ACCT 3201 · The Audit Function · Purpose, Regulation, Roles

Led by Dorothy Rigour Simulacrum

1. Module 1 ○ Open

   The Audit Function · Purpose, Regulation, Roles

   Led by Dorothy Rigour Simulacrum

   The question

   An introduction to the audit function in the UK — what auditors actually do, the regulatory architecture (FRC transitioning to ARGA, ICAEW, the FCA), the legal framework (Companies Act 2006), and the international standards regime (ISA UK, transposing IAASB standards). Rigour Simulacrum covers the auditor's overarching duty under the Companies Act, the four cornerstones of audit (independence, scepticism, evidence, judgement), the structural difference between audit firms and other professional-services businesses, and how the audit relationship works between the audit committee, the auditor, and management.

   Outcome

   The student can articulate the purpose of audit, identify the regulatory framework and the relevant standards, distinguish reasonable assurance from absolute assurance, and outline the structure of the audit lifecycle. (Audit foundations)

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   Practice scenarios

   The Auditor's First Conversation with a New Audit Committee Chair

   You meet for the first time, as engagement partner on the 2024 Halberd plc audit, with the audit committee chair — a former CFO new to the chair role. The work tests whether you can explain the auditor's role, the audit committee chair's responsibilities, and the working relationship clearly, in plain English, without retreating to jargon under pressure from a busy senior counterpart.

   Your goals

   • Frame the auditor's responsibilities clearly: opinion on truth and fairness of financial statements; reasonable assurance (not absolute); compliance with UK reporting framework (IFRS or FRS 1020 as applicable); compliance with ISA UK; specific UK requirements (going concern; viability statement review; key audit matters in the auditor's report).
   • Frame the audit committee chair's responsibilities: oversight of financial reporting; oversight of internal controls and risk management; oversight of internal audit function; oversight of external audit (appointment, fees, independence, scope, findings); reporting to the board.
   • Identify the shared responsibilities: judgement on material accounting estimates (provisions, impairments); going concern; significant transactions; identified frauds.
   • Identify the most-worried-about areas in a UK mid-cap manufacturer: revenue recognition (especially long-term contracts); inventory valuation; impairment of goodwill and intangibles; pension assumptions if defined-benefit plan is large; going concern (especially in current macroeconomic environment); fraud risk (procurement, expense fraud).
   • Frame as a 1,000-word memo previewing the meeting: structured to introduce the auditor's role, ask the chair to introduce hers, propose a working pattern for the year (frequency of meetings, communication channels, escalation paths).

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