
preparing reports, but the of audit evidence which are 35% of the syllabus. In contrast, reporting is a minor area of
biggest part of any assurance
conclusions being drawn developed in later chapters. Read the syllabus, so you should expect no more than one or two
engagement, as the
from the work you do in through this section carefully and questions in this area.
practitioner needs to be able
evidence collection will be attempt Interactive question 1.
to justify the conclusion In the assessment, students may be required to:
feeding through into the
which he publishes. Section 2 deals with reporting.
ultimate report.  define the assurance process, including:
Therefore understanding the You must be aware of the basic
basics of evidence collection content of an unqualified audit – performing the engagement
is extremely important. report, and in particular the – obtaining evidence
opinion given. Also note – evaluation of results of assurance work
Similarly, the report is the
section 2.4 on other reports. – concluding and reporting on the engagement
published product of the
– reporting to the engaging party;
assurance engagement and Finally complete all the Self-test
therefore is also very questions to confirm your  identify the different methods of obtaining evidence
important in practice for both understanding of the topics including tests of control, substantive procedures
assurance providers and covered in this chapter. including analytical procedures and data analytics; and
users of information.
 recognise the strengths and weaknesses of the different
Stop and think methods of obtaining evidence.
How much evidence is Specific syllabus references for this chapter are: 1f, 3b, c.
enough evidence?

Study Due
5 Introduction to internal If you work in practice you are Chapter 5 is important as it Internal control is an important practical area in auditing. It is
control likely to be involved with the provides an introduction to therefore 25% of the syllabus and you should expect that to
audit department in some internal control. The principles be reflected in your assessment. In the sample paper there
Every company has internal
way. You may be involved in introduced here are developed for were 15 questions on internal control related issues. This is
controls. Auditing standards
a wide range of different specific transaction cycles in the first chapter of four in this area.
require auditors to consider
types of audit, or you may Chapters 6–8.
whether to rely on the entity's In the assessment students may be required to:
have specialised in a
controls as part of their audit. You need to be able to view this  state the reasons for organisations having effective
particular sector. However, all
This will be the case in two topic from both the business's systems of controls;
companies have internal
instances: point of view and that of the
controls and many audits  identify the fundamental principles of effective control
auditor. As you are reading the
(1) Where the auditors' risk involve controls testing, so systems;
chapter, notice that it is the
assessment includes an this is an area you will have or
responsibility of the business to  identify the main areas of a business that need effective
expectation of the will gain practical experience
implement and maintain a system control systems;
operating effectiveness in. If so, think about an
of internal controls. The auditor
of internal controls (so example of controls testing  identify the components of internal control in both
then records and assesses the
controls testing must be you have been involved in. manual and IT environments, including:
system as part of the audit
carried out to support Remember the controls you
process. – the overall control environment
the risk assessment) were testing and try to think
back to what the objectives of – preventative and detective controls
(2) Where substantive – internal audit;
the control were and how you
procedures alone do
tested them. It is this skill of  define and classify different types of internal control,
not provide sufficient
recognising the purpose of with particular emphasis upon those which impact upon
evidence
controls and therefore how to the quality of financial information; and
A company's internal test them that will be
controls will be important in important both in practice  identify, for a specified organisation, the sources of
the majority of audits, and in your assessment. information which will enable a sufficient record to be
regardless of the size of the made of accounting or other systems and internal
If you work in a finance
company being audited and controls.
department in industry you
the sector it is in. are likely to be involved in the
Specific syllabus references for this chapter are:
operation of a number of
Stop and think 2a, b, c, d, e, f, i.
controls relating to the
Why are internal controls so financial statements. Think
important to an auditor? through the controls you
regularly implement and
consider the objectives
behind them.

Study Due
6 Revenue system As almost all companies Chapter 6 looks at internal control As the sales system is an important practical area, your
make sales, you are likely to within the revenue cycle taking assessment might well include a scenario internal controls
The revenue (sales) system is
be involved with sales each stage of the cycle in turn. This question in this area. The sample paper contained one
usually the most important
transactions at some point in is an important chapter as question looking at strengths and weaknesses in a given
system in a business. Most
your career either recording questions in your assessment may sales system.
companies operate on a
them or auditing them, or require application of knowledge
credit basis, that is, they In the assessment, students may be required to:
analysing them to see if they to a specific scenario. Read
invoice for goods when  show how specified internal controls mitigate risk,
are subject to tax. Due to the through sections 1–4 carefully.
despatched to customers including cyber risks, and state their limitations;
fact that sales usually Make sure you understand the
and then collect the cash at a
comprise a large number of difference between the control  identify internal controls for an organisation in a given
later date. Obviously it is
similar transactions, objectives, controls and tests of scenario;
important for companies to
assurance providers often controls. Attempt Interactive
ensure that they invoice  identify internal control deficiencies in a given scenario;
test controls over sales rather questions 1–4.
promptly and collect cash and
than carrying out substantive
promptly, to ensure that they Section 5 looks at a particular way  select appropriate methods of obtaining evidence from
tests. It is therefore crucial
have sufficient capital to in which this topic could be tests of control and from substantive procedures for a
that you understand the key
continue operating. examined. Make sure you attempt given business scenario.
aspects of a receivables
Interactive question 5.
Some companies, particularly system and are able to apply
Specific syllabus references for this chapter are: 2f, g, h; 3f.
retail or hospitality these when they are relevant Complete all Self-test questions.
companies, operate on a and not to particular
cash basis. This means that businesses.
they do not extend a period
of credit for sales but are
paid cash or cash equivalents
(for example, cheques or
credit card payments) at the
time of sale. In such
businesses, some of the
issues outlined in this chapter
will be irrelevant.
Stop and think
What are the key risks to a
business in terms of sales
income when cash is
collected at point of sale?

