1. Explain briefly the concepts of ‘reasonable assurance’ and ‘inherent limitations’ in (a) an assurance engagement and (b) an audit of financial statements.
2. Discuss the role and importance of IAS and IFRS in developing international auditing standards.
3. Explain briefly the positions of EU and US regulators with regard to the auditing of financial statements of corporations subject to multiple listings.
4. Financial reporting, auditing and corporate governance.
‘The effective functioning of capital markets is essential to our economic well-being. In my opinion, a sound financial reporting infrastructure must be built on four pillars:
(1) accounting standards that are consistent, comprehensive, and based on clear principles to enable
financial reports to reflect underlying economic reality;
(2) effective corporate governance practices, including a requirement for strong internal controls that implement the accounting Standards
(3) auditing practices that give confidence to the outside world that an entity is faithfully reflecting its economic performance and financial position; and
(4) an enforcement or oversight mechanism that ensures that the principles as laid out by the accounting and
auditing standards are followed.’ Sir David Tweedie, chairman, IASB (Deloitte, 2005: 2)
Read the above statement and write an essay on this topic considering the following issues:
(a) The effect of the choice of accounting standards on a company’s reporting policy and
performance.
(b) The importance of the relationship between accounting and auditing standards and
corporate governance.
(c) The internationalization of accounting and auditing standards and effective functioning of
capital markets.