A1 Flashcards
(27 cards)
What is the main difference between US GAAS and US GAAP?
GAAS = measures quality of audit performance
GAAP = Rules, guidelines necessary to define U.S accepted accounting practice
What is management responsibility in an audit?
- Prepare the F/S
- DIM of internal control
- Inclusion of adequate disclosures
What is the Auditors responsibility in an audit?
- Opinion
- professional judgement/professional skeptisim
- Follow GAAS
- Independence
What are the steps in obtaining reasonable assurance in an audit?
- Plan the work and properly supervise any assistants
- Determine and apply appropriate materiality levels
- ID RMM
- Obtain appropriate audit evidence
What is the overall obj of an audit of a nonissuer?
To obtain reasonable assurance AND report opinion on F/S
What is the overall objective of ICFR?
1.Express opinion on effectiveness of company’s internal control
2. Plan and perform audit to obtain reasonable assurance about if MW exists
What is a Critical Audit Matter?
- Required in Issuer audits
- Relates to Accounting/Disclosures that are Material to FS
- Involves especially challenging, subjective, complex judgement for auditor
What are the 4 requirements of a CAM paragraph (IPAD)
- ID of CAM
- Description of Principal considerations that led to determine CAM
- Description of how CAM was addressed
- Referenced to relevant F/S account and Disclosure
What is the difference between CAM and KAM?
CAM = Critical Audit Matters (issuers ONLY, required in issuers, if no CAM is identified –> need to state so)
KAM - Key Audit Matters (noissuers ONLY), not required
What is Form AP?
Required for Public company for EACH Audit report - must be filed 35 days after audit
What are the most common GAAP Problems?
- GAAP consistency change (unjustified)
- Inadequate disclosures
- Unreasonable accounting estimate
What are the most common scope limitations?
- Time constraints
2.Observe inventory/confirm receivables/obtain FS - Refusal of mgmt to produce rep letter
What is the main difference between between Emphasis of Matter/Other Matter/Explanatory Matter?
EOM and Other matter = Nonissuer
Explanatory = Issuers
When is an Emphasis of Matter paragraph required?
- Justified accounting principles
- Subsequent facts that lead to other audit opinion
- F/S are prepared in special purpose framework
When is a contingency loss accrued for and disclosed?
IF loss is probable AND can estimate loss = Accrued AND Disclosed
IF loss is probable OR reasonably possible ==> Disclosed ONLY
What is an Other Matter paragraph and when is it required?
Refers to matter other than those presented or disclosed in the F/S
Required when : Auditor restricts use of report, sub events
When is an explanatory paragraph required?
Going concern, material change in accounting princple
When is an explanatory paragraph required?
Going concern, material change in accounting principle
If issuing comparative FS on a first year client, the PY audit was unmodified opinion - how should the CY report be modified?
In an other-matter paragraph note the predecessor auditor expressed an unmodified opinion on the PY FS
What term is used in the SAS indicate a presumptively mandatory requirement?
Should
If F/S prepared in accordance with OCBOA and are not titled appropriately, how should the report be modified?
Required a qualified opinion with basis for modification paragraph
What paragraphs in a nonissuers report refer to GAAP?
Opinion and Management’s Responsibility
When disclaiming an opinion due to scope limitations - how is the opinion modified?
Opinion states that “no opinion is expressed”
Auditors responsibility is revised to mention the disclaim
Additional paragraphs are added to indicate reasons the auditor did not comply with GAAS
What factor should most influence an auditor’s decision to modify the audit opinion?
The effect of misstatement on the financial statements as a whole