Study Due
7 Purchases system As almost all companies The format of Chapter 7 is very As purchases is another important practical area, your
make purchases, you are similar to that of Chapter 6. Again assessment might well include scenario internal controls
The purchases system is
likely to be involved in the key issues are the control questions in this area. The sample paper contained one such
another important system in
purchases at some point in objectives at the various stages of scenario question looking at consequences of given
a business. More so than in
your career, whether the cycle and the tests of controls weaknesses in a purchases system.
the case of sales, most
recording them or analysing which the auditor might perform
companies operate on a In the assessment, students may be required to:
them or providing assurance to determine whether the controls
credit basis, that is, they are  show how specified internal controls mitigate risk,
on them. Similarly to sales, are operating effectively. Make
invoiced for goods when including cyber risks, and state their limitations;
purchases usually comprise a sure you are familiar with both of
those goods are despatched
large number of similar these aspects within the context of  identify internal controls for an organisation in a given
to them and then pay later. It
transactions, and therefore the purchases cycle. scenario;
is important for companies to
they are often tested by
ensure that they have an Also note section 4 on the  identify internal control deficiencies in a given
testing controls. It is therefore
uninterrupted supply of the identification of weaknesses and scenario; and
crucial that you understand
goods and services they attempt Interactive question 5.  select appropriate methods of obtaining evidence from
the key aspects of a
need in order for their tests of control and from substantive procedures for a
purchases system and are
business to function. Key given business scenario.
able to determine whether
issues are therefore choosing
they are relevant to particular
the right suppliers and Specific syllabus references for this chapter are: 2f, g, h; 3f.
businesses.
negotiating good credit
terms, then managing
payments so as to create the
correct balance between
keeping suppliers happy and
making the most of the credit
available.
Stop and think

What are the key risks to a
business when they make
purchases on credit?

Study Due
8 Employee costs Due to the fact that payroll Chapter 8 continues the theme of As payroll is an important practical area, your assessment
usually comprises a large internal controls but applied to the might well include scenario internal controls questions in this
The payroll system is another
number of similar payroll cycle. Again, you must be area. The sample paper contained a number of questions
important system in a
transactions, they are often familiar with the key control focused on payroll controls.
business. Most employees
tested by testing controls, objectives and tests of controls at
work best when they are paid In the assessment, students may be required to:
although the fact that payroll each stage of the cycle. Attempt
on time! Obviously it is  show how specified internal controls mitigate risk,
costs are also predictable Interactive questions 1–3.
important for companies to including cyber risks, and state their limitations;
means that analytical
ensure that they keep their Work through section 4 and
procedures are also often  identify internal controls for an organisation in a given
employees happy. attempt Interactive question 4.
used. Payroll can be an area scenario;
Stop and think that is subject to frauds, for Complete all Self-test questions.
 identify internal control deficiencies in a given scenario;
example, fictitious employees
What are the key risks to a and
may be inserted into the
business in terms of paying  select appropriate methods of obtaining evidence from
payroll. It is important that
salaries and wages? tests of control and from substantive procedures for a
you understand the key
aspects of a payroll system given business scenario.
and are able to identify
Specific syllabus references for this chapter are: 2f, g, h; 3f.
weaknesses in a given
system.
9 Internal audit If you work in a large or mid- This is a brief chapter but includes A question on this topic is likely to be included in your
tier firm you are likely to some important information. Read assessment as one of the questions on internal controls.
Many larger companies have
come across internal audit at through sections 1 and 2 paying
internal audit departments as In the assessment, students may be required to identify the
some point in your training, particular attention to the
they are generally components of internal control in both manual and IT
either liaising with them or distinction between the internal
considered to be an environments, including internal audit.
reviewing their work as part and the external auditor and the
important part of good
of an external audit. Some of role of internal audit. In addition, students may be required to:
management of a company.
you may carry out some or all
Most large audit firms also You should also complete all of  identify the components of internal control in both
of your training as an internal
offer internal audit services the Interactive and Self-test manual and IT environments, including:
auditor.
as well as external audit questions.
– internal audit.
services.
The specific syllabus reference for this chapter is: 2d.
Stop and think
Might there be any problems
associated with offering both
external and internal audit
services?

Study Due
10 Documentation If you work in practice, you Chapter 10 deals with the This topic is likely to be examined on a regular basis and
will prepare working papers straightforward topic of audit questions should be reasonably straightforward if you are
Assurance providers need to
from very early on in your documentation. Read through well prepared.
keep working papers about
career, so it is important to sections 1 and 2 and review the
the work they have done for There was one question in the sample paper on
know the key contents of sample working papers provided
clients, so assurance firms documentation, looking at the reasons behind preparing
these and the purpose of which will help you to put the topic
will have stores of files particular pieces of documentation and whether these
them so that you record the in context.
relating to their clients. They reasons were valid.
correct details within them.
are required to keep them Sections 3 and 4 are more
Some contents are required In the assessment, students may be required to:
for a set period of time and technical in nature so read
by ISAs, but each firm will
may keep them for longer if through them carefully. Notice the  define the assurance process, including:
have a particular way of
they feel it benefits the minimum period for which audit – keeping records of the work performed; and
detailing their work and
relationship. These records documents must be retained and  state the reasons for preparing and keeping
keeping their files, which you
must be kept secure. Firms that they are the property of the documentation relating to an assurance engagement.
will learn very quickly. Most
may keep files in paper or assurance provider.
firms have pre-printed or pre- The specific syllabus references for this chapter are: 1f; 3a.
electronic form, which will
programmed working papers Attempt Interactive question 1 and
bring different security
which already contain some the Self-test questions.
problems.
of the reference details that
Stop and think the working papers are
required to have.
Why are assurance providers
required to keep working
papers on the work they have
done?

