Audit Standards & Engagement Planning Flashcards
(31 cards)
Compliance Audit
Are they following laws & regulations?
Operational Audit
Is the company operating correctly?
Are they doing the right thing, correctly, within the proper budget?
Done by internal auditors, typically.
Financial Statement Audit
examination for the purpose of giving an objective opinion as to the fairness of financial statement presentations, in all material respects, that are free from material misstatement, whether due to fraud or error, in conformity with AFRF, such as GAP
Absolute assurance,
looking at everything
Scope
items that are considered material (what we are looking at) ((Reasonable assurance))
Professional Skepticism
attitude that includes a questioning mind and a critical assessment of audit evidence
AFRF
Applicable Financial Reporting Framework
like GAAP, IFRS, or OCBOA
Substantive testing
If reliance on internal controls is high, less subst testing
if reliance is low, more subst testing
(it means the scope is bigger/you will test more stuff/more stuff is considered material)
Non-issuer
non-public entity; not required to provide audited financial statements to the SEC
governed by ASB?AICPA
Publicly traded company (issuer) is governed by whom?
PCAOB
ASB imposes 2 types of requirements on auditors
Unconditional Requirements
Presumptively mandatory requirement
Unconditional requirement
required; will say “must” or “is required to”
Presumptively mandatory
expected but in rare cases may depart from if ineffective; must document how an alternate procedure was sufficient to achieve the objective of the standard
keyword: “SHOULD”
Unqualified = unmodified
unqualified: clean opinion
unmodified: not modified aka clean
10 GAAS
measure of the quality of the auditor
broken up into:
General standards
Fieldwork Standards
Reporting Standards
General Standards
Should i accept the job? am i qualified?
(qualification/quantity)
apply from acceptance to completion -- Training and proficiency Independence Due professional care
TIP PIC ANOE
10 GAAS
General
Training
Independence
Professional care
Fieldwork
Planning/supervision
Internal controls
Professional Care
Reporting Accounting principles in accordance with GAAP No new principles - consistency Omitted disclosures - none Express an opinion
Independence CARES
Must be independent for:
Compilation (unless mentioned in disclosures)
Agreed upon procedures ( leads to findings, client says do this or that, not that)
Review (you’re giving limited assurance)
Exam aka audit
Special reports
RID-C
get RID of them, C you later!
Reasons for change - whyd they change auditor?
Integrity of management
Disagreements during audit
Communication with management or those charged with governance
Stuff auditor should communicate to those charged with governance
audit committee would DISAPPROVE of an auditor who failed to inform them about these matters
Disagreements with management Illegal acts (noncompliance with laws/reg) Significant accounting policies Adjustments Prior discussions with management Problems or significant difficulties Responsibilities Other information Views of the accountant Estimates
Management is responsible for the DIM 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
Design
Implementation
Maintenance
Inherent risk
the risk of a material misstatement due to the nature of an element of the financial statements
Control risk
risk that a material misstatement will not be prevented or detected and corrected on a timely basis due to lack of effective internal controls
Risk of Material Misstatement (RMM)
Control and inherent risk
