Auditing 2 Flashcards
What kind of analysis is used for Balance Sheet Accounts?
Ratio Analysis
What kind of analysis is used for Income Statement Accounts?
Trend Analysis
Comparative Financial Statements: Audit to Review
- Reissue the prior year report OR
- Include an additional paragraph explaining the responsibility in the prior period and that no auditing procedures have been performed SINCE THE PREVIOUS REPORT DATE
What is different about comparative financial statements that are filed with the SEC?
The ONLY requirement is that the statements are marked as Unaudited
When can compilations and reviews not be compared in comparative financial statements?
When financial statements that omit substantially all of the disclosures required by GAAP are not comparable to financial statements that do include these disclosures.
What do you do when the current period is unaudited and the previous period was audited?
The unaudited statements should be clearly marked and the accountant should reissue the report
OR
Include a paragraph that states:
1. The prior period statements were audited
2. The date of the report and the opinions expressed.
3. That NO AUDIT WORK has been done since last date.
In a review of interim financial statements (SEC required) should the auditor be worried about internal control?
Yes. They should be worried about significant weaknesses in internal control and the likelihood of their occurrence. An evaluation. Which is different from a non-issuer.
What is the objective of a review of interim financial statements?
To determine whether material modifications are necessary for the information to be in conformity with the applicable reporting framework (GAAP) through inquiries and analytical procedures.
If you have not audited the interim F/S (typical review) what should you request be done to the F/S?
They should be marked as “unaudited”
What statement should you include in the auditor’s report when quarterly info by the SEC HAS NOT BEEN REVIEWED
Paragraph should state that the auditor was unable to review such information.
What statement should you include in the auditor’s report when quarterly infor by the SEC IS OMITTED
Paragraph should state that the company has not presented such quarterly information that was required.
If there was no audit OR review for an issuer what should the accountant do?
They should withdrawal if possible due to fraud, deceptive, misleading financial information, but if not possible then they should issue a disclaimer of opinion.
When should a CPA provide positive assurance in a comfort letter?
- In respect to a CPA’s independence
2. Compliance to the form of F/S with SEC act as long as the F/S are AUDITED.
When should a CPA provide negative assurance in a comfort letter?
- UNAUDITED financial statements or interim financial statements that were only reviewed
- Whether NON-FINANCIAL information complies in form to the SEC regulation S-K Act
How is a normal review different from a review under attestation engagements?
A review (or compilation) service under SSARS is for the financial statements whereas a review under SSAE is for subject matter or an assertion of the subject matter that is the responsibility of another party (most likely mgmt)
Who established the Statements on Standards for Attestation Engagement?
AICPA
What are the major attestation services under SSAEs?
- Agreed upon procedures (mgmt assertions)
- Financial forecasts and projections
- Pro forma financial statements
- INTERNAL CONTROL over financial reporting.
- Compliance (CAN NOT be part of an audit)
- MD&A
How are Attestation Standards (TIPPYPASSER) different from GAAS?
- make no reference to the financial statements
- make no reference to GAAP
- are much BROADER and provide levels of assurance below what is provided in GAAS
What are the five general attestation standards (TIPPY)?
T- Training and proficiency
I- Independence
P- Professional due care in Planning and Performance
P- Professional and adequate knowledge of subject matter
Y- Your belief that the subject matter is capable of evaluation against suitable criteria (objective, complete, relevant, and measurable)
What are the two field work attestation standards? (PAsser)
P- Planning and Supervision
A- Appropriate sufficient evidence for a reasonable based conclusion
What are the four reporting attestation standards? (paSSER)
S- Subject matter or the assertion that is being reported on and the character of the engagement be identified
S- Significant reservations about the engagement must be disclosed
E- Express conclusions on the subject matter or the assertion related to the criteria
R- Restrict use of report to specified parties when applicable.
What type of assurance is provided for Attestation Examinations? Reviews?
Examinations- Positive assurance
Review- Negative assurance (usually then withdrawal)
What a financial forecast? Can it be general or limited use?
A financial forecast is the expected financial results of a future period that is based on expected conditions and expected courses of action. It is BOTH gen. and limited.
What is a financial projection? Can it be general or limited use?
A financial projection is based on hypothetical situations “what if” scenario. It is limited use ONLY.
