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Audit A1 Flashcards

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1
Q

Most Authoritative Non Issuer Standards:

A

SAS AICPA

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2
Q

Most authoritative Issuer Standards:

A

PCAOB

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3
Q

Government Organization Standards

A

GAGAS- Generally Accepted Government Audit Standards

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4
Q

Attestation Engagements Standards

A

SSAE- Statements on Standards for Attestation Engagements

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5
Q

What are the Standards for Preparation, Compilation, and Review of Historical FS?

A

SSARS- Statements on Standards for Accounting and Review Services

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6
Q

What are the standards for preparation or compilation of pro forma financial info & forecasts

A

SSARS- Statements on Standards for Accounting and Review Services

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7
Q

What is the first level of auditing guidance in the GAAS Hierarchy for both issuers and nonissuers?

A

Nonissuers: SASs published by ASB
Issuers: PCAOB auditing standards

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8
Q

What is the second level of auditing guidance in the GAAS Hierarchy?

A

interpretive publications,
—which are recommendations for how SASs should be applied to certain situations

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9
Q

What is the third level of auditing guidance in the GAAS Hierarchy?

A

Other auditing publications
—have no authoritative status but may be helpful for the auditor

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10
Q

What are the steps in the audit process?

A
  1. accept engagement
  2. assess risk and plan response
  3. perform procedures and obtain evidence
  4. form conclusions
  5. reporting
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11
Q

What is the purpose of an audit?

A

Provide financial statement users with an opinion on whether the entity’s financial statements are presented fairly in all material respects in accordance with the applicable financial reporting framework.

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12
Q

What does the auditor’s report provide credibility to?

A

entity’s financial statement

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13
Q

What are the client management responsibilities for an audit?

A
  • preparation of the financial statements in accordance with GAAP
    -design, implementation, and maintenance of internal control relevant to FS preparation and presentation
  • providing the auditor with access to all necessary information needed to perform an audit
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14
Q

What are the auditor responsibilities for an audit?

A

-expressing an opinion on the financial statements based on the results of the audit
-maintaining professional skepticism
-complying with relevant ethical requirements
-exercising professional judgment
-obtaining sufficient appropriate audit evidence
-complying with GAAS

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15
Q

3 inherent limitation of an audit:

A
  1. nature of financial reporting
  2. nature of audit procedures
  3. timeliness of financial reporting and the balance between benefit and cost
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16
Q

When does an auditor refer to GAAS?

A

For guidelines on how to perform the audit.

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17
Q

When should the auditor refer to financial reporting framework? (GAAP, IFRS, etc)

A

to evaluate whether the transactions are recorded and reported fairly in the FS

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18
Q

Which paragraphs in an audit report of a non issuer is GAAS mentioned?

A

Basis for Opinion &
Auditor responsibilities

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19
Q

Which paragraphs in an audit report of a non issuer is GAAP (IFRS or other financial reporting framework) mentioned?

A

opinion paragraph &
mangement responsibility

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20
Q

What is included in the auditor’s opinion section of a nonissuer audit report?

A

-States the auditor’s opinion regarding fair presentation of the financial statements in accordance with the applicable financial reporting framework
-the entity
-financial statement titles
-the dates or periods covered
-the identification of the applicable financial reporting framework

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21
Q

What is included in the basis for opinion section of a nonissuer audit report?

A

-States that the audit was conducted in accordance with GAAS
-states the auditor is required to be independent
-references the section of the auditor’s report that describes auditor responsibilities
-states whether the auditor believes that sufficient appropriate evidence has been obtained to provide a basis for the opinion

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22
Q

What is included in the Substantial Doubt About the Entity’s Ability to Continue as a Going Concern (as necessary) section of a nonissuer audit report?

A

-draws attention to the note in the financial statements that discloses the conditions or events identified
-states that the auditor’s opinion is not modified with respect to this matter

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23
Q

What is included in the Key Audit Matters (when engaged) section of a nonissuer audit report?

A

-states the definition of a key audit matter
-describes each key audit matter identified

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24
Q

What is included in the Management’s Responsibility Section section of a nonissuer audit report?

