3 Flashcards
appropriate evidence
is persuasive not conclusive
tolerable rate
the max rate of deviation that the auditor would be willing to accept w/o altering the planned assessment of control risk.
achieved upper precision limit
the max deviation rate per the sample
= sample error rate + margin for sampling risk
upper precision limit and tolerable rate
If the achieved upper precision limit is greater than the tolerable rate, the control cannot be relied upon and the control risk assessment will be increased.
ICFR - the client didn’t furnish adequate evidence for the auditor to evaluate the IC over inventory. All evidence was provided.
What type of opinion would we give.
Issue a disclaimer of opinion.
A scope restriction results in a disclaimer of opinion for the company’s ICFR
ICFR - The auditor’s examined the client’s IC over cash receipts and concluded that they are operating as designed. The problem is the design does not include control procedures to prevent misstmts and the potential omission of cash receipts.
What should the auditor do?
Determine if the control deficiency is a material weakness by obtaining further evidence.
The severity of a deficiency depends on whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstmt. When an auditor identifies deficiencies in controls, the auditor must perform procedures to assess if the deficiency alone or in combination w/other deficiencies could result in a material misstmt.
ICFR - The auditors concluded that the ineffectiveness of the design of controls over AP and cash disbursements represents a material weakness in IC even though the f/s are NOT materially misstated.
What should the auditor do?
Express an adverse opinion on the internal controls.
An adverse opinion must be issued when one or more material weaknesses exist in the client’s IC.
ICFR - Mgmt has not provided assurance that there are no material weaknesses in controls. Subsequent tests reveal there are NO material weaknesses.
What should the auditor do?
Express an unqualified opinion on the IC.
The auditor has identified no material weaknesses in IC.
Adverse opinion
F/S are not presented in conformity w/ US GAAP
There is a departure from GAAP
Disclaimer of Opinion
The auditor does not express an opinion
Qualified opinion
Except for stmt in the qualified opinion paragraph
Auditor’s responsibilities sections
stmt that an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the f/s.
stmt that there is no guarantee that an audit in accordance w/GAAS will always detect an existing material misstmt.
Responsibilities of mgmt section
Stmt that responsibilities extend to the design, implementation and maintenance of IC relevant to the preparation and fair presentation of F/S that are free from material misstmt, whether due to fraud or error.
Other matter paragraph
could include a stmt that the prior yr’s f/s were audited by other auditors including the nature of the opinion and date of the predecessors audit report.
Emphasis of Matter paragraph
describes a matter presented in the F/S that the auditor believes is fundamental to point out.
It could describe related party transactions.
It could discuss uncertainty relating to litigation that is properly disclosed in the F/S
