M1 Flashcards
(10 cards)
Who are those charged with governance
Typically, the board of directors or the audit committee
Who may be appointed to the audit committee
Directors that are not employees and have no material financial interest in the company
What are the responsibilities of the audit committee?
-Select and appoint the independent auditor and set the fee
-Assures the auditor is independent
-Reviews the nature, details, and scope of the audit engagement
-Reviews the quality of the auditor’s work
-Ensures recommendations made by the auditor are given proper attention
-Maintains the lines of communication
How often is the audit committee required to meet without management present
at least once a year.
What should an auditor assess before accepting an engagement
-firm’s ability to meet reporting deadlines
-Firm’s ability to staff the engagement with personnel having experience and availability
-Integrity of client
-Firms independence from client
-The evaluation by the group engagement partner of whether the team will be able to obtain sufficient appropriate evidence.
When is an auditor permitted to accept an engagement with a scope limitation
When the entity is required by law or regulation to have an audit
What information is in the engagement letter?
Information related to overall audit strategy
Does not typically include information related to specific audit procedures.
Frequency of engagement letter
for issuers - the engagement letter should be provided once a year
For nonissuers - if no revision is needed just remind mgmt of the terms.
Before accepting an audit
Auditor must obtain the prospective client’s permission to make inquiries of the predecessor auditor. (predecessor may provide work papers) May still take the audit if the predecessor does not provide work papers.
What are questions for predecessor auditor
Mgmt integrity
disagreements with mgmt
reason for change in auditor
any fraud noncompliance and internal control matters
Nature of entity’s relationships and transactions with related parties
