Chapter 2 LO7 Flashcards
Use U.S. standards as a basis for further study
SASs issued by AICAP have what two classification numbers?
- SAS number shows what order it was issued 2. AU-C number indicating location in codification of auditing standards
the AICPA code of professional conduct outlines the ethical requirements for CPA who do what (@)
- practice in accounting firms 2. work in organizations as part of management
auditing standards describe professional skepticism as what 3 t hings?
- an attitude that inclueds a questioning mind 2. being alert to conditions that might indicate possible misstatements due to fruad or error 3. critical assessment of audit evidence
When auditors want more specific guidelines, they can use what?
less authoritative sources
T/F if auditor is convince that client has an excellent system of internal control, one that includes adquate internal controls for providing reliable data, the amount of audit evidence to be accumulated can be significantly less than when controls are not adequate
T
when is a misstatement considered material?
if knowledge of teh misstatement will affect a decsion of a reasonable user of the financial statements
if the cpa or thier assistants are not qualified to perform the work, a professional obligation exists to do one of what 3 things?
- acquire the requistite knowlege and skills 2. suggest someone else who is qualified to perform the work 3. decline the engagement
the auditors opinion is based on what?
the evaluation of audit evidence obtained and the auditors finding
why is the auditors opinion important?
it enhances the users degree of confidence they can place in the information presented in the financial statements
auditing standards by PCAOB are numbered how?
consecutively..they recently reorganized their standards by topic
an understanding of the clients business helps the auditor identify what?
significant client business risks that impact the risk of significant misstatements in the FSs
auditing standards are regarded as authoritative literature and every member who permforms audits of historical financial statements is required to follow them under what?
AICPA code of professional conduct
The Code and auditing standards stress the need for _____ in an audit engagement
independence
how is having the appropriate competence and capabilities to do an audit interpreted…what must the auditor have? (3)
they must have formal education in auditing and accounting, adequate practical experience for the work being performed, and continuing professional education
the principles (purpose, responsiblitlies, performance, and report) are too general to provide meaningful guidance so auditors turn to what 2 things?
SASs (statements on auditing standards) issued by AICPA and ASs issued by PCAOB these 2 are more specific
what are auditors responsible for when making judgements about the presence of material misstatments?
they are responsible for applying relevant training, knowledge, and experience in making informed decsions about the courses of actions that are appropriate in the circumstances of the audit engagement
an auditor presumes that management will provide the auditor access to what?
all info relevant to the preparation and presentation of financial statments, including unrestricted access to persons within the entitiy from whom the auditor may obtain audit evidence
according to the AICPA principal of auditing standards,,what are the reporting requirements of the auditor (reporting)
The auditor is responsible for expressing an opinion in the form of a written report about whether the financial statements are expressed fairly, in all material respects, in accordance with the applicable financial reporting framework.
what should an auditor do if an opinion cant be expressed?
the auditors report should state that conclusion
auditors are reponsible for fulfilling their duties _____ and _____
carefully diligently
the structure of the codification for auditing standards is orgnaized around what 4 principles (principals in AICPA Auditing Standards)
- Purpose- the purpose of an audit 2. responsibilities- personal responsibilities of the auditor 3. Performance- auditor actions in performing the audit 4. Reporting- reporting
T/F The principles underlying an audit are not requirements and do not carry authority, but they provide structure for the Codification
T
The ASB issued a Preface to the Codification of Auditing Standards containing the “Principles Underlying an Audit in Accordance with Generally Accepted Auditing Standards” (the principles). The principles provide a framework for the two objectives of conducting an audit of financial statements. what are the 2 objectives/
- Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error 2. Report on the financial statements, and communicate as required by GAAS, in accordance with the auditor’s findings.
Materials published by the AICPA, including industry audit guides, provide assistance on what?
on specific questions
