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Flashcards in Audit Section 2-1 Deck (20):

When a group engagement partner decides to make reference to a component auditor's examination under US GAAP, the group engagement partner's report should state " We did not audit the F/S of X company....." in which part of the audit report?

The auditor's responsibility paragraph.


If an accounting change has NO MATERIAL EFFCT on the F/S in current year, but the change is reasonable certain to have a material effect in later years, the change should be

DISCLOSED in the NOTES to the F/S for the CURRENT year, but NO modification of the auditor's report is necessary.


If an change in accounting principle has MATERIAL EFFCT on the F/S in current year

It would be treated as a consistency modification in the auditor's report for the current year.


A division of responsibility ONLY affect the auditor's responsibility paragraph and the opinion paragraph,

but DOES NOT REQUIRE inclusion of a basis for opinion paragraph and not prevent the issuance of an UNMODIFIED opinion.


Involvement of another auditor ( A auditor decides to take responsibility for the work of the other Auditor) DOES NOT

prevent the issuance of an UNMODIFIED opinion. and NOT affect the introductory paragraph, the auditor's responsibility paragraph and the opinion paragraph.


The introductory paragraph of disclaimer of opinion is MODIFIED.

"We were engaged to audit the accompanying F/S of xxx Company" ( Under Qualified or Adverse opinion is "We have audit the accompanying F/S of xxx Company")


POSITIVE assurance is provided in OCBOA reports, reports on specified EIA (element, items, accounts) and reports on special-purpose financial presentation to

comply with contractual agreement or regulatory provision.


NEGATIVE assurance is provided in

Reports on compliance with aspects of contractual agreements or regulatory requirements related to audited F/S


The auditor has NO ACTIVE RESPONSIBILITY to make any inquiries or to perform any further auditing procedures to discover subsequent events after

The original date of the auditor's report.


Subsequent discovery of facts AFTER the report release date, the auditor should

首先判断 是否有人现在依靠(依赖)这个报告里的F/S


1. 建议客户修改F/S
3.做出NOTIFICATION(声明)F/S和auditor's report不应该再依靠。
2. Dissociate auditor's report with F/S


Omitted audit procedures discovered AFTER submission of the audit report

1. 有无其他程序已经充分的补偿忽略的程序(已经起到同样的作用)。Whether other audit procedures were adequate to compensate for the omitted audit procedure. 有则妙,不用再管。
2. 忽略掉的程序损害(影响)审计者现在拥有的,对之前发表过的意见的支持。且有人依靠审计者的报告,审计者应该迅速的重新采用省略的程序。


Adjustments or disclosures are made AFTER the original date of the auditor's report, the auditor may

要么DUE DATE (only for the particular subsequent event), 要么 EXTEND the auditor's responsibility for all subsequent events to this later date.


Standard compilation report

We ( the accountant) have performed compilation engagement in accordance with SSARS (statements on standards for accounting and review services)


Standard review report

stating that a review is substantially less in SCOPE than an audit.


Review engagement requirement



Change in engagement is during the course of an engagement, a client may ask the accountant to change an audit to a compilation or review, or a review to a compilation (从高到低)

If the accountant decides a change in engagement is JUSTIFIED, he must comply with the standard for a compilation or review, then issue an appropriate report. The report SHOULD NOT refer to the original engagement, any procedure performed as part of the engagement, or any scope limitation.


Prepare engagement does not require CPA independence. Compilation engagement DOES NOT require CPA independence, but the lack of independence required to be specifically disclosed, however, the CPA has the option,but NOT required to disclose the REASON for the lack of independence, and not assurance and no opinion were provided.

Review engagement require CPA independence, limited assurance was provided.


Compilation requirement

1. knowledge of industry accounting principles and practices.
2. understanding of client's business
S(staff qualification).T(transaction type&频率.A(accounting basis for prepare F/S).F(form of accounting records).F(F/S form and content)
3. reading the F/S


When the client (management) does not (refuse) to provide representation letter to accountant, the review is

incomplete and accountant may not issue the review report and WITHDRAW from an engagement to review a nonissuer's F/S. (note there are NOT adverse or qualified opinion anymore)


Document in a compilation engagment

1. the engagement letter
2. any significant findings or issue
a. results of compilation procedures indicating that the F/S could be materially misstated and the action taken to address these findings.
b. the resolution of questions and concerns raised during the compilation procedure.
3. oral or written communication with management regarding fraud or noncompliance with laws and regulation that came to the CPA's attention
4. a copy of F/S
5. a copy of accountant's report.