Acca aaa s21 Notes

September 2021 to June 2022 exams
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REGULATION, LEGAL MATTERS AND QUALITY 
CONTROL
Chapter 1
WHAT IS ASSURANCE?
1. Audit and assurance
We start with a little bit of revision of AA, and indeed you will be making use of AA skills throughout 
AAA (such as suggesting audit evidence to look for). 
The paper is called ‘Advanced Audit and Assurance’ and we start by explaining what is meant by the 
terms ‘audit’ and ‘assurance’.
It is often not possible to check things for yourself, whether quality, accuracy, performance or 
existence: you might not have the skills or the time, or you might be in the wrong location. Therefore 
you must rely on someone else to give you assurance. This means you have to decide:
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What standards should be applied?
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What represents ‘good’, ‘acceptable’ or ‘unacceptable?
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How much checking should be done? All checking and assurance has an associated cost.
Audit is one form of assurance. We will see that in AAA other forms of assurance might have to be 
described and discussed too, such as providing assurance to a bank that a company’s cash flow 
budget is not a work of fantastic fiction or that a take-over target is not hiding horrific liabilities.
An audit is defined as: the independent examination of and expression of opinion on the financial 
statements of an entity by a duly appointed auditor in pursuit of that appointment.
The important words here are ‘independent’ and ‘opinion’.
Independence is essential and underlies the value of auditing - and of all other forms of assurance
Opinion really means that one auditor or accountant could look at a set of financial statements (or a 
cash budget) and disagree with the opinion of another.
Judgment is essential to all assurance: there are no certainties and there are no certifications of 
correctness or accuracy.