A

-states that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework
-states that management’s responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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25
What is included in the Auditor's Responsibility Section section of a nonissuer audit report?
statement on each: - "the responsibility of the auditor is to obtain reasonable assurance about whether the financial statements are free from material misstatement and to issue an auditor's report that includes the auditor's opinion" - "reasonable assurance is a high level of assurance but is not absolute" - "the risk of not detecting a material misstatement due to fraud is higher than one resulting from error" - "misstatements are material if there is substantial likelihood they would influence the judgment made by a reasonable user" - "the details or description of what is involved in performing an audit, including judgment, risk assessment, internal controls, evaluation of accounting policies, overall presentation, and going concern" - "the auditor is required to communicate certain matters, including the planned scope and timing of the audit, significant findings, and certain internal control-related matters, to those charged with governance."
26
What is included in the Other Information (as necessary) Section section of a nonissuer audit report?
-Identifies the other information included with the financial statements and clarifies the responsibilities of both management and the auditor with respect to such information -include a statement that the auditor's opinion does not cover the other information
27
What is included in the Other Reporting Responsibilities (as necessary) Section section of a nonissuer audit report?
included only if the auditor addresses other reporting responsibilities in addition to GAAS
28
What does the audit report date indicate?
date the sufficient appropriate audit evidence was obtained to support the auditors opinion
29
What are Key Audit Matters (KAM)?
Matters that were of most significance in the audit of the financial statements of the current period NONISSUERS
30
What are Critical Audit Matters (CAM)?
Matter that was communicated or required to be communicated to the audit committee It relates to accounts or disclosures that are material to the financial statements and involves challenging, subjective, or complex auditor judgement. ISSUERS
31
What are the 3 sections on a standard Unqualified Issuer Report?
1. opinion 2. basis for opinion 3. CAMs
32
What is in the opinion section for a standard issuer report?
-states that an audit was performed -indicates the individual financial statements that were audited -States the auditor's opinion regarding fair presentation of the financial statements in conformity with the applicable financial reporting framework
33
What is included in the 1st paragraph of Basis for opinion section in standard issuers report?
— the financial statements are the responsibility of management; — the auditor's responsibility is to express an opinion; and — the auditor is registered with the PCAOB and is required to be independent.
34
What is included in the 2nd paragraph of Basis for opinion section in standard issuers report?
— the audit was conducted in accordance with the standards of the PCAOB; — the audit was planned and performed to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to error or fraud; — the details or description of what is involved in performing an audit; and — the auditor believes that the audit provides a reasonable basis for the opinion.
35
What is included in critical audit matters section of standard issuer report?
-must include the section titled "Critical Audit Matters" -should include discussion of any critical audit matters (CAMs) arising from the current period's audit of the financial statements OR -state that the auditor determined that there were no CAMs.
36
What must the auditor of issuer do after each audit report issued?
must file form AP with the PCAOb
37
What may the "except for" qualified opinion be the result of?
-result of inappropriate or misapplied accounting policies -inappropriate financial statement presentation -inadequate disclosure -an unreasonable accounting estimate.
38
When should an adverse opinion be issued?
-financial statements are not presented fairly (materially misstated) because management failed to follow GAAP MATERIAL and PERVASIVE
39
On a nonissuer report, what happens when an auditor expresses a modified or adverse opinion due to material misstatements of FS?
-both the Auditor's Opinion and Basis for Opinion sections are modified to state the modified opinion and to describe the matter giving rise to modification -auditor should not include a "Key Audit Matters" section in the auditor's report when issuing an adverse opinion on the financial statements
40
On an issuer report, what happens when an auditor expresses a qualified or adverse opinion due to material misstatements of FS?
-the auditor's report will include an additional paragraph immediately following the opinion paragraph -opinion paragraph will be modified -opinion paragraph will be modified
41
When should an auditor issue a qualified report due to a material GAAS Issue?
-unable to obtain sufficient appropriate audit evidence to support management's assertions about the nature of a matter involving an uncertainty -auditor is unable to fully complete an audit due to a scope limitation -MATERIAL BUT NOT PERVASIVE
