Audit 1 Flashcards
Management Responsibilities
They need to adopt good accounting policies.
U.S. Generally Accepted Accounting Principles
It is made up of rules and conventions that define accepted accounting principles at that time. It is an accepted framework for FS.
What type of Audit Evidence do you need?
They need sufficient appropriate audit evidence.
Where do you find guidance for a nonissuer?
A nonissuer is private. Guidance for the auditor can be found in the Statements on Auditing Standards.
How must an auditor of a nonissuer conduct the audit?
In accordance with ASB and SAS.
In what ways could an auditor provide professional skeptism?
Through using a third party to provide support for management representations, designing additional procedures to obtain more reliable evidence, or confirm management representations with a specialist.
What is the quality control system?
A system that makes sure the firm complies with professional standards: leadership, ethical requirements, client acceptance, HR, engagement performance, and monitoring.
What established the PCAOB?
The Sarbanes Oxley Act of 2002
What paragraphs should be referenced in the audit report when disclaiming an opinion?
The disclaimer of opinion should be referenced in the auditors responsibility paragraph as well as the additional paragraph before the opinion paragraph. Titled “Basis for disclaimer of Opinion”
How would an inadequate disclosure of the substantial doubt on an entity’s ability to continue as a going concern be classified?
It would be a departure from GAAP. (qualified or adverse opinion).
What does it mean to reference a component auditor?
If you reference the component auditor you are not assuming responsibility for their work. (even if they have an excellent reputation).
How is a change in accounting estimate accounted for?
Prospectively- meaning it does not reference consistency.
ex- change in the useful life used to calculate depreciation.
When do you require an emphasis of matter paragraph?
When there is a change in accounting principal, when a special purpose framework is used, or substantial doubt about and entities ability to continue as a going concern.
How to deal with consistency?
Consistency is implicitly stated. Unless inconsistency exists than there is an explicit statement.
Auditors Responsibility
- responsibility to express an opinion on FS
- plan and perform audit to obtain reasonable assurance
- obtain evidence
- assessment of risk of Material misstatements
- test internal controls
- evaluating accounting policies and estimates made by management
- evaluate overral presentation
What type of opinion would be rendered for an unjustified change in accounting principle?
a qualified or adverse opinion.
What is the phrase to include in an auditors report when expressing a qualified opinion?
“Except for…present fairly”
What type of report is issued when you are associated with FS of a public company you didnt audit or review?
Issue a disclaimer of opinion.
What indicates division of responsibility?
When a group engagement partner reports that part of the audit was performed by another auditor.
Where is GAAS mentioned in the auditor report?
In the auditors responsibility paragraph.
Where is GAAP mentioned in the auditor report?
In the opinion paragraph
How does the Audit report alter for a disclaimer of opinion?
The auditor’s responsibility paragraph mentions the disclaimer, and the opinion paragraph states that an opinion cannot be rendered.
qualified opinion because of scope limitation is worded..?
by stating the possible effects on the financial statement
What are examples of scope limitations?
restrictions on the audit such as timing of the work, inability to obtain audit evidence, not acceptable accounting records…
