Flashcards in Auditing 1: Deck 1 Deck (20):
Express an opinion on financial statements
What must the auditor obtain?
Sufficient and appropriate evidence to make a reasonable basis for the opinion
High, but not absolute, level of assurance
What is management's responsibility?
Preparation of financial statements and internal control
Purpose of an Audit
provide an opinion on whether financial statements are presented fairly, in all material respects, in accordance with the financial reporting framework
Nature of Audit Procedures
Fraud (intentional) or fraud (unintentional)
Statements on auditing standards
Auditor must conduct the audit according to which standards?
Examples of professional skepticism
Perform additional audit procedures, corroborating management's explanations, using third party confirmations
Who established the PCAOB?
The Sarbanes-Oxley Act of 2002
GAAS and who issues them?
Generally accepted auditing standards, issued by the Auditing standards board (ASB)
When are PCAOB standards required?
When auditing an "issuer"
Audits of Non-ssuers must comply with which auditing standard?
Statements on auditing standards published by the auditing standards board
Audits of issuers must comply with which auditing standard?
PCAOB Auditing Standards
Change in accounting estimate
-Accounted for prospectively
-Does not affect the comparability of financial statements
Factors that mitigate the "going concern" issue
1. Postponement of expenditures (including R&D)
2. Plans to dispose assets
3. Plans to borrow money or restructure debt
4. Plans to increase ownership equity (sell stock)
What should an auditor do when sufficient evidence about consistency is obtained?
No mention of consistency needs to be made
Disclaimer of Opinion
Unable to obtain sufficient appropriate audit evidence to provide a reasonable basis for an opinion; thus no opinion is expressed.
Consistency standards refers to what?
Changes in application of accounting practices between periods; affects comparability