Study Due
11 Evidence and sampling If you are training in practice, Section 1.1 of this chapter picks This is a very important part of your syllabus and the issues
you are likely to be involved up on some of the points on discussed here and previously in Chapter 4 underpin the
Evidence is what the
in obtaining evidence, but evidence introduced in Chapter 4. following two chapters as well. You can expect a number of
assurance conclusion is
less likely to be involved in Review these points briefly as they practical and theoretical questions in the assessment
based on. Therefore, in
the more judgemental areas should be familiar. Then read covering audit evidence.
practice, knowing what tests
of how to obtain it and how through sections 1.2–1.6. Notice in
to carry out and how many In the assessment, students may be required to:
much of it to obtain. particular the different procedures
items to test is an important  identify and compare the different methods of
However, as you progress which can be used to obtain
practical skill. Getting it obtaining evidence from the use of tests of control, and
with your training, you will be evidence and the way in which
wrong may cost the firm substantive procedures, including analytical procedures
given opportunity to make CAATs may be used.
money, if too much work is and data analytics;
judgements in this area. You Section 1.4 considers analytical
done, or leave the firm
will be expected to draw procedures as a substantive  recognise the strengths and weaknesses of the different
exposed to negligence
conclusions from the audit procedure. You will have come methods of obtaining evidence;
claims, if insufficient work is
work you have undertaken across analytical procedures in
done. It is an area where  identify the situations within which the different
from an early stage. It is Chapter 3 as a planning
considerable judgement will methods of obtaining evidence should and should not
important therefore to procedure.
have to be exercised. be used;
understand why you are
Stop and think carrying out a particular test Attempt Interactive question 1  compare the reliability of different types of assurance
and what you intend to before moving on. evidence; and
How do you think an auditor
achieve by it. Sections 2 and 3 look at the issue  recognise when the quantity (including factors affecting
determines how much
of sampling. This is quite a sample design) and quality of evidence gathered from
evidence to obtain?
technical topic so read through it various tests and procedures is of a sufficient and
slowly ensuring that you appropriate level, after taking account of sampling risk,
understand the various definitions to draw reasonable conclusions on which to base a
as you work through. Also note the report.
different ways of selecting the
sample in section 2.3 and review Specific syllabus references for this chapter are:
the Worked example. You should 3b, c, d, e, g.
attempt Interactive questions 2
and 3 to confirm your
understanding.
Finally attempt the Self-test
questions.

Study Due
12 Written representations When carrying out assurance Chapter 12 is a short chapter but There was one question on the sample paper, relating to
work, you are sure to ask looks at the important issue of written representations, dealing with their purpose. You
Written representations are
questions of management, so management representations. The should not expect more than one or two questions on this
the result of the assurance
knowing when to record key issues to note are the general area in your assessment.
procedure of inquiry. As
these will be important. If in matters which are included in the
auditors commonly ask In the assessment, students may be required to:
the future you are part of the letter of representation and the
management questions
management of a company instances where other specific  identify the circumstances in which written confirmation
during an audit engagement
that has assurance services, it issues may be addressed. It is of representations from management should be sought
the critical points are when
is important to understand important to note that and the reliability of such confirmation as a form of
these representations should
what assurance providers are management representations assurance evidence.
be put into writing and how
asking you to do when you cannot be a substitute for audit
much reliance can be placed The specific syllabus reference for this chapter is: 3h.
sign a written representation evidence which should be
on them.
letter. available.
Stop and think
Read through sections 1 and 2.
Why might assurance Then review the example of the
providers want certain management representation letter
representations made by in section 3.
management to be written
Finally attempt Interactive
down and acknowledged by
question 1 and the Self-test
the management?
questions.

Study Due
13 Substantive procedures – key If you work in practice and This is a detailed chapter which Questions about assurance evidence could be set in the
financial statement figures carry out assurance work, you looks at the specific audit context of any balances outlined in this chapter.
could be involved in carrying procedures which are applied to
This chapter (on substantive In the assessment, students may be required to:
out any of the tests outlined key financial statement figures.
testing), in conjunction with
here. Read through section 1. Notice  select appropriate methods of obtaining evidence from
Chapters 6–8 (on tests of
the way in which the procedures tests of control and from substantive procedures for a
controls), covers the
address the financial statement given business scenario; and
powerhouse of assurance
provision. It has been said in assertions.  recognise issues arising while gathering assurance
this Study Manual that the In section 2 the key issue is the evidence that should be referred to a senior colleague.
collection of evidence is a auditor's attendance at the Specific syllabus references for this chapter are: 3f, i.
vital part of the assurance inventory count. Work through the
engagement. Remember the Worked example taking particular
results of tests of controls note of the procedures performed
may allow assurance by the auditor before, during and
providers to reduce tests of after the count.
detail but that substantive
Section 3 deals with the audit of
testing can never be
receivables. Make sure you
eliminated entirely. In this
understand the difference
chapter, the practical tests
between the positive method of
that are regularly carried out
confirmation and the negative
by assurance providers are
method and the circumstances in
looked at. In an audit, all of
which these would be used.
the financial statement
assertions would be looked In section 4 the key points to note
at. In a different assurance are the procedures for confirming
engagement, particular information about a client with the
assertions might be focused bank and the performance of the
on. bank reconciliation. Read through
section 4 carefully and review the
Stop and think bank reconciliation in the Worked
Think back to the issues of example.
quality of evidence discussed Then read through sections 5–7.
in Chapter 11. What sources For the audit of payables notice
of evidence do you think the importance of the
there are in respect of the reconciliation of supplier
balances to be discussed in statements.
this chapter?

Study Due
14 Codes of professional ethics If a trainee in practice is at a Chapter 14 introduces the Ethics is 20% of the syllabus, and therefore in the sample
client carrying out assurance concept of ethical behaviour and paper, there were ten questions on ethics. These were a
Professional ethics is of
work, he could be faced with sets out the sources of guidance combination of questions about general ethical concepts and
critical importance to
ethical decisions, such as if on this issue. Specific aspects of principles, which we shall look at in this chapter, and more
accounting professionals.
client staff are trying to ethical behaviour are then detailed ethical threats and safeguards, which we shall look
Remember in Chapter 1
influence him as to the developed in Chapters 15 and 16. at in the next two chapters.
where we set out that one
appropriateness of a
reason people seek Read through sections 1–4. Make In the assessment, students may be required to:
particular accounting policy,
assurance from accountants sure you understand that ethical  state the role of ethical codes and their importance to
in which case he should refer
is that they are independent, guidance can be found in the the profession;
the matter to his assurance
impartial people? That is due IESBA Code, the ICAEW Code and
senior.  recognise the differences between a rules-based ethical
to their code of ethics. Ethical the 2016 FRC Ethical Standard.
issues are important for all Also note the nature of the code and one based upon a set of principles;
accountants, from trainees to guidance, ie, it is in the form of a  recognise how the principles of professional behaviour
partners. framework rather than a set of protect the public and fellow professionals;
specific rules.
Stop and think  identify the key features of the system of professional
Finally, complete Interactive ethics adopted by IESBA and ICAEW; and
What ethical issues might
question 1 and the Self-test  identify the fundamental principles underlying the
arise for trainees that are less
questions. IESBA and the ICAEW Code of Ethics.
likely to arise for partners?
And vice versa? Specific syllabus references for this chapter are :
4a, b, c, d, e.

