ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Auditors of Brightwater Utilities, a regulated water company, are obtaining an understanding of the legal and regulatory framework. Which of the following best describes laws with a direct effect on the financial statements for ISA 250 (Revised) purposes?
Laws with a direct effect are those that determine the amounts and disclosures in the financial statements, such as tax and pension legislation. The auditor must obtain sufficient appropriate audit evidence of compliance with these. Laws on employment, environment or safety usually have only an indirect effect.
- ALaws on employment contracts that might lead to fines disclosed as contingent liabilities
- BEnvironmental laws with possible penalties for the sector
- CLaws that determine the reported amounts and disclosures, such as tax and pension legislationCorrect
- DLaws relating to health and safety of operations
Explanation
Laws with a direct effect are those that determine reported amounts and disclosures in the financial statements, such as tax and pension laws. For these the auditor must obtain sufficient appropriate evidence of compliance. The others are laws whose breach may have an indirect effect via fines or litigation, and require only limited procedures.
Did you get it right without looking?
One question tells you little. A timed set on Laws and regulations shows your real accuracy, how long you take and where you lose marks.
More Laws and regulations questions
- Brightwell LLP audits Orion Chemicals. The auditor discovers that Orion has discharged waste above permitted limits. Management says it will…
- Auditor Halden & Co finds that the managing director of Orsino Group, a listed company, has been involved in non-compliance with securities …
- Kestrel Logistics' auditor, Dunmore & Co, is planning the audit. Which of the following procedures is required by ISA 250 (Revised) as part …
- While auditing Lumen Retail, the auditor suspects the finance director is involved in a tax evasion scheme. What should the auditor do in de…
- Audit staff at Ridgeway Pharma plc ask which audit procedure ISA 250 (Revised) requires in all audits to help identify non-compliance with l…
- While auditing Brightwater Ltd, a manufacturer, the auditor learns from the finance director that the company may have breached an environme…