42
When should an auditor issue a disclaimer of opinion on report due to a material GAAS Issue?
- significant uncertainty, a scope limitation, a lack of independence, or an auditor association with unaudited financial statements - BOTH MATERIAL AND PERVASIVE
43
Regarding a nonissuer report, what happens when a qualified or disclaimer of opinion is issued?
-Auditor's Opinion and Basis for Opinion sections are modified to state the modified opinion or that no opinion is expressed (disclaimer) -to describe the matter giving rise to modification or the reason for the inability to obtain sufficient appropriate audit evidence -should NOT include a Key Audit Matters section in the auditor's report when issuing a disclaimer of opinion on the financial statements.
44
Regarding an issuer report, what happens when a qualified or disclaimer of opinion is issued?
- paragraph immediately following the opinion paragraph is added and the opinion paragraph is modified -a qualified opinion and a disclaimer of opinion will include modified language in the Basis for Opinion section -The auditor is not required to report critical audit matters in the auditor's report when the auditor expresses a disclaimer of opinion
45
When is an emphasis-of-matter paragraph included in the auditor's report of a nonissuer?
-required by GAAS -at auditor's discretion
46
What is an emphasis-of-matter paragraph used for?
-when referring to a matter that is appropriately presented or disclosed in the financial statements and is of such importance that it is fundamental to the users' understanding of the financial statements -does not affect auditors opinon
47
When is an "other-matter" paragraph included in audit report?
-when required by GAAS -at auditors discretion
48
What does an "other-matter" paragraph refer to?
matters other than those presented or disclosed in the financial statements that are relevant to the users' understanding of the audit, the auditor's responsibilities, or the auditor's report
49
What is does an explanatory paragraph include?
-an appropriate title -should describe the matter being emphasized -the location of relevant disclosures about the matter in the financial statements
50
Where does an explanatory paragraph go in an unqualified report of an issuer?
follow the opinion paragraph
51
If the auditor is finds that their has been a change in accounting principles or an adjustment to correct a material misstatements previously issued financial statements has affected the comparability of entities current financial statements, what should the auditor do?
add an emphasis of matter paragraph in the auditors report
52
If auditor is required by GAAS or they decide that it is necessary to include language in an audit report (or other written communication) that restricts the use of auditors written communication, where should that language be included in audit report?
Nonissuer- other matter paragraph issuer- explanatory paragraph
53
When reporting on comparative financial statements, what should the auditor do if they become aware of evidence that affects the prior years financial statement and the opinion that was expressed?
the auditor should update the prior opinion in the current year's audit report -the reasons for the updated opinion should be disclosed in the emphasis-of-matter or other-matter (explanatory) paragraph
54
What should be included in the current period audit report if the successor auditor does not present the predecessor's audit report?
-an opinion only on the current period financial statements -An other-matters (explanatory) paragraph should be included indicating that the financial statements from the prior period were audited by a predecessor auditor and the type of opinion expressed by the predecessor auditor; the nature of any emphasis-of-matter, other-matter, or explanatory paragraphs; and the report date.
55
Under a scenario in which the current period financial statements are audited and presented in comparative form with prior financial statements that were compiled or reviewed, What should the auditor include in the report?
-include an other-matter (explanatory) paragraph in the current audit report indicating the distinction. -A statement in the other-matter (explanatory) paragraph should also be included to indicate that these services are less in scope than an audit and, as such, do not provide a basis for expressing an opinion on the financial statements
56
What kind of paragraph should be use if the prior period's comparative statements were not audited, reviewed, or compiled?
other-matter (explanatory) paragraph It should further indicate that the auditor assumes no responsibility for them.
57
events or transactions that occur after the balance sheet date, but before the financial statements are issued
Subsequent events
58
condition that existed on or before the balance sheet date that usually requires an adjustment to the financial statements or footnote disclosure
recognized subsequent event
59
Involve a significant business event (e.g., sale of bonds) which occurred after the balance sheet date
nonrecognized subsequent event
60
Do non recognized subsequent events usually require an adjustment to the financial statement?
no, instead are disclosed in footnotes
61
What is the auditors responsibility for subsequent events?
gather evidence related to subsequent events UP TO THE DATE OF THE AUDITORS REPORT
62

Audit Exam (4 decks)

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