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Audit Outlines > A6 Outline > Flashcards

A6 Outline Flashcards

1
Q

Governs any service that a member of the AICPA performs.

A

AICPA Code of Professional Conduct

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2
Q

The Code of Professional Conduct governs any service that member of the AICPA performs including:

A

Audit, Special Reports, Compilations, Reviews, Services Performed on financial forecasts/projections, and attestation engagements

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3
Q

Is a distinguising mark of a profession that accepts a high degree of respoonsibility to the public. Voluntary acceptance for the purpose of benefiting society

A

A professional code of conduct

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4
Q

Provides conceptual framworks to be utilized in the absence of applicable guides.

A

The Code of Professional Conduct

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5
Q

Outlines enhanced financial disclosure requirements

A

Sox Title IV

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6
Q

Outlines auditor independence rules, including prohibited services, audit partner rotation, and audit committee preapproval and reporting.

A

Sox Title II

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7
Q

Provides for the Public Company Accounting Oversight Board PCAOB that consist of 5 members (2 MUST BE CPAs, and 3 CANNOT BE CPAs), requires firms that audit issuers to register with the PCAOB, and outlines certain auditing standards that must be followed be registered firms.

A

Sox Title I

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8
Q

Outlines Improper influence on conduct of audits.

A

Sox Title III

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9
Q

Has adopted AICPA Code of Professional Conduct Independence and Integrity and Objectivity Rules and has issued its own inependence standards concerning contengent fees, tax transactions and services, non-audit services related to internal control over financial reporting, and communications with the audit committe regarding independence.

A

The PCAOB

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10
Q

Has outlined an extensive list of circumstances that could impair auditor independence, many of which reflect the AICPA’s Code of Professional Conduct and the provisions of SOX.

A

U.S Securities and Exchange Commission (SEC)

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11
Q

Requires independence when auditing and rendering an opinion on an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA).

A

Department of Labor (DOL)

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12
Q

States that the fundamental principles of professional ethics for professional accountants are integrity, objectivity, professional competence and due care, confidientiality, and professional behavior

A

The IFAC Code of Ethics for Professional Accountants

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13
Q

Based on a conceptual framework approach (versus a set of specific rules) under which entities are required to indentify, evaluate, and address threats to compliance with fundamental principles, and whenever possible, safeguards should be applied to eliminate threats or reduce threats to an acceptabe level.

A

IFAC Code of Ethics for Professional Accountants

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14
Q

Serves as the primary record of the work performed, and provides support for the audit opinion rendered on the financial statements.

A

Audit Documentation

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15
Q

Documentation is also caled:

A

working papers

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16
Q

Belongs to the auditor

A

Audit Documentation

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17
Q

The date on which the auditor grants the client permission to use the report.

A

Report Release Date

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18
Q

The date by which final documentation must be assembled.

A

Documentation Completion Date

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19
Q

Nonissuers: Documentation completion date =

A

Report release date + 60 days

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20
Q

Issuers: Documentation completion date =

A

Report release date + 45 days

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21
Q

Nonissuers: Documentation retention requirements:

A

Five years for audits of nonissuers

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22
Q

Issuers: Documentation retention requirements

A

Seven Years for audits of issuers

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23
Q

Type of professional that may be needed, and should be guided by the CPA

A

An IT Professional

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24
Q

An entity’s use of information technology affects both the evaluation of internal control and the procedures used to gather evidence, but it does not affect:

A

The auditor’s objectives

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25
Q

Involves automated means of originating, processing, storing, and communicating information.

A

Information Technology

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26
Q

Differences between manual and a computerized enviornment include:

A

a. Uniform processing improves consistency
b. Reduces paper audit trails
c. Increases the risk of unauthorized access

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27
Q

Electronically marks specific transactions

A

Transaction tagging

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28
Q

Sections of the application program code that collect transaction data for the auditor.

