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Audit > Chapter 17 -- Related Reporting Topics > Flashcards

Chapter 17 -- Related Reporting Topics Flashcards

1
Q

Section 17.1: Interim Financial Information

What is the objective of a review of interim financial statements?

A
  • To determine if there are any material misstatements that should be made to the financial statements.
  • It provides the auditor with a basis for reporting whether material modifications should be made in order to conform
  • The review provides negative assurance
  • Independence in required
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2
Q

Section 17.1: Interim Financial Information

What does an auditor do when reviewing interim financial statements?

A

The auditor is responsible for:
* Testing accounting records and the effectiveness of controls
* Obtaining corraborating evidence
* Apply certain audit procedures
* Become aware of all significant matters identified in an audit
* Obtain written representations from management

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3
Q

Section 17.1: Interim Financial Information

What is involved when conducting a review of interim financial statements?

A
  • Establishing and understanding with the client
  • Obtain knowledge of the business industry and controls
  • Making inquiries
  • Performing analytical procedures
  • Obtain written representations from management
  • Evaluating the results of the procedures
  • Reading minutes of meetings
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4
Q

Section 17.1: Interim Financial Information

When would a modification of a review of interim financial information be made?

A

A modification of a review of interim financial information would be made if there is a departure due to inadequate disclosure, and the auditor believes that if it’s feasible, it should be included in the report.

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5
Q

Section 17.1: Interim Financial Information

What are the procedures in planning a review of interim financial statements?

A
  • Reading documentation of the prior audit and prior reviews
  • Reading recent annual information and prior interim financial reviews
  • Consider current audit results
  • Ask management about any changes in business or internal control.
  • If it’s an initial review, make inquiries of the predecessor auditor and review their documentation.
  • If it’s an initial review, obtain knowledge of the relevant information.
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6
Q

Section 17.2: The Auditor’s Responsibilities to the Annual Report

What is the responsibility of the auditor in regard to the other information included in the annual report?

A
  • Read the other information and determine of there are any material inconsistencies with the audited statements.
  • Determine that the other information is separate from the required supplementary information (RSI)
  • To respond if there are statements that would undermine the credibility of the auditor’s report
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7
Q

Section 17.2: The Auditor’s Responsibilities to the Annual Report

What should the auditor determine when reading the Other Information of an Annual Report?

A

The auditor should read the Other Information section to consider if there are:

  • Any material inconsistencies between the Other Information section and the financial statements
  • A material misstatement of fact exists
  • The information is misleading
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8
Q

Section 17.2: The Auditor’s Responsibilities to the Annual Report

What happens when a material consistency that relates to the financial statements is found in other information of the annual report before the release date?

A

The auditor should request management to revise the letter of transmittal.

If management refuses to revise the other information
* Communicate the matter to those charged with governance
* Include in the description of Other Information section of the auditor’s report
* Withhold the auditor’s report
* Withdraw from the engagement

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9
Q

Section 17.2: The Auditor’s Responsibilities to the Annual Report

What happens when a material consistency that does not relate to the financial statements is found in other information of the annual report before the release date?

A

The auditor should request management to revise the letter of transmittal.

If management refuses to revise the other information
* Communicate the matter to those charged with governance
* Withhold the auditor’s report
* Withdraw from the engagement

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10
Q

Section 17.2: The Auditor’s Responsibilities to the Annual Report

What is the purpose of including Other Information in the annual report?

A

Other information contains financial and nonfinancial information that are not reported on the audited financial statements.

Examples include
* Annual Report to Owners
* Management Report on Operations
* Selected Quarterly Data
* Financial Summaries
* CEO’s Letter in th Annual Report

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11
Q

Section 17.3: Required Supplementary Information (RSI)

How is the RSI reported in the auditor’s report?

A

The RSI is reported in a separate paragraph after the opinion section, and should be added if
* The RSI is not omitted
* Presecribed guidelines are followed
* Required audit procedures are completed
* Limited procedures are performed to report any omissions or deficiencies.

