Audit Standards & Engagement Planning Flashcards
An auditor must remain independent for which engagements?
Attestation “ERAS”
- E - Examinations(audits)
- R - Reviews
- A - Agreed upon procedures
- S - Special Reports
Describe independent in appearance:
- No direct financial interest(Self, Spouse, Cohabitant, Dependents)
- No Material Indirect financial interest(includes brothers/sisters, step children, parents)
What is the successor auditor required to speak with the predecessor about?
“RID-C”
- Reasons for change in auditor
- Integrity of Management
- Disagreements arising during predecessors audit
- Communication with audit commitee(Illegal acts, I/C, etc)
What items should an auditor communicate to those charged with governance?
“DISAPPROVE”
- Disagreements w/ Management
- Illegal Acts
- Significant accounting policies
- Adjustments(significant) proposed by auditor
- Prior discussions with Management
- Problems during audit
- Responsibility of the auditor under GAAS
- Other info
- Views of other accountants contracted by management
- Estimates in the accounting records
In what medium should communications with those charged with governance take place? When can these communications take place?
- Can be oral or in writing
- Can take place during the audit or after the audit report has been issued
What are the elements of an engagement letter?
“FACSIMILE”
- F - Fees
- A - Auditor’s Responsibility(GAAS)
- C - Confirmation of Engagement
- S - Scope & Objective of Engagement
- I - Internal Control
- M - Management’s Responsibility
- I - Irregularities(fraud)
- L - ILlegal Acts
- E - Errors
Are engagement letters required for PCAOB companies? What about AICPA companies?
- PCAOB: Yes
- AICPA: No, they are recommended though
What are the steps in planning an audit?
“Brainstops”
- B - Basic Discussions w/ client
- R - Review of audit documentation
- A - Ask about recent Developments
- I - Interim Financial Statements
- N - Non-audit Personnel
- S - Staffing
- T - Timing
- O - Outside Assistance
- P - Pronouncements
- S - Scheduling w/ client
The clarity standards apply to what type of entities?
Non-Issuers(non-public)
What is RMM?
RMM=CRXIR
What is the audit equation?
AR=CRxIRxDR
Define Audit Risk:
The risk that the auditor may unknowingly fail to appropriately modify the opinion on F/S that are materially misstated.
What are the auditor’s responsibilities regarding communication of fraud?
- Must communicate to Mgmt or Governance all knowledge or suspicion of fraud
- Must communcicate to those charged with governance if management is involved
- Can be oral or in writting
What are the three aspects of the fraud triangle?
- Motivation
- Opportunity
- Rationalization
What are the 6 elements of a quality control system?
“HEAL-ME”
- H - HR
- E - Ethical Requirements
- A - Acceptance of continuing relationships
- L - Leadership
- M - Monitoring
- E - Engagement Performance
