Unit 2 Flashcards
(26 cards)
What is the relationship between quality control standards and GAAS Standards
Quality Control standards pertain to the conduct of all professional activities of an entity’s practice as a whole while GAAS relates to the conduct of each individual audit segment.
What are 4 reasons why a significant engagement deficiency can exist
- sufficient evidence was not compiled
- the engagement team reached an inappropriate overall conclusion
- report is not appropriate for the circumstances
- the firm is not independent
How long does audit documentation have to be retained for an issuer? What about a non-issuer?
PCAOB states that documentation for an issuer has to be retained for 7 years
SAS Rules state that documentation for non-issuers are retained for 5 years
When is the report release date?
the date the auditor gives the client permission to use the report
The what is the purpose of the permanent (continuous file) file and what are some examples
it is a collection of documents that have a continuing interest year over year…could be like contracts or pension plans or leases etc…
What topics should be included in the agreement to audit engagement terms
the objectives and scope management responsibility auditor responsibility inherent limitations reporting framework
What factors affect the nature and extent of necessary planning activities
Size and complexity
auditors previous experience
changes in circumstances that occur during the audit
The engagement partner is responsible for what 3 functions during an audit
planning
supervision
and complying to relevant audit standards
What written document is required for every audit
the audit plan
What are the six main financial statement assertions
COVERU
Completeness cutOff Valuation,allocation,accuracy Existence and occurrence Rights and obligations Understandably and classification
Does the external auditor share responsibility with the internal auditors over the establishment of estimates, matreiality, and assessing the risks of mistatement?
NO THE EXTERNAL AUDITORS THINK FOR THEMSELVES
To what extent are analytical procedures used during the planning of an audit
they are used in order to understand the client’s business and to identify unusual transactions and events, amounts, ratios, or trends that represent specific risks to the audit.
What are Audit Data Analytics (ADAs)
ADA’s involve analyzing patterns identifying anomalies, and extracting other useful information through analysis and modeling.
When performing Audit Data Analytics (ADA’s), you do 5 steps, what are they
- Plan the ADA: looking at population and best procedures
- Access and prepare the data for the purposes of the ADA
- Consider the relevance and reliability of the data used
- perform the ADA
- Evaluate the results and form a conclusion
What are ‘notable items’ related to Audit Data Analytics (ADAs)
they are items that may identify a previously unidentified risk, modify or support the assessment of risks of material misstatement, or provide the auditor with information to better plan audit procedures
What are some inherent limitations of internal controls
management override
human error
deliberate collusion
What are the five components of internal controls
CRIME
Control environment Risk assessment Information and communication systems Monitoring Existing control activities
Why is the control environment so important to internal controls
it is the basis for the tone of the organization and it starts with management “tone at the top”
What is included in the control environment
communication and enforcement of integrity/ethics
commitment to competence
management philosophy and operating style
org. structure
Name some control activities that are relevant to an audit
PAID TIPS
Prenumbering docs
Authorization of transactions
Independent checks
Documentation
Timely performance reviews
Information processing general and application controls
Physical controls for safeguarding assets
Segregation of duties
What functions should be segregated??
ARC
Authorization
Recording
Custody of the assets
what is auditing around the computer
it’s where the auditor doesn’t necessarily test or audit the program in the computer, but looks at the inputs and independently processes those inputs to see if they got the same outputs
What are the 5 computer assisted audit techniques (CAATs)
Transaction tagging: electronically marks specific transactions
Embedded audit modules: sections of program code collect data for the auditor
Test Data: use of the clients system to process the auditors data, offline
Integrated Test Facility:use of client’s systems to process the auditors data, online
Parallel Simulation: use of the auditors system to re-process client data
Final Audit Documentation should complete the audit file within how many days of the issuance of the report for a non issuer and issuer
60 days for issuer
45 days for a non issuer