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12
Q

Section 17.3: Required Supplementary Information (RSI)

What is included in the RSI Section of the Auditor’s Report?

A

A section after the opinion paragraph is added for the RSI
* RSI reference and the applicable reporting framework.
* Statement that the RSI is the responsibility of Management
* Statement that the auditor has applied procedures in accordance with GAAS
* Statement that the auditor does not express an opinion or provide any assurance on the RSI

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13
Q

Section 17.3: Required Supplementary Information (RSI)

What type of procedures are performed for required supplementary information?

A

Limited
* Inquiry
* Comparing supplemental information to the financial statements

Report any omissions or requirements for material modifications

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14
Q

Section 17.3: Required Supplementary Information (RSI)

Is RSI Audited?

A

Since RSI is not part of the basic financial statements, it is not audited.

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15
Q

Section 17.3: Required Supplementary Information (RSI)

What does the auditor do if management refuses to present an RSI?

A
  • The auditor should express an unqualified opinion on the basic financial statements.
  • The auditor should revise the separate section of the RSI and need not present the omitted information.
  • The auditor should describe the omission
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16
Q

Section 17.3: Required Supplementary Information (RSI)

What should the auditor ask management in regard to RSI?

A
  • Inquire if RSI within the prescribed guidelines
  • Whether methods of measurement or presentation have changed and the reason for the change
  • Any significant assumptions or intepretations
  • Compare the RSI for consistency with the basic statements
  • Obtain management’s written representation to its responsibilities to the RSI and compliance with guidelines
17
Q

Section 17.4: Supplementary Information to the Financial Statements

What must the auditor determine when reporting on the Supplementary Information to the Financial Statements as a whole?

A
  • Auditor must determine that the supplementary information is based on the underlying records that are used to prepare all of the financial statements
  • Information relates to the same period as the financial statements.
  • Financial statements were audited
  • Auditor’s report did not express an adverse or disclaimer of opinion
  • Supplementary information will be presented with the audited statements or be made readily available without any additional changes made by management.
  • An auditor is not required to perform subsequent event procedures on Supplementary Information.
  • Materiality level used for the audit of financial statements
18
Q

Section 17.4: Supplementary Information to the Financial Statements

What procedures does an auditor perform when reporting on Supplementary Information?

A
  • Understand the methods of preparation
  • Inquiring about the purpose and criteria for the supplemental information
  • Inquiring about significant assumptions
19
Q

Section 17.4: Supplementary Information to the Financial Statements

What type of information is included in a report of Supplemental Information?

A
  • Additional details or explanations of items in or related to the statements
  • Consolidating information
  • Statistical data
  • Historical summaries
20
Q

Section 17.4: Supplementary Information to the Financial Statements

What are management’s responsibilities surrounding supplementary information (SI)?

A
  • Preparing SI in accordance with applicable criteria
  • Providing written representations
  • Including the auditor’s report on the SI with the SI and the audited statements
21
Q

Section 17.5: Engagements to Report on Summary Financial Statements

What date should be used when presenting the Report on Summary Financial Statements?

A

The date of the report should be no earlier than:

  • The date that the auditor obtained sufficient appropriate evidence on which to base the opinion
  • The date of the auditor’s report on the audited financial statements.
22
Q

Section 17.5: Engagements to Report on Summary Financial Statements

What procedures are performed by an auditor in an engagement to report on supplementary financial statements?

A
  • Determine whether the summary statements agree with the related information in the audited statements.
  • Determine that information in the summary statements can be recalculated based on the related information in the audited statements
  • Comparing the summary statements with the related information in the audited statements
  • Evaluate whether the summary statements are prepared in accordance with the applied criteria applied by management
  • Obtain a representation letter from management
23
Q

Section 17.5: Engagements to Report on Summary Financial Statements

What should the auditor do if the Report on Summary Financial Statements does not accompany the audited financial statements?

