AUD Mnemonics Flashcards
GAAS - Generally Accepted Auditing Standards (TIPPICANOE)
3 Categories: General, Fieldwork, Reporting
3 General
(T)raining & Proficiency
(I)ndependence
Due (P)rofessional Care
3 Fieldwork
(P)lanning & Supervision
(I)nternal Control
(C)orroborative Audit Evidence
4 Reporting (A)ccounting Principles in Conformity With GAAP (N)o New Accounting Principles Applied (O)mitted Informative Disclosures (E)xpression of Opinion
The auditor must maintain independence for attestation engagements (CARES/ERAS)
(C)ompilations - unless lack of independence is indicated
(A)greed upon procedure engagements and other engagements covered by the attestation standards leading to findings
(R)eviews
(E)xaminations (audits)
(S)pecial Reports
Preconditions for accepting an audit engagement (DIM)
Management’s Responsibilities:
(D)esign, (I)mplementation, and (M)aintenance of internal control
Inquiries of the predecessor auditor (RID-C)
(R)easons for change
(I)ntegrity of management
(D)isagreements during audit
(C)ommunication with management of those charged with Governance
Any of these would cause the successor to get RID of the new client and C you later!
Matters the auditors should communicate with those charged with Governance (DISAPPROVE)
(D)isagreements with management
Noncompliance with laws and regulations, including (I)llegal acts
(S)ignificant accounting policies adopted or changed by management
(A)djustments proposed by the auditor with a significant impact on the financial records
(P)roblems arising during the audit in obtaining evidence and employee cooperation
(P)rior discussions with management before acceptance of the engagement
(R)esponsibilities of the auditor under GAAS to obtain reasonable assurance
(O)ther information regarding responsibilities
(V)iews of other accountants who were contacted by management on significant matters
(E)stimates in the accounting records and the process used to obtain them
The mnemonic reminds us that an audit committee would DISAPPROVE of an auditor who failed to inform them on these matters.
Elements of the Engagement Letter (FACSIMILE)
(F)ees
(A)uditor’s Responsibility (GAAS)
(C)onfirmation of Engagement
(S)cope & Objective of Engagement
(I)internal Control (communicate significant deficiences & material weaknesses in IC)
(M)anagement’s Responsibility (preparation of F/S, design, implementation, and maintenance (DIM) of IC and access to info
(I)rregularities (fraud)
i(L)legal Acts (noncompliance with laws & regulations)
(E)rrors
Planning Procedures of an Audit (BRAINSTOPS)
(B)asic discussions with the client about the nature of the engagement and about their industry
(R)eview of audit documentation from previous auditor
(A)sk about recent developments in the company such as mergers and new products
(I)nterim F/S are analyzed to identify accounts & transactions that differ from expectations
(N)on audit personnel of the accounting firm who have provided services (tax prep) to the client should be contacted and to learn more about the client
(S)taffing for the audit should be determined & a meeting held to discuss the engagement
(T)iming of the various audit procedures should be determined (IC testing, inventory counting)
(O)utside assistance needs to be determined, including the use of a specialist (appraiser, IT expert)
(P)ronouncements reflecting changes in accounting principles and audit standards should be reviewed
(S)cheduling with the client is needed to coordinate activities
The mnemonic reminds you that the auditor’s BRAINSTOPS if they don’t plan out the audit carefully before beginning the detailed testing of client records
6 Elements of Quality Control (HEAL-ME)
(H)uman Resources (Personnel Management)- the firm should establish policies and procedures for effective hiring, development, assignment, and advancement of staff
(E)thical Requirements (Independence)- the firm should establish procedures to ensure that independence is maintained in attest engagements, and that there is an apporpriate means for identifying potential independence difficulties involving staff memebers
(A)ccpetance and continuance of client relationships and specific engagements
(L)eadership responsibilities for quality within the firm (“tone at the top”)
(M)onitoring - the firm should establish procedures to verify that it is complying with the above standards
(E)ngagement performance
Management’s Assertions (U-PERCV)
(U)nderstandibility and Classification (P)resentation and Disclosure (E)xistence or Occurrence (R)ights and Obligations (C)ompleteness (V)aluation or Allocation
Audit Procedures: may consist of risk assessment procedures, tests of controls, & substantive tests (ICORRIIA)
(I)nquiry (C)onfirmation (O)bservation (R)ecalculation (R)eperformance (I)nspection of tangible assets (I)nspection (examination) of records or documents (A)nalytical Procedures
Internal Control testing should be as strong as (IRON)
(I)nquiry: interview company personnel
(R)e-performance: can it be replicated?
(O)bservation: watch the control be applied
I(N)spection: dig into the details/documents
Objectives of Internal Control (ACE)
(A)ccurate & reliable financial reporting
(C)ompliance with laws and regulations
(E)ffectiveness & efficiency of operations
Reminds mgmt that it should try and establish a strong internal control structure as to have an ACE in the hole.
5 Elements of Internal Control (CRIME)
(C)ontrol Activities (R)isk Assessment (I)nformation & Communication (M)onitoring Control (E)nvironment
Control Environment (CHOPPER)
(C)ommittment to competence
(H)uman resource policies & practices
(O)rganizational structure
(P)articipation of those charged with Governance
(P)hilosophy of mgmt & mgmt operating style
(E)thical values & integrity
(R)esponsibility assignment
Control Activities: policies & procedures that help ensure that mgmt directives are carried out (PIPS)
(P)erformance reviews
(I)nformation processing
(P)hysical controls
(S)egregation of duties
