1 Flashcards
Contingent fee prohibited for
Preparation of tax return or refund claim
Audit/Review of FS
Compilation
Examination
Independence Required/Not required
Required
Audits
Reviews
Examinations
Agree-upon procedures
Not required
FS preparation
Tax return
Consulting
Compilation(must be disclosed)
CPA disclose client’s info without consent
Review by state CPA society
Inquiry from AICPA
Court-ordered subpoena or summons
What percentage of client’s ownership interests would Non covered members own to be impaired independence?
5%
Presumptively mandatory requirement
Unconditional requirement
“should”- Auditor must comply or document reason for not doing so
“must” - Auditor must comply always
When does auditor need to document/communicate significant deficiencies or material weaknesses
During the audit or within 60 days of the report release date
Auditor must report the illegal act first to?
Client’s board of directors
Auditor and management responsibilities in an engagement letter
Auditor
-Conducting the audit with GAAS
-Obtaining reasonable assurance
-Communicating IC deficiencies to audit committee
Management
-Preparing FS,IC
- Providing relevant information
Planning an examination of IC
Making preliminary judgements about IC
Identifying any changes to IC
Considering the type of evidence available
Statements of Standards for Accounting Review Services (SSARS) apply to/not apply to
Apply to
-Reviews
-Compilations
-Preparations
NOT apply to
-Bookkeeping
-Reproducing
-Consulting or tax services
Quality control elements for CPA firm
(HEAL-ME)
Human resources
Ethical requirements
Acceptance and continuance of client
Leadership responsibilities for quality
Monitoring
Engagement performance
Monetary policy tools
Expansionary
-Buy securities
-Lower interest rate
-Decrease reserve
Contractionary
-Sell securities
-Raise interest rate
-Increase reserve
Statements on Standards for Attestation Engagements (SSAE) apply to
Examination
Agree-upon procedures
GAAS engagement quality review documentation
Reflects review date
Provides evidence that
-Firms engagement quality control procedures were performed
-Reviewer is unaware of unresolved or inappropriate judgments or conclusions
What do reduction in the reserve requirements create?
Decrease Reserve Requirements →Excess cash reserves in bank →Make loans (leading to an increase in the money supply) →Lower Interest Rate
How does Federal Reserve reduce inflationary pressures?
Contractionary Monetary Policies
-Reduce the money supply →Increase margin requirements
Business Cycle
Peak→Recession→Through→Recovery
Who does command Demand/Supply curve?
Demand - by consumer
Supply - by supplier
Business cycle impact on housing sector and trade balance
Early expansions
Housing sector- Increase
Trade deficit- Increase
What is control risk and inherent risk?
Control risk - IC will fail to prevent or detect a material misstatement on a timely basis.
Inherent risk -