A
  • The auditor should evaluate whether the summary clearly describes where the audited statements are available.
  • The auditor should evaluate whether the audited statements are readily available to the intended users of the summary statements without further action by management.
24
Q

Section 17.5: Engagements to Report on Summary Financial Statements

When are the Audited Financial Statements readily available?

A

Audited financial statements are readily available when:
* The information is obtained by an email from the company
* On the company’s website
* Accompany the summary statements

25
Q

Section 17.5: Engagements to Report on Summary Financial Statements

What is a criteria for the auditor to report on the summary of financial statements?

A
  • The auditor audited the statements from which they are derived.
  • The report expresses an opinion on whether the summary statements are consistent, in all material respects, with the audited statements, in accordance with the applied criteria.
26
Q

Section 17.6: Financial Statements Prepared in Another Country

How should an auditor report on financial statements when the information is based on another country?

A

The reporting standards of the other country will be the applicable framework, and the other country will be identified.

If the other country’s report form and content are used:
* The report must be what would be issued by auditors in the other country in similar circumstances
* The auditor must obtain sufficient appropriate evidence to support statements in the report
* The auditor must comply with the other country’s reporting standards.

27
Q

Section 17.6: Financial Statements Prepared in Another Country

What is included in the auditor’s report for financial statements prepared in accordance with a reporting framework generally accepted in another country and intended for use in the U.S.?

A
  • An emphasis-of-matter paragraph identifying the reporting framework used in the preparation of the financial statements
  • An emphasis-of-matter paragraph indicating that the framework differs from accounting principles generally accepted in the U.S.
  • The auditor should report using the U.S. form of report
28
Q

Section 17.7: Reports on Application of Requirements (AU-C 915)

What is included in the written Report on Application of Requirements of an Applicable Financial Reporting Framework

A
  • A description of the appropriate application of the framework to the specific transaction or type of report and the reasons for the conclusion, if appropriate.
  • A brief description of the engagement and a statement that the engagement was in accordance with AU-C 915.
  • An alert in a separate paragraph that restricts the use of the report to specified and identified parties.
29
Q

Section 17.7: Reports on Application of Requirements (AU-C 915)

When are the standards for AU-C 915?

A
  • By an accountant in public practice
  • Applies to an actual transaction given specific facts and circumstances of a specific entity.
  • Addresses whether a reporting framework applies to a proposed transaction involving facts or circumstances of a specific entity.
  • Addresses how a completed transaction of a specific entity may be accounted for under the existing reporting framework.
  • Does not apply to a current, or continuing, auditor
  • Independence is not required, but must disclose the lack of independence
30
Q

Section 17.8: Special Purpose Frameworks Audits

How is an audit on the financial statements of a special purpose framework reported?

A

When auditing the financial statement of a special purpose framework, the following information is included in the Emphasis-of-Matter paragraph:
* A statement that the financial statements are prepared in accordance with the applicable framework.
* A reference to the note that describes the framework
* A statement that the framework is a basis other than GAAP

31
Q

Section 17.8: Special Purpose Frameworks Audits

When issuing and audit report on a special purpose framework, what if the statements are suitably titled?

A

If the auditor believes that the statements are not suitably titled.

  • The auditor should disclose any reservations in a basis for qualified opinion section.
  • The auditor will qualify the opinion.
32
Q

Section 17.9: Key Audit Matters (KAM)

What are key audit matters (KAM)?

A
  • Key audit matters are generate for non-issuers
  • Key audit matters are matters that are most significant in the current period audit.
  • Key audit matters are based on the auditor’s professional judgement.
  • The communication of key audit matters gives users more information to facilitate their understanding of matters that may affect the entity, the statements or the audit.
33
Q

Section 17.9: Key Audit Matters (KAM)

What should an auditor consider in determining key audit matters?

A
  • Areas of higher assessed risks of material misstatements.
  • Significant risks
  • Significant auditor judgements about areas involving significant management judgements.
  • The audit effect of significant events or transactions during the period.

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