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Flashcards in Audit 6 Deck (28):
1

Direct Financial Interest

Stock ownership, even if owned in a blind trust

Financial interest in a client through a partnership and the member is a general partner

Financial interest in a trust when the member is the trustee

2

Indirect financial interest examples

Member owns shares in a mutual fund that invests in the attestation client

Member owns a direct financial interest in Company A and Company A has a direct financial interest in the attestation client

3

Independence is NOT impaired in a financial institution client by (ordinary course of business)

Collateralized (Fully) car loans with a financial institution client

Cash advance or credit card balances not exceeding $10,000

A bank account that is fully insured by the government

A passbook loan

4

General standards include

Professional Competence

Due Professional Care

Planning and Supervision

Sufficient Relevant Data

5

Member is obligated to disclose confidential information even without the consent of the client in the following circumstances

Subpoena or summons

Quality review of the member’s professional practices by the AICPA

Inquiry either by the ethics division or the trial board

6

Types of services where receiving a commission is acceptable (MUST DISCLOSE)

C-ompilation
A-dvisory
T-ax

7

The PCAOB is subject to oversight by the SEC and has the duty to

Register public accounting firms

Establish rules

Conduct Inspections

8

Broad categories of misconduct

While performing audit

Outside the scope of accounting services

Criminal conviction

9

Audit documentation should

Assist with planning, conducting, and supervising the audit

Show that the accounting records reconcile with the F/S

Be prepared in enough detail so that an EXPERIENCED Auditor who has no previous connection with the audit can understand including the NET(nature, extent, timing)

10

Document retention
(Issuers (PCAOB ))

Documentation retained 7years

Documentation completion date 45 days following the report release date

11

Document retention
(NON-issuers(SAS))

Documentation retained 5 years

Final audit documentation file to be assembled within 60 days following the report release date

12

Significant audit findings include matters that

Are related to the selection and application of accounting principles

Are related to matters that give rise to significant risks

Are related to possible material misstatements in the F/S

Cause significant difficulty in applying necessary audit procedures

May result in modification of the auditor’s opinion or the inclusion of an emphasis-of-matter paragraph in the auditor’s report

Need to revise the auditor’s previous risk assessment

13

Areas that must be separated in IT

C-ontrol team
O-perators
P-rogrammers
A-nalyst(System)
L-ibrarian

14

Audits of recipients of federal financial assistance should be conducted in accordance with both GAAS and GAGAS. The following also apply

Expanded IC documentation and testing requirements

Expanded reporting to include formal written reports on the consideration of IC and the assessment of control risk

Expanded reporting to include whether the federal financial assistance has been administered in accordance with applicable laws and regulations

Applications of single audit standards to federal financial assistance

15

Attestation requirements under GAGAS/GAS could include

Compliance with laws, regulations, rules, contracts, or grants

Effectiveness of IC over compliance with specified requirements

Presentation of MD&A

Reliability of performance measures

16

Objectives of performance audits

I-C
C-ompliance
E-ffectiveness, Economy, and Efficiency

17

Audit risk of noncompliance=

Risk of material noncompliance X Detection risk

As risk of noncompliance increases

CPA should decrease  detection risk=(More audit work)

18

Types of government reports

R-eport on IC over compliance
O-pinion of compliance
C-ombined report on compliance and IC over compliance

19

Required documentation is includes the following

The assessed risk of material noncompliance

Responses to the risk assessment

The basis or rationale for materiality levels

Compliance with supplemental requirements

20

GAGAS includes the following ethical principles

Serving the public interest

Integrity

Objectivity

Proper Uses of Government Information, Resources, and Positions

Professional Behavior

General Standards

21

General Standards are made up of?

Independence

Professional judgment

Competence

Quality Control and Assurance

22

GAGAS Requirements for performing Financial Audits

Previous Audits and Attestation Engagements

Fraud, noncompliance, and abuse

Develop a Finding

Audit Documentation

23

Elements of a finding include

Criteria

Condition

Cause

Effect or potential effect

24

GAGAS Requirements for Reporting on Financial Audits

Auditor’s compliance with GAGAS

Report on IC and Compliance with Provisions of Laws, Regulations, Contracts and Grant Agreements

Communicate Deficiencies in IC, Fraud, and Noncompliance

25

Content of report on IC of Governmental entities

Assertion that evaluating compliance with laws, rules, and regulations with a direct and material effect on the F/S is part of developing an opinion on F/S

The Assertion that specific controls relating to financial reporting are considered

An indication wither no weaknesses were found or that significant deficiencies were found, and an indication whether those deficiencies were material.

26

Threats to Independence

Self-Interest Threat

Self-Review Threat

Bias Threat

Familiarity Threat

Undue Influence Threat

Management Participation Threat

Structural Threat

27

Documentation of Independence must include

Threats to independence
Safeguards
Considerations
The auditor’s understanding

28

The interrelated elements of quality control are:

H-uman resources
E-ngagement/client acceptance and continuance
L-eadership responsibilities
P-erformance of the enegagement

M-onitoring
E-thical requirements