Audit and Attestation Green Book Lee Flashcards
(104 cards)
Types of services a CPA can provide:
Assurance Services
Attestation
Auditing
Assurance services include:
Attestation and Audit
What is assurance service? Are accountants required to be independent?
To improve info for decision making. Info can be financial or nonfinancial.
Examples: Information systems, security review, accounts receivable review.
Yes, accountants are required to be independent.
What is an attestation service?
To affirm something to be correct/ true. More assurance than assurance services.
Examples: agreed upon procedures, reporting on pro forma financial info, a compliance attestation.
What is an agreed upon procedure?
In which a practitioner is engaged to issue a report on finding on a subject matter. Does not provide examination or review. Does not provide an opinion or negative assurance. Report will only include the procedures performed and the findings.
What is the applicable pronouncement for attestation services?
SSAE (statements on standards for attestation engagement)
What are the two levels of attest assurance?
Positive (high level) assurance based on an examination
Limited (moderate level) assurance based on a review.
BUT these do not apply to the agreed upon procedure.
Are accountants required to be independent for attestation services?
YES
What is an audit?
Providing attestation service on historical financial statements, attest to the assertions made by management.
Express an opinion on financial statements.
Provide a reasonable (high, but not absolute level of) assurance.
Are accountants required to be independent for audits?
YES
Differentiate between issuers and nonissuers?
Isssuers: entities who issue stocks to the public and are required to register with SEC
Nonissuers: entities that are privately held, therefore are not required to register with the SEC
AICPA vs PCAOB
AICPA standards promulgated by the Auditing Standards Board (ASB), followed by auditors when audit nonissuers.
PCAOB standards: promulgated by the Public Company Accounting Oversight Board, followed by auditors when auditing issuers.
For issuers or nonissuers does a CPA need to issue a report on FS and IC?
For issuers.
For non issuers just a report on FS
For issuers or nonissuers does a CPA need to test test of controls?
For issuers.
Not required for nonissuers.
Is partner rotation manadoty for issuers or nonissuers?
Mandatory for issuers and optional for nonissuers.
What is a concurring partner?
The partner who reviews the audit work to ensure that the quality of audit work and reporting is in keeping with the firms quality standards.
Nonissuers can follow what standards to prepare their F/S?
GAAP
OCBOA (income tax basis, cash basis, or regulatory basis)
IFRS.
Can issuers use OCBOA?
No, only nonissuers. Issuers might have a choice between GAAP or IFRS. US companies usually have to use GAAP and foreign companies can choose either.
The purpose of the audit is to express an opinion on whether the FS are in accordance with GAAS? true?
False, the purpose of an audit is to express an opinion on whether the financial statements are in accordance with GAAP, not GAAS.
Assertions relating to the FS are set forth by the auditor. T or F?
False, assertions relating to the FS are set forth by management.
In what situations are auditors not required to be independent?
Compilations
Taxes
Consultations
Other non attest services (bookkeeping/payroll)
compilation is a little different, why?
Compilation is an attest service, but not an assurance service. Compilation does not require accountants to be independent. if you are asked if a compilation is an attest engagement, answer yes.
What is the public accounting firm structure?
Staff accountants, Senior accountants, managers, partners.
What are the GAAS General Standards?
Tim Is Poor
GENERAL STANDARDS:
- The auditor must have adequate technical TRAINING and proficiency to perform the audit.
- The auditor must maintain INDEPENDENCE in mental attitude in all matters relating to the audit.
- The auditor must exercise due PROFESSIONAL CARE in the performance of the audit and the preparation of the report.