Auditing-General Flashcards
(24 cards)
Auditor’s primary role
Provide impartial and independent assessment of the reliability of management’s financial statements.
Auditing- definition
Accumulation and evaluation of evidence about financial information to determine the degree of correspondence between the information and established criteria.
What is the standard by which the quality of financial statements are judged?
GAAP
What is the standard by which the quality of the auditor’s performance is judged?
GAAS (Generally Accepted Auditing Standards)
What is the criteria by which internal control is judged?
COSO (Committee of Sponsoring Organizations)
What qualities must an auditor bring to the engagement?
Training
Independence
Due Professional Care
How are the auditor’s conclusions formed? (Field Work)
Planning and Supervision
Internal Control
Evidence
What are the components of the required language in the Auditor’s Report?
Accordance with GAAP
Consistency
Disclosure
Opinion
Evidence - definition
Information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria
How is evidence accumulated?
Transactions, Client interviews, outside communications, observations
What are the elements of a Quality Control System?
Tone at the top (Leadership) Independence of personnel Minimize risks of engagement Adequacy of personnel Compliance with professional standards Ongoing assessment of the adequacy and design of controls
Steps in the audit process
Engagement planning
Internal Control Consideration
Evidence gathering
Reporting
Steps in Engagement Planning
Decide whether to accept or continue engagement based on quality standards
Perform risk assessment procedures
Evaluate requirements for staffing and supervision
Prepare the required audit program
What are the steps for internal control considerations?
Assess the risk of material misstatement
Document the understanding of internal control
Perform a test of controls
What are the steps in evidence gathering?
Perform analytical procedures
Test ending balances
Test transactions
Describe the analytical procedures?
Comparison to expectations or benchmarks to provide reasonableness of evidence.
What can be used to analyze financial statements to provide an expectation of reasonableness?
Industry benchmarks
Prior year financial statements
Ratios
Reporting
Conclusions
Expressed in writing
Using standardized language
Types of Assurance services
Audit
Review
Compilation
Types of non-assurance services
Management consulting
Tax services
Bookkeeping
Payroll
Name three types of audit
Operational
Compliance
Financial statement
Complilation
CPA firm is engaged to assemble a financial statement based on management’s records
No assurance about reliability of information
Review
CPA firm is engaged to provide “low level” assurance
Reads financial statements
Performs analytical procedures
Make inquiries of client personnel
What assurance services require an engagement letter?
Audit
Review
Compilation
