Exam 1 Flashcards
(64 cards)
1
Q
Our firm agrees.
A
Assent
2
Q
Our firm disagrees.
A
Dissent
3
Q
Our firm will agree with certain changes.
A
Assent with Qualifications.
4
Q
Designate: Au-C xxx.xx
A
Objectives
5
Q
Designate: Au-C xxx.Axx
A
Application and other
6
Q
Designate: Au-C 9xxx.xx
A
Staff Interpretations
7
Q
What are the two categories of GAAS?
A
- Unconditional Requirements
- Presumptively Mandatory
8
Q
Auditors must be independent in ____ and _____.
A
- Fact
- Appearance
9
Q
(Framework) Accrual, GAAP, IFRS.
A
General Purpose Framework
10
Q
(Framework) Cash basis, tax basis, regulatory.
A
Special Purpose Framework
11
Q
Auditor must obtain _____ and _____ evidence to support audit opinion.
A
- Sufficient
- Appropriate
12
Q
Timeliness of financial reporting is important for balancing ____ and ____.
A
- Benefit
- Cost
13
Q
Scope restriction, which could be material and pervasive, and auditor lacks independence.
A
Disclaimer
14
Q
After risk assessment procedures, design _____, _____, and ____ of further audit procedures.
A
Nature, timing, and extent.
15
Q
Audits should be planned and performed with ______ ________, where looking for evidence, documentation, and fraud is important.
A
Professional Skepticism
16
Q
Audit risks cannot be zero.
A
Inherent Limitations of an Audit
17
Q
How many days do large accelerated filers have to file 10-K? (>$700m)
A
60 days of year end
18
Q
How many days do accelerated filers have to file 10-K? ($75m-$700m)
A
75 days of year end
19
Q
How many days do non-accelerated filers have to file 10-K? (<$75m)
A
90 days of year end
20
Q
How many days do large accelerated and accelerated filers have to file a 10-Q?
A
40 days of period end
21
Q
How many days do non-accelerated filers have to file a 10-Q?
A
45 days of period end
22
Q
Within how many days should an auditor file with the SEC a change in records for a public company?
A
2-5 business days
23
Q
Used to emphasis something in F.S., usually the footnotes.
A
Emphasis-of-Matter (EOM)
24
Q
Used to emphasize something that is not found in the F.S. (footnotes).
A
Other-Matter (OM)
25
What are the two examples where an EOM is required?
1. Going concern situation
2. Changes in accounting principles
26
The more complicated matters that arose during an audit of F.S. requires auditor to make subjective decision or complex judgment.
Critical Audit Matters (CAM)
27
What is required and not required for a CAM?
Required: Auditor tenure with client.
Not Required: Disclosing lead partner's name (allowed)
28
"Except for..." opinions. Misstatements and omissions (missing necessary footnote) are material, but not pervasive. Either scope or AFRF can cause. F.S. still fairly presented.
Qualified Opinion
29
Opinion only for pervasive and material improper application of AFRF. DON'T say, "Except for...". F.S. rendered meaningless.
Adverse Opinion
30
An opinion when scope limitation is pervasive and material, or auditor lacks independence, but still required to report due to governing bodies.
Disclaimer of Opinion
31
An opinion that is issued when F.S. provide a FULL and FAIR disclosure of all materials under AFRF and have NO scope restrictions.
Unqualified Opinion
32
What are the 8 sections of an auditors report? (in order) excluding disclaimer
Addressee information
1. _____ Opinion
2. Basis for ____ Opinion
3. Key Audit Matters
4. Responsibilities of Management for F.S.
5. Auditors Responsibilities for Audit of F.S.
6. Other information/Report on other L & R Requirements
33
What are the 3 lines needed for the auditor information section of an auditor's report?
1. Auditor's signature
2. Auditor city and state
3. Date of auditor's report
34
What is AFRF?
Applicable Financial Reporting Formats
35
When auditors turn in a report for an nonissuer (private company) that is clean.
An unmodified report.
36
When auditors turn in a report for an issuer (public company) that is clean.
An unqualified report.
37
Representations made by management to us either implicitly or explicitly in the F.S., transactions, or balances.
Assertions
38
What are the 2 categories of management assertions?