A

Embedded audit modules

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29
Q

Use of the client’s system to process the auditors data, off-line, while still under the auditor’s control.

A

Test Data

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30
Q

Use of the clients system to process the audtitor’s data, on-line (e.g. test data comingled with live data). Client personnel are not informed the test is being run.

A

Integrated Test Facility (ITF)

31
Q

The auditors system is used to re-process client data and then compare results with the clients files.

A

Parallel Simulation

32
Q

Audit requirements become increasingly restrictive as engagement requirements escalate from:

A

GAAS, to GAGAS, to the Single Audit

33
Q

Include all GAAS standards by reference and expand requirements with additional standards that focus on audits of government and governmental financial assistance (grants).

A

GAGAS

34
Q

Also called the yellow book

A

GAGAS

35
Q

Represent supplementary audit requirements that relate to federal financial assistance.

A

Single Audits

36
Q

Includes all GAAS standards by reference and expand requirements with additional standards that focus on audits of governemental financial assistance (grants).

A

GAGAS

37
Q

__________ is important in determining whether government assistance has indeed been earned or whether is owen back to the grantor.

A

Compliance

38
Q

What are managments responsibilities in regards to an audit of a government entity performed under GAGAS?

A

Management is responsible for indentifying the appropriate laws and regulation, establishing internal controls to provide reasonable assurance that the entity complies with applicable laws and regulations, preparing supplemental financial reports, and for obtaining and audit that satifies approprtiate legal, regulatory, or contractua; requirements.

39
Q

What are the auditor’s responsibilities in regards to an audit of a government entity performed under GAGAS?

A

Auditors are responsible for obtaining reasonable assurance that the financial statements are free of material misstatements resulting from violations of laws and regulations that have a direct and material effect on the determination of financial statement amounts, for determining whether management has properly identified laws and regulations, understanding the implications of noncomliance on the finanicial statements, and for ensuring the scope of the audit addresses the appropriate requirements.

40
Q

Type of GAGAS engagement that relates to compliance with specific laws, regulations, or rules.

A

Attestation Engagements

41
Q

Type of GAGAS engagement that relates to evaluations of effectiveness, economy, and efficiency; internal control; and compliance.

A

Performance Audits

42
Q

GAGAS defines three types of government engagements:

A
  1. Financial Audits
  2. Attestation Engagements
  3. Performance Audits
43
Q

How does an auditor report fraud in a GAGAS engagement?

A

The auditor should report all instances that incolce fraud or illegal acts, unless inconsequential.

44
Q

The auditor’s objectives for compliance audits include:

A

a. Forming an opinion on whether the entity complied, in all material respects, with complicane requirments.
b. Reporting at the level specified by the audit requirement.
c. Identifying audit and reporting requirements supplementary to GAAS and GAGAS (e.g. Single Audit Requirements) and addressing those requirements.

45
Q

In compliance audits, GAAS requires the auditor to perform Risk Assessment procedures for:

A

Each of the government programs and applicable compliance requirements selected for testing.

46
Q

The Risk Assessment Model for Audit Risk of Noncompliance:

A

Audit Risk of Noncompliance = Risk of Material Noncompliance (assessed by auditor) * Detection Risk (controlled by auditor)

47
Q

Risk of material noncompliance consist of two elements:

A

(1) Inherent Risk of Noncompliance

(2) Control Risk of Noncompliance

48
Q

The risk that the auditor will not detect material noncompliance that exists due to the audit procedures used.

A

Detection Risk of Noncompliance

49
Q

The auditor is to design an overall response to the assessment of the risk of material noncompliance. These responses include planning the nature, extent, and timing of:

A

a. Test of controls
b. Test of details
c. Analytical Procedures

50
Q

The auditor is to determine whether audit requirements include requirements supplementary to GAAS and GAGAS such as:

A

The Single Audit Act - auditor must perform appropriate propcedures.

51
Q

True or False: GAAS requires the auditor is to obtain an written representation letter from the entity when performing a compliance audit.