Study Due
15 Integrity, objectivity and Issues relating to integrity Sections 1 and 2 deal with the key As we saw in the previous chapter, ethics is an important area
independence and objectivity tend to be ethical issue of independence so for your exam. The sample paper contained six practical,
thought of at the beginning read through these carefully. scenario-based questions about issues relating to
We outlined in the previous
of the engagement and when Questions are likely to test this independence. In addition, there was a question on a conflict
chapter the importance of
deciding to accept clients, topic in detail so you need to have for an employed accountant working in industry between the
professional ethics.
and in practice, this will be a thorough understanding of this needs of his employer and his professional duty.
Stop and think left to the partners, not to a area. In the assessment, students may be required to:
trainee. However, it should be
How should an accountancy You must be familiar with the basic  recognise the importance of integrity and objectivity to
continually reappraised, so
trainee respond if the principle behind the importance professional accountants, identifying situations that may
you should be aware of
demands of his firm seem to of independence and objectivity impair or threaten integrity and objectivity;
factors arising during
contradict the requirements so do not underestimate the  suggest courses of action to resolve ethical conflicts
assurance engagements that
of his ethical duty? importance of section 1. Then relating to integrity and objectivity;
might affect independence
move on to section 2. There is a
and be prepared to make  respond appropriately to the request of an employer to
lot of detail here so work through
senior staff aware of them. undertake work outside the confines of an individual's
it methodically, taking note of the
You may also find yourself in expertise or experience;
different threats and safeguards.
difficult ethical situations,  define independence and recognise why those
Attempt Interactive questions 1
such as being invited to undertaking an assurance engagement are required to
and 2 to confirm your
accept gifts or hospitality be independent of their clients;
understanding.
from clients or finding you  identify the following threats to the fundamental ethical
inherit shares in a client Sections 3 and 4 deal with the way principles and the independence of assurance
company. in which ethical conflicts are providers:
resolved. Read these sections and
If you work in industry the – self-interest threat
try Interactive questions 3 and 4.
onus will be on you even – self-review threat
more to review your own Finally, attempt the Self-test – management threat
ethical compliance. questions. – advocacy threat
– familiarity threat
– intimidation threat;
 identify safeguards to eliminate or reduce threats to the
fundamental ethical principles and the independence of
assurance providers; and
 suggest how a conflict of loyalty between the duty a
professional accountant has to their employer and the
duty to their profession could be resolved.
Specific syllabus references for this chapter are:
4f, g, h, l, m, n, o.

Study Due
16 Confidentiality Any person carrying out Read through Chapter 16. The key Two of the ten ethics questions in the sample paper touched
professional accountancy point to understand is that on confidentiality.
Confidentiality is an
work is likely to obtain confidentiality is a fundamental
important practical matter for In the assessment, students may be required to:
confidential information. In principle. Learn the safeguards to
clients and assurance  recognise the importance of confidentiality and identify
practice, therefore, it is as confidentiality in section 2. There
providers. Clients are the sources of risks of accidental disclosure of
important an issue to trainees are a limited number of
exercising a degree of trust information;
as to partners. circumstances where disclosure is
in their assurance providers,
allowed. Read these carefully in  identify steps to prevent the accidental disclosure of
giving them unprecedented
section 3 together with the points information; and
access to information about
on money laundering.
the company which most  identify situations in which confidential information may
companies would believe to You should also complete the be disclosed.
be sensitive, and in some Interactive question and the Self-
Specific syllabus references for this chapter are: 4i, j, k.
cases, highly commercial. test questions.
Assurance providers are
bound by the principle of
confidentiality, but this duty
is not absolute. It can be a
delicate matter deciding
when an issue is confidential
and cannot be disclosed,
when a matter is not
confidential and can be
disclosed, or, most
problematically, when a
matter is confidential but
must still be disclosed to the
appropriate authorities.
Stop and think
When might an accountant
have to breach the
fundamental principle of
professional confidentiality to
make required disclosures?

3 Syllabus and learning outcomes
Covered
in chapter
1 The concept, process and need for assurance

Students will be able to explain the concept of assurance, why assurance is required and the
reasons for assurance engagements being carried out by appropriately qualified professionals.
(a) define the concept of assurance; 1
(b) state why users desire assurance reports and provide examples of the benefits
gained from them such as to assure the quality of an entity's published
corporate responsibility or sustainability report; 1
(c) compare the functions and responsibilities of the different parties involved in
an assurance engagement; 1
(d) compare the purposes and characteristics of, and levels of assurance obtained
from, different assurance engagements; 1
(e) identify the issues which can lead to gaps between the outcomes delivered by
the assurance engagement and the expectations of users of the assurance
reports, and suggest how these can be overcome; 1
(f) define the assurance process, including: 2, 3, 4, 10
 obtaining the engagement
 continuous risk assessment
 engagement acceptance
 the scope of the engagement
 planning the engagement
 performing the engagement
 obtaining evidence
 evaluation of results of assurance work
 concluding and reporting on the engagement
 reporting to the engaging party
 keeping records of the work performed;
(g) recognise the need to plan and perform assurance engagements with an
attitude of professional scepticism and the exercise of professional judgement; 3
(h) define the concept of reasonable assurance; and 1
(i) recognise the characteristics of fraud and distinguish between fraud and error. 3

