A1 Flashcards
Standards that provide the authoritative US auditing guidance for non-issuers and issuers, and who issues those standards?
Non-issuers:
State on Auditing Standards (SASs), issued by AICPA Auditing standards
Issuers:
Auditing Standards (ASs). Issued by the PCAOB Public Company Accounting Oversight Board
State the primary purpose of an audit
To provide FS users with an opinion on whether the FS are fairly presented, in all material respects, in accordance w/the applicable financial reporting framework
What are the 5 general GAAS requirements related to the conduct of an audit?
S - Professional Skepticism
E - Ethical Requirements
J - Professional Judgment
E - Sufficient & Appropriate Audit Evidence
C - Compliance w/GAAS
3 Inherent Limitations of an audit
The nature of financial reporting
The nature of audit procedures
Timeliness of financial reporting and the balance between benefit and cost
When should an auditor’s opinion be modified
A change in an auditor’s opinion is when:
*the auditor determines that the FS as a whole are materially misstated (GAAP issue): or
*the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the FS as a whole are free from material misstatement (GAAS issue)
Unmodified Opinion
(Non-Issuer)
*Title
*Addressee
*Auditor’s Opinion
*Basis for Opinion
*Responsibilities of Management for the FS
*Auditor’s Responsibilities for the Audit of the FS
*Signature of the Auditor, Auditor’s Address, and Date of the Auditor’s Report
When applicable, the auditor’s report may include additional sections depending on the circumstances of the audit.
Ex:
Going Concern
Key Audit Matters
Other Info
Other Reporting Responsibilities
What should be included in the opinion paragraph of the unmodified audit opinion (non-issuer)?
*Entity under audit
*Title of ea FS
*Dates or periods covered by the FS
*Stmt that the FS have been Audited
*Stmt that the FS present fairly, in all material respects, in accordance w/the applicable financial framework
*Applicable financial reporting framework and its origin
What should be included in the management’s paragraph of the unmodified audit opinion (non-issuer)?
*Management is responsible for the prep & fair presentation of the FS
*Stmt that this responsibility includes the design, implementation, & maintenance of internal control relevant to the preparation and fair presentation of FS that are free from material misstatement whether due to fraud or error.
*When required, the evaluation of whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
Where in the standard unmodified opinion (non-issuer) does the auditor refer to (1) the applicable financial reporting framework (i.e., GAAP or IFRS) and (2) generally accepted auditing standards?
(1) The financial reporting framework is referred to in the management’s responsibility & opinion sections.
(2) GAAS is referred to in the basis for opinion and auditor’s
What is the definition of a key audit matter (KAM)?
Key audit matters are those matters that were of most significance in the audit of the financial statements of the current period & are selected from the matters communicated to those charged w/governance.
Key audit matters relate to the audits of nonissuers only & entities have the option of whether or not to engage the auditor to communicate such matters in the auditor’s report.
When an auditor is engaged to communicate key audit matters in the auditor’s report, what information should be included?
When the auditor is engaged to communicate key audit matters, the auditor’s report should include a separate section with the heading “Key Audit Matters” and the following information should be included:
*A description of each matter
*A description of why it was of most significance to the audit
*How the matter was addressed in the audit of the financial stmts
