CH 2: Auditing and other Assurance Services (new) Flashcards by shreya Khatri

what 2 services do CPAs provide

-assurance services

-nonassurance services

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consulting service is an example of

non assurance service

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what is an assurance service (definition)

-infoenhancement service -CPA
enhance the degree of confidence in information

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what are the 2 types of assurance services

1-those that increase the reliability of info

2- those that involve putting info in a context that facilitates decision making

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what is an attest engagement

a type of assurance service and is an examination, review, or agreed upon procedure performed by a CPA

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3 types of attest engagements

-examination
-review
-agreed upon procedure

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the subject matter of an attest engagement is whos responsibility

management

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suitable criteria

standards such as GAAP

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Finanical statement audits are to check..

if fnan statements are following GAAP

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examination

-high/reasonable assurance
-low risk

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review

-limited assurance
-moderate risk

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agreed upon procedure

-summary of findings
-risk varies
-procedure agreed upon with specified users

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what is an attest engagement referred to when the subject matter is historical fnan statements

audit

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What type of attest activity provides reasonable assurance that
the amts in the fnan statements are reasonably correct?

audit

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balance sheet audit evidece

-all included assets/obligations exist

-includes all assets/obligations

-assets/obs are properly valued

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income statement evidence

-sales have actually occurred

-sales are recorded at correct amts

-recorded expenses are applicable to accting period

-all expenses have been recognized

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what creates the demand for audits

-audits lend credibility of information

-reduce information risk

-does not address business risk

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fnan statements misstatements occur bc of

-accidental errors

-lack of knowledge of accting principles

-unintentional bias

-deliberate falsification (fraud)

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corporate governance

the rules, processes, and laws by which businessess are operated, regulated, and controled

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effective corporate governance requires..(skip)
.

-interests of companys stakeholders to be balanced

-corporations to have a BOD to oversee corporate governance

-public companies have an audit commitee

-publoic company board members must be independent

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sarbanes oxly caused

-toughned penalities for corporate fraud

-restricted the types of consulting services CPAs can perform

-created the PCAOB

-reduced sekf regulation

-required an integrated audit

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dodd frank act purpose

improve accountability and transparency in the financial system

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audit vs attest

audit- performed to disover risks or issues that may have not ben known before

attest- assurance engagement where a cpa is enaged to issue an examination, reivew, or agreed upon thing to report on subject matter

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who performs attest enagagements

only CPA in a public practice

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what are the 4 types of audits

-fnan audit -compliance audit -operational audit -integrated audit

fnan statement audit

audit of the fnan acct info of a company to determine whether they were prepared in conformity with GAAP

compliance audit

a evaluation of a companies orgs adherence to regulatory guidelines

examples of compliance audits

-IRS audit of taxpayers return -FDIC examination oby mbank examiners to check w banking laws -internal auditors performing audit on internal controls and regulations -payroll compliance -non profit

compliance attestation

agreed upon procedures to help entity with their compliance and must comply with AICPA or PCAOB standards

operational audits

audit to test the effectiveness of operations of specific department to measure its performance

who is an operational audit performed by

usually internal employees

is a fnan audit an attest

yes

is a complaicce/operationa audit an attest

no unless they are doing an agreed upon procedure

integtrated audit

audit that combines and provides assurance on both fnan statemenets and effectiveness on internal controls

is an integrated audit an attest

yes if a test of internal controls by a cpa no if its issued by compnay management on internal auditors

are audits performed by internal,govt, or tax auditors attest

no they are not attest functions

internal auditors

-employed by the company -perform operational, compliance, and internal control audits -report to high level indiviual and audit commitee

do internal auditors report to the CFO

no. never

what is the IIA

institute of internal auditors -develops standards related to internal auditing

governement accountaibility office auditors (GAO)

perform compliance, operational, and fnan audits for govt agencies

tax auditors

responsible for enforcement of tax laws (ex state taxes, sale taxes) -complaince audits of income tax returns

AICPA (what does it stand for)

American institute of certified public accountants

what does aicpa do

establishes standards for private companies and auditing standards -contintuing public education -research and publication -self regulation

PCAOB

public company accounting oversight board

cpa exam

testing in 4 -auditing and attestation -fnan acct and reporting -regulation -bus env and concepts

state board of accountancy

issues cpa certficates

peer review

critical review of ones public acct firms practices by another public accting firm to ensure compliance w professional standards

FASB

fnan accoutning standards board sets GAAP for entities other than fedeal, statem and local govt designated by SEC and AICPA

GASB

govt accting standardds board sets accting standards for dnan accting for state and local govt

FASAB

federal accting stdns advisory board sets accting standard for the US govt

IFAC

international federation of accts sets international accting standards

PCAOB role

-oversee CPAS of public companies

SEC

responsibility of PCAOB and protects investors by requiring disclosure of fnan info and offers securities for sale

the audit arm of congress

GAO govt accouting office auditors

forensic accounting is

fraud investigation

local accoutning firms

- 1-2 offices in a single area with few cpas

regional accting firms

-offices in neigboring cities with larger staff

national

offices in most major cities in the US

big 4

extenive operations in US and globally via a network

structure of a national cpa firm

partner manager senior staff

partner

assures that audit is performed in accordance with proffesional standards

managers

supervise overall engagement

seniors

in charge of auditors on daily basis manage staff hours train staff

staff

work under the immediate supervision of the senior

The AICPA's Code of Professional Conduct sets forth

ethical rules for CPAS

peer review relating term

quality control

internal control relating term

basis for sampling and testing

GAO relating term

Auditing staff reporting to Congress

disclosure relating term

material information

creditbility relating term

Critical characteristic that must be maintained by the accounting profession

Regulation of auditors of public companies relating term

PCAOB

Registration statement relating term

SEC

audited fnan statements relating term

opinion

Compilation of financial statements relating term

accounting service

Generally accepted auditing standards Related Term, Phrase, or Organization

SASs

compliance audit Related Term, Phrase, or Organization

internal revenue service

operational audits Related Term, Phrase, or Organization

internal auditor

providing creditbility to various types of info Related Term, Phrase, or Organization

attest function

reasonable assurance they follow GAAP Related Term, Phrase, or Organization

audited fnan statements

protection of investors Related Term, Phrase, or Organization

SEC

compliation and preparation of fnan statements Related Term, Phrase, or Organization

acct services by cpa

Guide to scope of substantive procedures Related Term, Phrase, or Organization

Consideration of internal control

Essential element for the attest function Related Term, Phrase, or Organization

independence

what is business risk

the risk associated with a companies survival and profitability

infromation risk

the risk that the info for a company is not accurate

The review of a company's financial statements by a CPA firm:

Is substantially less in scope of procedures than an audit.

during fnan statement auditers. seek to restrict which type of risk

detection risk

who has the primary authority to set accting standardsf

FASB

CH 2: Auditing and other Assurance Services (new) Flashcards

(88 cards)