Covered
in chapter
2 Internal controls
Students will be able to explain the nature of internal controls and why they are important,
document an organisation's internal controls and identify weaknesses in internal control
systems.
(a) state the reasons for organisations having effective systems of control; 5
(b) identify the fundamental principles of effective control systems; 5
(c) identify the main areas of a business that need effective control systems; 5
(d) identify the components of internal control in both manual and IT
environments, including: 5, 9
 the overall control environment
 preventative and detective controls
 internal audit;
(e) define and classify different types of internal control, with particular emphasis
upon those which impact upon the quality of financial information; 5
(f) show how specified internal controls mitigate risk, including cyber risks,
and state their limitations; 5, 6, 7, 8
(g) identify internal controls for an organisation in a given scenario; 6, 7, 8
(h) identify internal control deficiencies in a given scenario; and 6, 7, 8
(i) identify, for a specified organisation, the sources of information which will
enable a sufficient record to be made of accounting or other systems and
internal controls. 5
3 Gathering evidence on an assurance engagement

Students will be able to select sufficient and appropriate methods of obtaining assurance
evidence and recognise when conclusions can be drawn from evidence obtained or where
issues need to be referred to a senior colleague.
(a) state the reasons for preparing and keeping documentation relating to an
assurance engagement; 10
(b) identify the different methods of obtaining evidence from the use of tests of
control, substantive procedures, including analytical procedures and data
analytics; 11
(c) recognise the strengths and weaknesses of the different methods of obtaining
evidence; 11
(d) identify the situations within which the different methods of obtaining
evidence should and should not be used; 11
(e) compare the reliability of different types of assurance evidence; 11
(f) select appropriate methods of obtaining evidence from tests of control and
from substantive procedures for a given business scenario; 6, 7, 8, 13
(g) recognise when the quantity (including factors affecting sample design) and
quality of evidence gathered is of a sufficient and appropriate level, after taking
account of sampling risk, to draw conclusions on which to base a report; 11

Covered
in chapter
(h) identify the circumstances in which written confirmation of representations
from management should be sought and the reliability of such confirmation as
a form of assurance evidence; and 12
(i) recognise issues arising whilst gathering assurance evidence that should be
referred to a senior colleague. 13
4 Professional ethics
Students will be able to understand the importance of ethical behaviour to a professional and
identify issues relating to integrity, objectivity, professional competence and due care,
confidentiality, professional behaviour and independence.
(a) state the role of ethical codes and their importance to the profession; 14
(b) recognise the differences between a rules based ethical code and one based
upon a set of principles; 14
(c) recognise how the principles of professional behaviour protect the public and
fellow professionals; 14
(d) identify the key features of the system of professional ethics adopted by IESBA
and ICAEW; 14
(e) identify the fundamental principles underlying the IESBA and the ICAEW Code
of Ethics; 14
(f) recognise the importance of integrity and objectivity to professional
accountants, identifying situations that may impair or threaten integrity and
objectivity; 15
(g) suggest courses of action to resolve ethical conflicts relating to integrity and
objectivity; 15
(h) respond appropriately to the request of an employer to undertake work outside
the confines of an individual's expertise or experience; 15
(i) recognise the importance of confidentiality and identify the sources of risks of
accidental disclosure of information; 16
(j) identify steps to prevent the accidental disclosure of information; 16
(k) identify situations in which confidential information may be disclosed; 16
(l) define independence and recognise why those undertaking an assurance
engagement are required to be independent of their clients; 15
(m) identify the following threats to the fundamental ethical principles and the
independence of assurance providers:
 Self-interest threat
 Self-review threat
 Management threat
 Advocacy threat
 Familiarity threat
 Intimidation threat; 15
(n) identify safeguards to eliminate or reduce threats to the fundamental ethical
principles and the independence of assurance providers; and 15
(o) suggest how a conflict of loyalty between the duty a professional accountant
has to their employer and the duty to their profession could be resolved. 15

4 Technical knowledge grid
4.1 Technical knowledge

The tables contained in this section show the technical knowledge in the disciplines of financial
reporting, audit and assurance, business analysis, ethics and taxation covered in the ACA
syllabus by module.
For each individual standard the level of knowledge required in the relevant Certificate and
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 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
Advanced
Audit and
Topic
Level
The International Auditing and Assurance Standards Board D C
The Authority Attaching to Standards Issued by the International Auditing C A

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

International Auditing and Assurance Standards Board
Discussion Papers C
Working Procedures C
International Standards on Auditing (UK)
200 (Revised June 2016) Overall Objectives of the Independent Auditor B A 

and the Conduct of an Audit in Accordance with International Standards
on Auditing (UK)
210 (Revised June 2016) (Updated July 2017) Agreeing the Terms of B 
Audit Engagements
220 (Revised June 2016) (Updated July 2017) Quality Control for an B 
Audit of Financial Statements
230 (Revised June 2016) Audit Documentation C B A
240 (Revised June 2016) (Updated July 2017) The Auditor's C B A

Responsibilities Relating to Fraud in an Audit of Financial Statements
250 A (Revised December 2017) Consideration of Laws and Regulations B A

in an Audit of Financial Statements
250 B (Revised June 2016) The Auditor's Right and Duty to Report to C
Regulators of Public Interest Entities and Regulators of Other Entities in
the Financial Sector
260 (Revised June 2016) (Updated July 2017) Communication with B A

Those Charged with Governance
265 Communicating Deficiencies in Internal Control to Those Charged B A

with Governance and Management
300 (Revised June 2016) Planning an Audit of Financial Statements B A 

Assurance
Assurance
Advanced
Audit and
Topic
Level
315 (Revised June 2016) Identifying and Assessing the Risks of Material C A 
Misstatement Through Understanding of the Entity and its Environment
320 (Revised June 2016) (Updated July 2017) Materiality in Planning and C A 
Performing an Audit
330 (Revised July 2017) The Auditor's Responses to Assessed Risks C B A
402 Audit Considerations Relating to an Entity Using a Service C B

