#1 Financial Statement Audits

Question 1

What are the General Standards for the PCAOB Auditing standards?

Answer 1

(TID)

1. Training
2. Independence 3. Due Care

Question 2

What are the Fieldwork standards for the PCAOB Auditing standards?

Answer 2

(PIE)

1. Planning and Supervision
2. Internal Control
3. Evidence

Question 3

What are the Reporting Standards for the PCAOB Auditing Standards?

Answer 3

(GCDO)

1. GAAP
2. Consistency
3. Disclosure
4. Opinion

Question 4

What are the 4 primary themes organized around the AICPA GAAS standards?

Answer 4

“PR-PR”)

1. Purpose/Premise
2. Responsibilities(takes the place of General Standards)
3. Performance(takes the place of Fieldwork Standards)
4. Reporting

Question 5

In AICPA professional standards, what are the 2 professional requirements?

Answer 5

1. Unconditional Requirements (“must”)

2. Presumptively mandatory requirements(“should”)

Question 6

Who is responsible for the administration of a quality control system?

Answer 6

May be vested in one person but everyone shares responsibility.

Question 7

List the six elements of a quality control system.

Answer 7

1. Leadership responsibilities for quality within the firm
2. Relevant ethical requirements (especially independence)
3. Acceptance and continuance of client relationships
4. Human Resources
5. Engagement Performance
6. Monitoring

Question 8

What is a Engagement Quality Control Review?

Answer 8

A process designed to provide an objective evaluation, before the report is released, of the significant judgements the Engagement team made and the conclusions it reached. This process is only required for those audit engagements for which the firm determines necessary.

Question 9

What are the services for which a CPA firm is required to have a system of quality control?

Answer 9

Audits, Attestation, Compilation and Review services. (Not applicable to tax or consulting services.)

Question 10

List the two types of test of details

Answer 10

1. Tests of ending balances

2. Tests of transactions

Question 11

What are some considerations that must be given by the auditor during the planning phase of the audit?

Answer 11

1. Determine whether to accept or continue the audit Engagement.
2. Assess the risk of material misstatement.
3. Evaluate requirements for staffing and Supervision.
4. Prepare the required written udit program(also called the “audit plan”)

Question 12

List the two types of substantive audit procedures.

Answer 12

1. Analytical procedures

2. Tests of details.

Question 13

List the four basic steps in the audit process.

Answer 13

1. Planning
2. Internal Control Consideration
3. Substantive audit procedures
4. Reporting

Question 14

What considerations should be given by the auditor regarding internal controls prior to beginning an audit or performing substantive audit procedures?

Answer 14

1. Obtain the required understanding of internal control for planning purposes.
2. Perform tests of controls to evaluate operating effectiveness of internal control if contemplating reliance on specific controls.

Question 15

List the reason(s) for which an entity may receive a qualified opinion.

Answer 15

1. Misstatement, such as a GAAP departure(material, not pervasive effect)
2. Scope limitation (material, not pervasive effect)

Question 16

List the reason(s) for which an entity may receive a disclaimer of opinion.

Answer 16

Scope limitation ( material and pervasive effect)

Question 17

How is an auditor’s unmodified Audit report structured under the clarified Auditing standards?

Answer 17

1. An introduction(1 sentence)
2. Management’s responsibility section(1 sentence)
3. Auditor’s responsibility section(3 paragraphs, consisting of 9 sentences).
4. Opinion (1 sentence)

Question 18

List the reason(s) for which an entity may receive an adverse opinion.

Answer 18

Misstatement, such as a GAAP departure (material and pervasive effect)

Question 19

What type of assurance is associated with a “review” of an entity’s financial statements?

Answer 19

Negative assurance, which is considered a moderate level of assurance.

Question 20

What type of assurance is associated with an “audit” of an entity’s financial statements?

Answer 20

Positive assurance, which is a high level of assurance.

Question 21

To what services are Statements is Standards for Accounting and Review Services (SSARs) applicable?

Answer 21

SSARs are applicable to reviews and compilations of the financial statements of private companies, that is, non-issuers.