1. Transaction-Related Audit Objectives - Classes of transactions, events, and related disclosures for a period
2. Balanced-Related Audit Objectives - Transactions, balances. and presentation and disclosure at year end
39
What are the 4 phases of an audit engagement?
1. Planning and designing an audit approach
2. Testing controls and transactions at interim
3. Testing details of balances and analytical procedures(substantive procedures $$)
4. Issuing an audit report
40
What are the 3 sub-actions of the 1st phase of an audit engagement?
1. Preliminary engagement activities
2. Develop an overall audit strategy
3. Create an audit plan
41
What are the 4 parts of developing an audit strategy?
1. Determine reporting basis
2. Determine objectives
3. Develop audit strategy aids
4. Document significant revisions
42
What are the 3 parts of preliminary engagement activities?
1. Establish understanding between auditor and client
2. Establish auditor independence
3. Establish management integrity (make sure no issues)
43
What are the 3 things you need for an audit plan?
1. Documentation of procedures, planning, and performance
2. Nature, timing, and extent of risk assessment procedures
3. Nature, timing, and extent of further audit procedures (find an assertation level)
44
What are the 3 parts of understanding I.C.s and testing controls and transactions? (Stage 2 of audit plan)
1. Test control risk, at interim
2. Understand internal controls
3. Make preliminary assessment based on segmented inquiries
45
What are the 2 important parts of testing details of balances and analytical procedures? (Stage 3 of audit plan)
1. No matter how high or low control risk level is, you must do tests of details
2. If control is weak (high risk), must do year-end substantive procedures of F.S.
46
What are the 3 areas which constitute inherent limitations of an audit such that audit risk can never be zero?
1. Nature of financial reporting
2. Nature of audit procedures
3. Timeliness of financial reporting and balancing cost and benefit
47
All the accounts involved, balance sheet and statement of earnings, generating operating cash INFLOWS.
Sales and Collection Cycle
48
All the accounts involved with generating operating cash OUTFLOWS.
Acquisition and Payments Cycle
49
All accounts that deal with salaries/wages outflows and the taxes involved.
Payroll and Personnel Cycle
50
Inventory and COGS accounts.
Inventory and Warehouse
51
Accounts that deal with cash inflows AND outflows involving financial activities, including equity accounts. Any payable financial accounts longer than A.P. (30 days).
Capital Acquisition and Repayment
52
What are the 3 SOX provisions concerning issuers ?
1. Loans to officers/directors prohibited
2. Cannot hire CEO, CFO, CAO, Controller from CPA firm 1 year prior to planned audit
3. Issuers must appropriately fund audit commission so they can hire experts
53
SOX established ________, which is appointed and overseen by the SEC. Authority to set and enforce audit, quality control, ethics and independence standards for public companies.
Public Company Accounting Oversight Board (PCAOB)
54
How many board members on PCAOB?
5 members
55
How long do PCAOB members serve, and how many CPAs can be on the board?
1. 5 year terms
2. no more than 2 CPAs
56
What is the difference been an CPA firm that works for more than 100 issuers compared to an firm that doesn't?
The >100 firm must have annual inspection where the <100 firm has an inspection every 3 years.
57
How many years must a CPA firm retain audit documentation?
7 years
58
Auditors report to ______.
A. Managers
B. Audit Committees
Audit Committees
59
True or False
CPA firms do not have to register with the PCAOB.
False
60
CEOs and CFOs are require to _____ their 10-K and 10-Q's.
Certify
61
What are the 6 manager assertions for classes of transactions and events and related disclosures for the period under audit?
1. Completeness
2. Classification
3. Cutoff
4. Accuracy
5. Presentation
6. Occurance
62
What are the 6 manager assertions for account balances and related disclosures at period end?
1. Presentation
2. Existence
3. Rights and Obligations
4. Completeness
5. Accuracy, Valuation, and Allocation
6. Classification
63
What is the one general balance-related audit objective for manager assertions about account balances and related disclosures that isn't the same?
For the accuracy, valuation, and allocation assertion the general objectives are:
1. Accuracy
2. Cutoff
3. Tie-in
4. Realizable Value
64
What are the two general transaction-related audit objectives for manager assertions about classes of transactions and events and related disclosures that isn't the same?
For cutoff the general objective is:
1. Timing
For accuracy the general objectives are:
1. Accuracy
2. Posting and Summarization