Organisation
450 (Revised June 2016) (Updated July 2017) Evaluation of C A

Misstatements Identified during the Audit
500 (Updated July 2017) Audit Evidence B A 
501 Audit Evidence – Specific Considerations for Selected Items B A
505 (Updated July 2017) External Confirmations (Revised July 2017) B B A
510 (Revised June 2016) Initial Audit Engagements – Opening Balances C B A
520 Analytical Procedures B A A
530 Audit Sampling B B A
540 (Revised June 2016) Auditing Accounting Estimates, Including Fair C B A

Value Accounting Estimates, and Related Disclosures
550 Related Parties C B A
560 Subsequent Events B A
570 (Revised June 2016) Going Concern A 
580 Written Representations C B A
600 (Revised June 2016) Special Considerations – Audits of Group C A

Financial Statements (including the Work of Component Auditors)
610 (Revised June 2013) Using the Work of Internal Auditors C B A
620 (Revised June 2016) Using the Work of an Auditor's Expert B A

Assurance
Assurance
Advanced
Audit and
Topic
Level
700 (Revised June 2016) Forming an Opinion and Reporting on Financial B A 
Statements
701 Communicating Key Audit Matters in the Independent Auditor's B A

Report
705 (Revised June 2016) Modifications to the Opinion in the A 

Independent Auditor's Report
706 (Revised June 2016) Emphasis of Matter Paragraphs and Other A 

Matter Paragraphs in the Independent Auditor's Report
710 Comparative Information – Corresponding Figures and Comparative B A

Financial Statements
720 The Auditor's Responsibility Relating to Other Information B A
800 Special Considerations – Audits of Financial Statements prepared in B A

Accordance with Special Purpose Frameworks
805 (Revised October 2016) Special Considerations – Audits of Single B A

Financial Statements and Specific Elements, Accounts or items of a
Financial Statement
International Standards on Auditing
810 (Revised) Engagements to Report on Summary Financial Statements B
International Auditing Practice Note (IAPN)
1000 Special Considerations in Auditing Financial Instruments B
International Standards on Review Engagements (ISREs)
2400 (Revised September 2012) Engagements to Review Historical C B

Financial Statements
International Standards on Review Engagements (UK & Ireland)
2410 Review of Interim Financial Information Performed by the C B

Independent Auditor of the Entity
International Standards on Assurance Engagements (ISAEs)
3000 (Revised) Assurance Engagements Other than Audits or Reviews of C B

Historical Financial Information

Assurance
Assurance
Advanced
Audit and
Topic
Level
3400 The Examination of Prospective Financial Information C A
3402 Assurance Reports on Controls at a Service Organisation C B
3410 Assurance Engagements on Greenhouse Gas Statements C 
International Standards on Related Services (ISRSs)
4400 Engagements to Perform Agreed-upon Procedures Regarding B

Financial Information
4410 Compilation Engagements (Revised March 2012) B
IAASB Statements
ISQC1 (Revised June 2016) (Updated July 2017) Quality Control for Firms C B
that Perform Audits and Reviews of Financial Statements, and Other
Assurance and Related Services Engagements
Other Guidance
Bulletin (October 2016): Compendium of Illustrative Auditor's Reports on B B

United Kingdom Private Sector Financial Statements for periods
commencing on or after 17 June 2016
FRC Briefing Paper B B

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

Ethics Codes and Standards
Ethics Codes and Standards title Level Modules
IESBA Code of Ethics for Professional Certificate Level

Accountants C/D Accounting
(parts A, B and C and Definitions) B Assurance
C/D Business, Technology and Finance
ICAEW Code of Ethics D Law
C Management Information
C Principles of Taxation
Professional Level
A Audit and Assurance
B Business Strategy and Technology
B Financial Accounting and
Reporting
B/C Financial Management
B Tax Compliance
B Business Planning
Advanced Level
A Corporate Reporting
A Strategic Business Management
A Case Study
FRC Revised Ethical Standard (2016) B Assurance
A Audit and Assurance
Advanced Level
A Corporate Reporting
A Strategic Business Management
A Case Study

5 Glossary of terms
Analytical procedures Evaluations of financial information through analysis of plausible
relationships among both financial and non-financial data. Analytical
procedures also encompass such investigation as is necessary of
identified fluctuations or relationships that are inconsistent with other
relevant information or that differ from expected values by a significant
amount.
They include consideration of comparisons of the entity's financial
information with other information, and the consideration of
relationships among elements of financial information that would be
expected to conform to a particular pattern or between financial
information and relevant non-financial information.
Anomaly A misstatement or deviation that is demonstrably not representative of
misstatements or deviations in a population.
Application controls Manual or automated procedures that typically operate at a business
process level. Application controls can be preventative or detective in
nature and are designed to ensure the integrity of the accounting
records. Accordingly, application controls relate to procedures used to
initiate, record, process and report transactions or other financial data.
Appropriateness The measure of the quality or relevance and reliability of the audit
evidence.
Assurance An engagement in which a practitioner expresses a conclusion
engagement designed to enhance the degree of confidence of the intended users
other than the responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria.
Assurance team (a) All members of the engagement team for the assurance
engagement
(b) All others within a firm who can directly influence the outcome of
the assurance engagement
Audit documentation The record of procedures performed, relevant evidence obtained and
(working papers) conclusions the auditor reached.
Audit evidence Information used by the auditor in arriving at the conclusions on which
the auditor's opinion is based.
Audit of financial The objective is to enable the auditor to express an opinion whether the
statements financial statements are prepared, in all material respects, in
accordance with an applicable financial reporting framework.
Audit plan An audit plan is more detailed than the strategy and sets out the nature,
timing and extent of audit procedures (including risk assessment
procedures) to be performed by engagement team members in order
to obtain sufficient appropriate audit evidence.
Audit risk The risk that the auditor expresses an inappropriate audit opinion when
the financial statements are materially misstated. Audit risk is a function
of the risks of material misstatement and detection risk.
Audit sampling The application of audit procedures to less than 100% of items within a
population of audit relevance such that all sampling units have a chance
of selection in order to provide the auditor with a reasonable basis on
which to draw conclusions about the entire population.

