Acca aaa s21 Notes

September 2021 to June 2022 exams
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4. Planning the assignment
Every client could use different sets of measures and different ways of taking measurements and the 
first step is to find out precisely what work the auditor is expected to carry out. What key performance 
indicators (KPIs) will be used? What are the comparatives? How and when are the measurements 
made? What evidence does the client use and which will also be available to the auditor?
Each KPI should be assessed to see if measurement (and therefore auditing) can be reasonably 
accurate or if the KPI is too ill-defined.
The auditors should consider if they have the appropriate competences to audit the KPIs. If third party 
experts are needed, their independence and competence will have to be assessed.
When is the work to be done?
What type of assurance is required: positive/reasonable or negative/limited?
5. Potential problems with KPIs and their measurement
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Not specific-enough to be meaningful. For example, the company reports on serious industrial 
accidents. However, this leaves unanswered what is meant by ‘serious’.
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Lack of consistency from one period to the next. So, if the definition of ‘serious’, above, were to 
be altered, the safety record could be manipulated to show improvement.
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Comparability across industries is likely to be difficult as different firms could measure an 
identically described measured differently.
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Record-keeping and internal controls might not be sufficient to permit the figures to be audited. 
For example, how would the auditor know that escapes of waste into the local river are 
completely recorded?
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Is the auditor competent to verify the technology used in the measurements and the 
calculations that might follow?
6. Example
You are the auditor of Kipper Co, which manufactures paper from wood pulp. In its annual report the 
company publishes data on some environmental and social measures. The key performance 
indicators published are:
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The company’s carbon footprint.
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Its energy efficiency
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Release of chemicals into the local river
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Incidence of industrial diseases.