Lec 18 Flashcards
what is the association framework
it is a term used to indicate that a public accountant is involved with the financial information issued by that enterprise
what are the 2 scenarios when a PA is associated with F/S
- when you consent the use of your firm’s name in connection to the statements
- you have prepared or performed some other services - even if not audit or name not on F/S, you are still associated
why is association important
it is important because it subjects you to the rules of professional conduct
what 3 things discussed in class can make a PA associated
- statements produced on PA’s letterhead
- statements result from bookkeeping services performed by PA
- documents released by company identify PA as auditor
do PAs know every time that they are associated
not necessarily
what are the 2 synonyms related to high assurance
audit assurance and positive assurance
what are the 2 synonyms related to medium assurance
review assurance and negative assurance
what is a synonym related to no assurance
complication assurance
what is done in no assurance/complication
no attempt was actually made to verify accuracy or completeness of information
why is standard wording important in reporting
because it helps users identify exceptions
what are the 5 basic segments of an unmodified auditor’s report
- opinion segment
- basis for opinion segment
- key audit matters (KAM) segment
- management and governance responsibility segment
- auditor responsibility segment
who is the traditional addressee in the report title
the shareholders
what is contained in the opinion segment and what does the first paragraph indicate and identify
- indicates that an audit report was conducted and identifies F/S audited
- state whether they have an unqualified, qualified, disclaimer or adverse opinion
what is contained in the opinion explanation segment
contains the fact that auditors believe that disclosure is adequate (implicit assertion) through obtaining SAAE
what is contained in the KAM segment and described and what is it an exception of
- why was it determined to be a KAM
- how was it addressed in the audit
- reference to disclosure in F/S
it is an exception to the fact that audit methodology should not be known or how testing was technically conducted
what are specific examples of KAM (3)
- valuation of GW and LT assets
- valuation of F/S
- management discretion of revenue recognition
why is KAM needed for users of F/S
because users do not have the sufficient knowledge to figure this out themselves and the KAM section highlights it for them
what is KAM NOT (4)
- not a substitute for disclosure in F/S
- not a substitute for auditor to express modified opinion
- not a substitute for reporting any matters relating to going concern
- not a separate opinion on an individual matter
what is contained in the management responsibility segment (3 main points)
- preparation and fair representation of F/S in accordance with GAAP
- design and implement I/C
- going concern of the company - kinda ties in with the fact that they should ensure operations are streamlined
what is contained in the wording of auditors responsibility segment
the auditors objective in obtaining sufficient reasonable assurance and the definition of materiality which is misstatements having the magnitude to influence the economic decisions of users
what are the 2 reasons for which a reservation in unqualified opinions exists
- departure from GAAP in disclosure
- scope limitation
why is a departure in GAAP bad for disclosure
because it leads to inadequate disclosure
why is a scope limitation bad for disclosure
because it leads to not enough SAAE being collected
depending on materiality of the misstatement, what opinions are issued for a GAAP departure
qualified opinion and adverse opinion