Audit strategy The formulation of the general strategy for the audit, which sets the
scope, timing and direction of the audit and guides the development of
the audit plan.
Audit trail A stream of evidence that permits the tracing of a transaction forward
from its inception to the appropriate ledger accounts or to vouch from
the ledger account to the inception of the transaction.
Business risk A risk resulting from significant conditions, events, circumstances,
actions or inactions that could adversely affect an entity's ability to
achieve its objectives and execute its strategies, or from the setting of
inappropriate objectives and strategies.
Close family A parent, child or sibling who is not an immediate family member.
Contingent fee A fee calculated on a predetermined basis relating to the outcome of a
transaction or the result of the services performed by the firm. A fee that
is established by a court or other public authority is not a contingent
fee.
Control activities The policies and procedures that help ensure that management
directives are carried out.
Control environment The control environment includes the governance and management
functions and the attitudes, awareness and actions of those charged
with governance and management concerning the entity's internal
control and its importance in the entity. The control environment sets
the tone of an organisation, influencing the control consciousness of its
people.
Control risk The risk that a misstatement that could occur in an assertion about a
class of transaction, account balance or disclosure and that could be
material, either individually or when aggregated with other
misstatements, will not be prevented, or detected and corrected, on a
timely basis by the entity's internal control.
Data analytics When used to obtain audit evidence in a financial statement audit, data
analytics is the science and art of discovering and analysing patterns,
deviations and inconsistencies, and extracting other useful information
in the data underlying or related to the subject matter of an audit
through analysis, modelling and visualisation for the purpose of
planning and performing the audit.
Detection risk The risk that the procedures performed by the auditor to reduce audit
risk to an acceptably low level will not detect a misstatement that exists
and that could be material, either individually or when aggregated with
other misstatements.
Direct financial A financial interest:
interest
 owned directly by and under the control of an individual or entity
(including those managed on a discretionary basis by others); or
 beneficially owned through a collective investment vehicle, estate,
trust or other intermediary over which the individual or entity has
control, or the ability to influence investment decisions.
Entity's risk A component of internal control that is the entity's process for
assessment process identifying business risks relevant to financial reporting objectives and
deciding about actions to address those risks, and the results thereof.

Error An unintentional misstatement in financial statements, including the
omission of an amount or a disclosure.
Fair Information is free from discrimination and bias in compliance with
expected standards and rules. The accounts should reflect the
commercial substance of the company's underlying transactions.
Financial interest An interest in equity or other security, debenture, loan or other debt
instrument of an entity, including rights and obligations to acquire such
an interest and derivatives directly related to such interest.
Financial statement Representations by management, explicit or otherwise, that are
assertions embodied in the financial statements, as used by the auditor to
consider the different types of potential misstatements that may occur.
Fraud An intentional act by one or more individuals among management,
those charged with governance, employees, or third parties, involving
the use of deception to obtain an unjust or illegal advantage.
General controls Policies and procedures that relate to many applications and support
the effective function of application controls by helping to ensure the
continued proper operation of information systems.
Immediate family A spouse (or equivalent) or a dependent.
Independence Freedom from situations and relationships that make it probable that a
reasonable and informed third party would conclude that objectivity
either is impaired or could be impaired.
Independence in The avoidance of facts and circumstances that are so significant that a
appearance reasonable and informed third party would be likely to conclude,
weighing all the specific facts and circumstances, that a firm's, or a
member of the assurance team's, integrity, objectivity or professional
scepticism has been compromised.
Independence of mind The state of mind that permits the expression of a conclusion without
being affected by influences that compromise professional judgement,
allowing an individual to act with integrity, and exercise objectivity and
professional scepticism.
Indirect financial A financial interest beneficially owned through a collective investment
interest vehicle, estate, trust or other intermediary over which the individual or
entity has no control or ability to influence investment decisions.
Information system A component of internal control that includes the financial reporting
relevant to financial system, and consists of the procedures and records established to
reporting initiate, record, process and report entity transactions (as well as events
and conditions) and to maintain accountability for the related assets,
liabilities and equity.
Informed Where the auditors believe that the member of management
management designated by the audit client to receive the results of a non-audit
service provided by the auditor has the capability to make independent
management judgements and decisions on the basis of the information
provided.
Inherent risk The susceptibility of an assertion about a class of transaction, account
balance or disclosure to a misstatement that could be material, either
individually or when aggregated with other misstatements, before
consideration of any related controls.

Integrity This means that an accountant must be straightforward and honest. It
implies fair dealing and truthfulness.
Internal audit function An appraisal activity established or provided as a service to the entity.
Its functions include, among other things, examining, evaluating and
monitoring the adequacy and effectiveness of internal control.
Internal control The process designed, implemented and maintained by those charged
with governance, management, and other personnel to provide
reasonable assurance about the achievement of an entity's objectives
with regard to reliability of financial reporting, effectiveness and
efficiency of operations and compliance with applicable laws and
regulations. The term 'controls' refers to any aspects of one or more of
the components of internal control.
Limited assurance A meaningful level of assurance, that is more than inconsequential but
is less than reasonable assurance, that engagement risk has been
reduced to an acceptable level, which then allows a conclusion to be
expressed negatively.
Management The person(s) with executive responsibility for the conduct of the
entity's operations. For some entities in some jurisdictions,
management includes some or all of those charged with governance,
for example, executive members of a governance board, or an owner-
manager.
Materiality An expression of the relative significance or importance of a particular
matter in the context of financial statements as a whole. The IFRS
Conceptual Framework for Financial Reporting states that a matter is
material if its omission or misstatement could influence the economic
decisions of users taken on the basis of the financial statements.
Misstatement A difference between the amount, classification, presentation, or
disclosure of a reported financial statement item and the amount,
classification, presentation, or disclosure that is required for the item to
be in accordance with the applicable financial reporting framework.
Misstatements can arise from error or fraud.
Money laundering The process by which criminal proceeds are sanitised to disguise their
illicit origins.
Non-sampling risk The risk that the auditor reaches an erroneous conclusion for any reason
not related to sampling risk. For example, the use of inappropriate
procedures, or misinterpretation of audit evidence and failure to
recognise a misstatement or deviation.
Non-statistical A sampling approach that does not have the characteristics of statistical
sampling sampling (see entry for statistical sampling).
Objectivity A state of mind that excludes bias, prejudice and compromise and that
gives fair and impartial consideration to all matters that are relevant to
the task in hand, disregarding those that are not.
Performance The amount or amounts set by the auditor at less than materiality for the
materiality financial statements as a whole to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a
whole.