A

TRUE

52
Q

Generally reports on compliance include:

A

A. Generall reports include:

(1) An opinion on compliance
(2) A report on internal control over compliance (opinion is disclaimed)

B. Reports can come in various combinations including a report on compliance only, a combined report on compliance and internal control over compliance, or a separate report on internal control over compliance.

53
Q

Documentation the auditor is to prepare for a comliance audit:

A

A. Risk Assessment

B. Response to the Risk Assessment (e.g. planned & executed tests)

C. Basis for Materiality Levels

D. Compliance with Supplemental Requirements

54
Q

Applies to audits of entities that spend equal or in excess of $750,000 of federal financial assistance ina fiscal year.

A

The Single Audit Act

55
Q

Single Audit Act engagements include:

A

Both entity-wide and program-spefcific audits.

56
Q

Materiality evaluations in a single audit include:

A

A separate evaluation of materiality for each major program, not simply an evaluation in relation to the financial statements taken as a whole.

57
Q

Generally, MAJOR PROJRAMS are those that spend:

A

$300,000 or more in federal financial assistance, however, auditors use a risk-based approach to determine major programs.

58
Q

The six interrelated elements of QUALITY CONTROL include: [HELP ME]

A

Human resources (hiring, staffing, development, & advancement)

Engagement/client acceptance and continuance (look for mgt. integrity, evaluate audit firms capability of completing engagement, and consider potential conflicts of interest)

Leadership responsibilities (“tone at the top” influences attitude throughout the firm)

Performance of the engagement

Monitoring (such as second partner review & peer review)

Ethical requirements (independence, integrity, & Objectivity)

59
Q

The nature and extent of a firms quality control policies and procedures will vary based on its:

A

Size, structure, complexity, as well as on cost-benefit considerations

60
Q

Apply to the professional activities of a firms practice

A

Quality Control Standards

61
Q

Apply to individual audit engagements

A

Generally Accepted Auditing Standards (GAAS)

62
Q

What is the auditor’s objective at the engagement level when performing engagements in accordance with GAAS regarding quality control procedures?

A

The auditors objective at the engagement level is to implement quality control procedures to provide reasonable assurance that the audit complies with professional standards and applicable legal and regulatory requirements, and to ensure that the auditor issues a report that is appropriate.

63
Q

While the engagement partner is responsible for the overall quality of the engagement, he or she may:

A

Delegate responsibility for certain procedures to other members of the engagement team.

64
Q

May be performed by a partner, another internal or external party, or a team of individuals (unaffiliated with the engagement) if required by the firms policies and procedures.

A

Engagement Quality Control Review

65
Q

Audit partner rotation when auditing an issuer:

A

The lead audit or coordinating partner and the reviewing partner must rotate off the audit every 5 years.

66
Q

What are risk associated with auditing around the computer?

A

Insufficient paper-based evidence and insufficient audit procedures.

67
Q

Manual Audit Procedures (IT)

A

“Auditing around the computer”

68
Q

Often appropriate for simple batch systems with a good audit trail and will result in the same level of confidence as would auditing through a computer.

A

Auditing around the computer

69
Q

The auditor tests the input data, processes the data independently, and then compares the independently determined results to the program results. Emphasis is on the input output stages of transaction processing.

A

Auditing around the computer

70
Q

Emphasis is on the input output stages of transaction processing:

A

Auditing around the computer

71
Q

Emphasis is on the input and processing stages of transaction processing.

A

Computer assisted auditing techniques (CAAT)

72
Q

Computer Assisted Auditing Techniques (CAATs) =

A

“Auditing through the computer”

73
Q

Used in highly automated systems, with complex audit trails and the elimination of physical source documents.

A

Computer Assister Auditing Techniques (CAATs)

74
Q

The primary disadvantage of auditing with a computer is that:

A

Audit documentation may not contain readily observable details of calculations.

Audit Outlines (7 decks)

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