Auditing1 Flashcards
(33 cards)
Which standards are mandatory for all audits?
GAAS (Generally Accepted Auditing Standards)
Generally accepted auditing standards for non-issuers are issued by _______ in the form of ____________.
Generally accepted auditing standards for non-issuers are issue by
the AICPA’s - Auditing Standards Board (ASB)
in the form of
Statements on Auditing Standards (SAS)
The _________ establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for issuers.
The Public Company Accounting Oversight Board - PCAOB
establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for issuers.
The Accounting and Review Services Committee of the AICPA is the authoritative body designated to issue pronouncements in connection with the unaudited financial statements of non-issuers. What are the pronouncements issued known as?
The Statements on Standards for Accounting and Review Services - SSARS
Issuers reference to auditing standards…
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board.
Non-issuers reference to auditing standards…
We conducted our audit in accordance with auditing standards generally accepted in the United States of America.
What are the requirements when a component auditor is referenced in a Group Audit?
- SAME framework
- component auditor not audited by the auditor
- magnitude of the portion of FS
- NOT SAME framework
- financial framework used
- auditor takes responsibility for evaluating and converting to group financial reporting framework
What is a Qualified Opinion?
A qualified opinion states that EXCEPT FOR the effects of the matter(s) to which the qualification relates, the financial statements are presented fairly, in all material respects, the financial position, results of operations, and cash flows of the entity in conformity with the applicable financial reporting framework.
What is an Adverse Opinion?
An adverse opinion states that the financial statements DO NOT PRESENT FAIRLY the financial position, results of operations, and cash flows of the entity in conformity with the applicable financial reporting framework.
What is a Disclaimer of Opinion?
A disclaimer of opinion states that the auditor does not express an opinion on the financial statements because the auditor was not able to obtain sufficient appropriate audit evidence to provide basis for an opinion.
Which situations would require an Emphasis-of-Matter paragraph?
- Going Concern
- Consistency (Justified)
- Changing Prior Opinion
- Special Purpose Framework
Which situations would require an Other-Matter paragraph?
- Restricts use
- Predecessor audit not reissued
- Comparative statements (audited current period/compiled or reviewed in prior period)
- Supplementary information
What procedures would assist an auditor in assessing a Going Concern issue?
"ADMITS" Analytical procedures Debt compliance Minutes Inquiry of legal counsel Third parties Subsequent events review
What conditions are events may be indicative of a Going Concern issue?
"FINE" Financial difficulties Internal matters Negative trends External matters
What are some typical reasons why an opinion would be modified to Qualified or Adverse?
- GAAP consistency change (unjustified)
- Inadequate disclosure
- Departure/violation of GAAP
- Unreasonable accounting estimate
What are some typical reasons why an opinion would be modified to Qualified or Disclaimer?
- Confirmation of AR is denied by management
- Consolidated sub information denied by management
- Audit restrictions
- Inadequate records
- No management representation letter signed
- Client legal counsel inquiry is denied
What must an auditor disclose when changing a prior opinion?
"DORCS" Date of the auditor's previous reports Opinion type previously issued Reason for the prior opinion Changes that have occurred Statement that the "opinion....is different."
What requirements must be meant by a predecessor auditor when reissuing and PRESENTING reports from prior periods?
- Read the statements
- Compare with current period statements
- Obtain a Letter of Representation from successor auditor
- Obtain a Letter of Representation from management
When a predecessor auditor PRESENTS prior period financial statements….what date should be used?
- Original date when no revision
- Reissue date when revised
What must a successor auditor do when the predecessor auditor DOES NOT PRESENT the reports from a prior period?
The successor auditor should express an opinion on the current period financial statements ONLY and indicate in an Other-Matter paragraph the predecessors’ opinion, nature of predecessors’ opinion, and date of the predecessors’ audit report. THE PREDECESSOR AUDITOR SHOULD NOT BE NAMED.
What must a successor auditor do when the prior period financial statements were UNAUDITED?
- If Compiled or Reviewed, include Other-Matter paragraph with explanation of prior service, date, description of any material modifications, and statement “less in scope than an audit.”
- If NO PRIOR SERVICE, include Other-Matter paragraph and indicate the auditor did not audit, review or compile the prior period financial statements and the auditor assumes NO RESPONSIBILITY.
What procedures must be performed to identify Subsequent Events?
"PRIME" Post balance sheet transactions Representation letter Inquiry Minutes Examine latest available interim statements
Does the auditor have responsibility for reporting on other information contained in the audited financial statements?
No. However, the auditor should read the other information because of the credibility of the audited financial statements may be undermined if there are material inconsistencies between the audited financial statements and the other information.
What must an auditor do if the other information contains a material inconsistency?
Advise management to revise the report. If management refuses, contact governance. Include Other-Matter paragraph if necessary.