Population The entire set of data from which a sample is selected and about which
an auditor wishes to draw conclusions.
Professional The application of relevant training, knowledge and experience in
judgement making informed decisions about the courses of action that are
appropriate in the circumstances of the audit engagement.
Professional An attitude that includes a questioning mind, being alert to conditions
scepticism which may indicate possible misstatement due to error or fraud, and a
critical assessment of audit evidence
Public interest entity A listed entity; and
An entity (a) defined by regulation or legislation as a public interest
entity or (b) for which the audit is required by regulation or legislation to
be conducted in compliance with the same independence
requirements that apply to the audit of listed entities. Such regulation
may be promulgated by any relevant regulator, including an audit
regulator.
Reasonable assurance A high level of assurance, that is less than absolute assurance, that
engagement risk has been reduced to an acceptably low level, which
then allows a conclusion to be expressed positively.
Sampling risk The risk that the auditor's conclusion based on a sample may be
different from the conclusion if the entire population were subjected to
the same audit procedure.
Sampling units The individual items constituting a population.
Statistical sampling An approach to sampling that has the following characteristics:
(a) Random selection of the sample items; and
(b) the use of probability theory to evaluate sample results, including
measurement of sampling risk.
Substantive Audit procedures designed to detect material misstatements at the
procedures assertion level. Substantive procedures comprise:
 tests of detail (of classes of transactions, account balances and
disclosures)
 substantive analytical procedures
Sufficiency The measure of the quantity of audit evidence.
Tests of controls Audit procedures designed to evaluate the operating effectiveness of
controls in preventing, or detecting and correcting material
misstatements at the assertion level.
Tolerable A monetary amount set by the auditor in respect of which the auditor
misstatement seeks to obtain an appropriate level of assurance that the monetary
amount set by the auditor is not exceeded by the actual misstatement in
the population.
Tolerable rate of A rate of deviation from prescribed internal control procedures set by
deviation the auditor in respect of which the auditor seeks to obtain an
appropriate level of assurance that the rate of deviation set by the
auditor is not exceeded by the actual rate of deviation in the
population.

True Information is factual and conforms with reality, not false. In addition the
information conforms with required standards and law. The accounts
have been correctly extracted from the books and records.
Valuation A combination of the making of assumptions with regard to future
developments, the application of appropriate methodologies and
techniques, and the combination of both to compute a certain value, or
range of values, for an asset, a liability or for a business as a whole.
Vouching Matching entries in the accounting records to supporting
documentation.
Walk-through A procedure that involves tracing a few transactions through the
procedure financial reporting system.
Walk-through procedures would normally be performed near the start
of the field-work stage of the audit. They involve tracing transactions
from the very beginning to the very end, in order to confirm that the
auditor has correctly understood how the controls are supposed to
operate. Walkthrough procedures aim to test the auditor's
understanding, and are not tests of controls. As such they provide no
audit evidence.


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The Institute of Chartered Accountants in England and Wales

For exams in 2019

3 Syllabus and learning outcomes 19

4 Technical knowledge grid 22

ICAEW 2019 Study Guide 1

2.1 Help yourself study for your ACA exams

Believe in yourself Yes, there is a lot to learn. But thousands have

2 Focus on the exam

3 The right method

4 The right recap

2 Assurance ICAEW 2019

Key study steps Activity

2.3 Detailed study guide

ICAEW 2019 Study Guide 3

4 Assurance ICAEW 2019

ICAEW 2019 Study Guide 5

6 Assurance ICAEW 2019

ICAEW 2019 Study Guide 7

8 Assurance ICAEW 2019

ICAEW 2019 Study Guide 9

Stop and think

10 Assurance ICAEW 2019

ICAEW 2019 Study Guide 11

12 Assurance ICAEW 2019

ICAEW 2019 Study Guide 13

14 Assurance ICAEW 2019

ICAEW 2019 Study Guide 15

16 Assurance ICAEW 2019

ICAEW 2019 Study Guide 17

18 Assurance ICAEW 2019

1 The concept, process and need for assurance

ICAEW 2019 Study Guide 19

3 Gathering evidence on an assurance engagement

20 Assurance ICAEW 2019

ICAEW 2019 Study Guide 21

4.1 Technical knowledge

22 Assurance ICAEW 2019

The Authority Attaching to Standards Issued by the International Auditing C A

The Authority Attaching to Practice Statements Issued by the A

International Standards on Auditing (UK)

200 (Revised June 2016) Overall Objectives of the Independent Auditor B A 

230 (Revised June 2016) Audit Documentation C B A

240 (Revised June 2016) (Updated July 2017) The Auditor's C B A

250 A (Revised December 2017) Consideration of Laws and Regulations B A

260 (Revised June 2016) (Updated July 2017) Communication with B A

265 Communicating Deficiencies in Internal Control to Those Charged B A

300 (Revised June 2016) Planning an Audit of Financial Statements B A 

ICAEW 2019 Study Guide 23

330 (Revised July 2017) The Auditor's Responses to Assessed Risks C B A

402 Audit Considerations Relating to an Entity Using a Service C B

450 (Revised June 2016) (Updated July 2017) Evaluation of C A

500 (Updated July 2017) Audit Evidence B A 

501 Audit Evidence – Specific Considerations for Selected Items B A

505 (Updated July 2017) External Confirmations (Revised July 2017) B B A

510 (Revised June 2016) Initial Audit Engagements – Opening Balances C B A

520 Analytical Procedures B A A

530 Audit Sampling B B A

540 (Revised June 2016) Auditing Accounting Estimates, Including Fair C B A

550 Related Parties C B A

560 Subsequent Events B A

570 (Revised June 2016) Going Concern A 

580 Written Representations C B A

600 (Revised June 2016) Special Considerations – Audits of Group C A