Ch 1-audit Report

Question 0

Requirement of audit evidence

Answer 0

Appropriate 合适

Question 1

US GAAP

Answer 1

Encompass the conventions, rules, and procedures necessary to define us accepted accounting practice at a particular time.

Gaap is one of financial reporting frameworks acceptable for prep f/s, IFRS is another one

Question 2

Conditions that indicate possible fraud

Answer 2

Pressure
Opportunity
Rationalization

Question 3

Conduct of audit

Answer 3

Professional skepticism.

1. Audit evidence that contradicts
2. Info that calls into the reliability of documents and response to inquiries
3. Condition indicate fraud
4. Conditions suggest need more audit procedures in addition to those required by GAAS.

Question 4

Ethical requirements

Answer 4

Auditors must be independence in both fact and appearance

Question 5

Professional judgement

Answer 5

Need to apply to both planning and performing, When to make decision about:

• Materiality
• Audit risk
• NET of audit procedures
• Whether SA evidence has been obtained
• Drawing conclusion based on the audit evidence obtained
• Evaluate mgmt’s judgements in applying framework

Question 6

Weak internal control

Answer 6

Does NOT equal averse opinion

Credit card example

Question 7

Professional standards

Answer 7

SASs-----AICPA(asb)----nonissuers
SASs------PCAOB---issuers
AS---------PCAOB---issuers
GAGAS---government
SSAE----engagements
SSARS---accounting and review

Question 8

Auditor’s responsibility with respect to SAS

Answer 8

Generally required to follow the guidance, and should be able to justify any departures

Question 9

PCAOB

Answer 9

It was established by SOX act of 2002

Question 10

Situation that departure from GAAP is permissible

Answer 10

When circumstances indicate that a financial presentation in accordance with GAAP would be misleading
( 如果遵循 gaap会误导人，那么可以不遵循GAAP, auditor 要发表unmodified opinion因为不是materially misstated.)

Question 11

Quality control system

Answer 11

Consists of policies and procedures designed, implemented, and maintained to ensure that the form complies with professional standards and appropriate legal and regulatory requirements, and any reports issued by cpa firm are appropriate

Question 12

Auditor’s report( unmodified opinion)

Answer 12

Mr DIM
Repports
Crame

Question 13

Auditor’s report

Answer 13

Mgmt Responsibility
DIM
REPPORTS
CRAME

Question 14

Going concern issue

Answer 14

• unmodified opinion, emphasis of matter

- disclaim if going concern uncertainty

Question 15

When to disclaim opinion

Answer 15

• a significant uncertainty
• a scope limitation
• lake of independence
• auditor associated with unaudited financial statements.

Question 16

Qualified (except for) opinion

Answer 16

Due to material GAAP departure:

• inappropriate or misapplied acct policies.
• inappropriate f/s presentation
• inadequate disclosure
• unreasonable acct estimate

Question 17

Undetected misstatements example

US GAAP: disclaim or withdraw

ISA: withdraw

Answer 17

• confirm A/R denied
• consolidated sub info denied
• audit restricts
• inadequate records
• no mgmt rep letter signed
• client lawyer denied

Question 18

Going concern

Answer 18

Adequate disclosure: unmodified and EOM

Inadequate dis: qualified/ adverse

Significant g/c uncertainty: disclaimer

Question 19

Comparative financial statements

Answer 19

Implicitly for consistent application of acct principles, explicitly only if there are issues with consistency.

There are no explicit reference to test basis.

Question 20

Auditing procedures help in identifying conditions and events that may indicate substantial doubt about going concern?

Answer 20

Confirming with 3rd parties the details of arrangements to maintain financial support.

Question 21

Company issues financial statements that purport to present financial position but omits the related statement of cash flows

Answer 21

Qualified opinion

Question 22

Change prior opinion( eom or other matter paragraph)

Answer 22

Date of the auditor's previous report
Opinion type previously issues
Reason
Changes
Statement

Question 23

Old cpa should do if he decide whether to reissue their report

Answer 23

• Read the statements for the current period
• compare the statement audited with current period statements
• obtain letter of rep from the successor auditor
• obtain a letter of rep from mgmt

Question 24

Unrevised & revised report date

Answer 24

Unrevised: original date Revised: dual date

Question 25

New cpa should do if reports of the predecessor auditor not reissued

Answer 25

- in other matter para - audited by predecessor audior, should not be named until the practice was acquired or merge with successor. - type of opinion by predecessor, if modified, then reason - the nature of any eom or other matter para include in predecessor's report - the date of predecessor auditor's report

Question 26

What should successor auditor do if prior period financial statement are restated in the current period to confirm with GAAP?

Answer 26

The successor auditor should express an unmodified opinion on the updated report on the prior period financial statement.

Question 27

What is comparative f/s?

Answer 27

Includes prior year's statement that were audited by a predecessor auditor whose report is not presented.

Question 28

When does dual date used?

Answer 28

When there is a subsequent event occurring after the original date of the auditor's report, and the auditor wished to extend responsibility only for the one event

Question 29

What is the difference between recognized and nonrecognized event

Answer 29

Recognized event-- look back--on or before balance sheet date-- require f/s adjustment Nonrecognized event-- look forward--after b/s date-- footnote disclosure

Question 30

Auditor's responsible

Answer 30

Gr: up to date of audit report During fieldwork: active responsibility to investigate certain subsequent events. During subsequent period: PRIME ``` Post b/s adjustments Request letter from mgmt Inquiry Minutes of stockholders Examine latest available interim f/s ```

Question 31

Auditor's respon after the original date of the auditor's report

Answer 31

No active responsibility, but if he aware of any info relate to subsequent events before the report release date, should consider adjust f/s or related disclosure