Chapter one: overview for audit and assurance

Question 1

Assurance services

Answer 1

Attestation and Audit

Question 2

Audit Services characteristics

Answer 2

1. An independent accounting firm takes the information prepared by someone else and then comparing it to an established set of criteria
2. The independent accounting firm provides a written report about the services performed.
3. The services add credibility, or integrity, to the information

Question 3

Audit Services Provide:

Answer 3

Provide financial statement users:
1. an opinion on if the financial statements are presented fairly and following the financial reporting framework(GAAP)
2. an opinion on the effectiveness of internal controls.

Question 4

Attestation services

Answer 4

1. examination of financial forecast
2. review of historical financial statements system and organization controls (SOC) report (outsourced accounting)
   3.agreed-upon procedures.

Question 5

Financial statement audits

Answer 5

Provide financial statement users with an opinion
1. presented fairly in accordance with GAAP
2. free of material misstatement
3. prepared in a consistent manner from prior years

Question 6

Limitations of an audit

Answer 6

1. the nature of financial reporting
2. the nature of audit procedures
3. need for a timely audit

Question 7

Materiality

Answer 7

the ability of information to influence decisions

Question 8

Demand for Audit and assurance services

Answer 8

1. remoteness
2. complexity
3. competing incentives
4. reliability

Question 9

Preparers responsibility

Answer 9

1. preparing the financial statement in accordance to GAAP
2. Designing, implementing, and maintaining internal controls.
3. Providing the auditors with access to all records, documentation, and personnel relevant to the preparation and fair presentation of the financial statements

Question 10

Auditors responsibility

Answer 10

1. conducting the audit in accordance to GAAS
2. planning and performing the audit with professional skepticism
3. planning and performing the audit with professional judgement

Question 11

Securities and Exchange commision (SEC)

Answer 11

The SEC is a federal government agency whose mission is to protect investors, maintain fair and efficient markets, and facilitate capital formations.

Question 12

Public company accounting oversight board (PCAOB)

Answer 12

The PCAOB, established in 2002 through the Sox regulation, overseas audits of public companies to safeguard investor interest
- makes GAAS
-sets standards and can penalize
- deals only with public companies

Question 13

American institute of certified public accountants (AICPA)

Answer 13

• Deals with auditing private companies
• in charge of CPA exam

Question 14

Financial accounting standards board (FASB)

Answer 14

Creates financial accounting standards
- created gaap
-cannot give penalties

Question 15

reasonable assurance

Answer 15

a high, but not absolute, level of assurance

Question 16

4 types of opinions on financial statement audits

Answer 16

1. unqualified clean
2. qualified
3. adverse
4. disclaimer of opinion

Question 17

3 types of opinions for internal controls

Answer 17

1.unqualified clean
2.adverse
3. disclaimer of opinion

Question 18

Persuasively material departures

Answer 18

adverse opinion- financial statements are not presented fairly

Question 19

pervasively material scope limitations

Answer 19

disclaimer of opinion- auditor was not able to gather enough evidence

Question 20

basis for opinion

Answer 20

management and auditors responsibilites

Question 22

scope paragraph

Answer 22

process of conducting an audit