Chapter 2

Question 1

Type of public accounting firms (4)

Answer 1

• Big 4
• National Network Firm
• Large Regional and Local firms
• Small Local firms

Question 2

Structure of Public Accounting Firms

Answer 2

Often sole proprietorship or partnership, but can be LLP or corporation

Question 3

Staff Levels (5)

Answer 3

• Staff accountant
• Senior Auditor / In-charge auditor
• Manager
• Senior manager
• Partner

Question 4

Requirement to be a Public Accountant (2)

Answer 4

• Obtain CPA
• Have public accountant license

Question 5

CPA Canada’s Role in Audit Quality (3)

Answer 5

• Support the setting of accounting, auditing, and assurance standard
• Developed practitioner guides, e-communication tools, audit quality blog
• Enhance audit quality through collaborative effort

Question 6

Component of conducting quality audit (2)

Answer 6

• Adhere to professional standard
• Help them improve their professional standard

Question 7

Provincial Practice Inspections and Audit Quality (3)

Answer 7

• Ensure public accountant conduct quality audit
• Normally done every 3y but can change if adequate standards are not maintained
• Can impose sanctions

Question 8

PCAOB

Answer 8

• Public Company Accounting Oversight Board
• Oversee audit of public companies in the USA

Question 9

CPAB

Answer 9

• Canadian Public Accountability Board
• Boost confidence in the integrity of financial reporting in Canada

Question 10

AASB

Answer 10

• Auditing and Assurance Standard Board
• Audit and quality control for public company audits in Canada

Question 11

AICPA

Answer 11

• American Institute of Certified Public Accountants
• Issue audit to private company

Question 12

CSA

Answer 12

• Canadian Securities Administrators
• Set policies

Question 13

SEC (2)

Answer 13

• Securities and Exchange Commission
• Canadian companies must comply with SEC if they are listed on the American Stock Exchange
• Provide investors in public corporation with reliable info to make investment decisions

Question 14

IAASB

Answer 14

• International Auditing and Assurance Standard Board
• Set international standard for auditing and assurance

Question 15

AASB

Answer 15

• Auditing and Assurance Standard Board
• Ensure that Canada’s POV is presented to the IAASB
• Set GAAS for FS audit

Question 16

Canadian Audit Standard (2)

Answer 16

• Part of the CPA Handbook
• Based on IAS

Question 17

Overall objective of FS audit (5)

Answer 17

• Provide reasonable assurance that FS are free from material error
• Consider potential fraud and error
• Communicate when FS comply with framework by giving an opinion
• Report on FS
• Communicate auditor finding in accordance with CAS

Question 18

Purpose of the FS Audit

Answer 18

Provide an opinion about FS

Question 19

Personal Responsibilities (3)

Answer 19

• Have appropriate competence and capabilities
• Comply with ethic and independence requirement
• Maintain professional skepticism and exercise professional judgement

Question 20

Performance Responsibilities

Answer 20

Provide reasonable assurance that FS are free from material error

Question 21

Ways to help FS be free from material errors (4)

Answer 21

• Planning audit and supervise engagement team
• Determine and apply materiality
• Identify and assess risk of material misstatement
• Obtain sufficient appropriate audit evidence

Question 22

Reporting Responsibilities (2)

Answer 22

• Express opinion on FS in a written report
• State if FS were presented in accordance with financial reporting framework

Question 23

High audit quality (5)

Answer 23

• Good values, ethic and attitudes
• Sufficient knowledge, skill and experience and get thing done in a timely manner
• Apply rigorous audit process and quality control
• Provide useful and timely reports
• Interacts appropriately with relevant stakeholders

Question 24

QM Firm assumptions (2)

Answer 24

• Responsibilities are fulfilled in accordance with professional standard and conduct engagement
• Appropriate engagement reports are issued

Question 25

QM risk assessment (3)

Answer 25

- Establish quality objective - Identify and assess risk to achieve objective - Implement policies or procedures to fix those risks

Question 26

Component of quality objectives (6)

Answer 26

- Governance Leadership - Relevant ethical requirement - Engagement performance - Acceptance and continuation of clients and engagement - Resources - Information and Communication

Question 27

Engagement Quality Reviews (5)

Answer 27

- Performed by EQ reviewer - "Second set of eyes" - Required for all public company audit - Can be used for high-risk audits - Takes 2y to become EQ reviewer

Question 28

QM engagement level (3)

Answer 28

- Engagement partner and team's responsibilities to manage quality of audit - Engagement partner takes overall responsibilities - Engagement partner needs to do a stand-back review to see if their involvement was enough