1 - Audit Standards and Engagement Planning Flashcards
Clarity Standards
Which audits do they apply to? Who issued the standards ?
- Non-Issuers
- (ASB) Auditing Standards Board of the AICPA
Standard entitled “Defining professional requirements in Statements on Auditing Standards” describes two types of requirements:
1) Unconditional Requirement - “MUST” comply “IS REQUIRED TO”
2) Presumptively Mandatory Requirement -
“SHOULD”
Must document how alternate procedure was sufficient
What are the 3 categories for the 10 (GAAS) Generally Accepted Auditing Standards applied by the PCAOB (issuers)?
1) General Standards
Apply to all aspects of engagement
2) Framework Standards
Gathering evidence
3) Reporting Standards
Audit report
What are the 10 (GAAS) Generally Accepted Auditing Standards applied by the PCAOB (issuers)?
Training and proficiency
Independence
due Professional care
Planning and supervision
Internal controls
Corroborative audit evidence
Accounting principles in conformity w/GAAP
No new acctg principles applied (Consistent)
no Omitted informative disclosures
Express opinion
(TIPPICANOE)
What are the 3 General Standards of GAAS?
Apply to ALL aspects of engagement - acceptance to completion
1) Training and proficiency
2) Independence
3) due Professional care
- Critical review of judgment at every level
- Due diligence
- Professional skepticism-Objective
What are the 3 Standards of Fieldwork of GAAS?
Planning Audit and gathering evidence
4) Planning and supervision
5) Internal Controls - Assess RMM (rely ⬆️)
6) Corroborative audit evidence-Sufficient appropriate evidence (Substantive testing ⬇️)
What are the 4 Standards of Reporting of GAAS?
7) Accounting principles conform w/GAAP - EXPLICITly stated in report
8) No new accounting principles applied (Consistent)
IMPLICIT - must identify principles NOT consistently applied
9) no Omitted disclosures
IMPLICIT- reasonably adequate unless stated
10) Express Opinion - Explicit
An auditor must maintain independence for which type of engagements? (ERAS)
Examinations
Reviews
Agreed upon procedures
Special reports
Need not be independent for:
Compilations (indicate lack independence)
Taxes
Consultations
Successor auditor makes inquiries of the predecessor auditor regarding:
(RID-C)
Reasons for change in auditor
Integrity of management
Disagreements during audit
Communication w/MGMNT or those charged with governance
Which matters should be communicated to those charged w/governance?
(DISAPPROVE)
Disagreements w/management
Illegal acts/Noncompliance with laws and regulations
Significant accounting policies adopted or changed by mgmnt
Adjustments proposed and un corrected misstatements
Prior discussions with management before acceptance of engagement
Problems during audit
Responsibilities to obtain reasonable assurance
Other info regarding responsibilities
Views of other accountants contacted by management
Estimates in accounting records and process to obtain them
SOX requires audit committee to be made up of:
Independent directors and at least one financial expert:
Understand GAAP; financial statements and internal controls
Need not be CPA
Elements of Engagement Letter
Fees
Auditors responsibility (GAAS)
Confirmation of engagement
Scope and objective of engagement (Statements and obj is opinion on FS)
Internal control (inh limits/sig def/mat weak)
Managements responsibility (prep and fair FS/DIM/provide access)
Irregularities - Fraud
Illegal acts
Errors
Fraud Triangle
Motivation
Opportunity
Rationalization
Nature and extent of CPA firms QC policies and procedures depend on:
CPA firms size
Nature of CPAs practice
Cost benefit considerations
