#4 Planning Activities 3 - Illegal Acts, Specialist s and Communication s Flashcards
Identify 3 audit procedures might bring to the auditor’s attention noncompliance with laws and regulations that don’t have a direct effect on the entity’s financial statements
- Inquiry of management and those charged with governance about noncompliance with applicable laws and regulations
- Inspection of correspondence with regulatory authorities
- Reading the minutes of meetings of those charged with governance.
What procedures can an auditor undertake to help detect illegal acts?
Make inquires of management about the entity’s compliance with applicable laws.
What matters should the auditor document with respect to the entity’s compliance with applicable laws and regulations?
- The results of the discussion with management, those charged with governance, and others as applicable.
- Any identified or suspected noncompliance with applicable laws and regulations.
What actions should an auditor consider when an illegal act has been detected?
- Gather additional evidence to determine relevant facts
- Discuss the matter with the appropriate level of management
- Consider consulting with the entity’s attorney and/or relevant specialists
- Consider the implications to other audit areas.
What is the auditor’s responsibilities to detect illegal acts?
The auditor should design the audit to provide reasonable assurance of detecting illegal acts having a direct and material effect on the financial statements.
What is meant by the term legal and regulatory framework?
Those laws and regulations to which an entity is subject; noncompliance may result in fines, litigation, or other consequences that may have a material effect on the financial statements.
When might an auditor have a duty to inform others outside of the audited entity of illegal acts known to the auditor?
- In response to a valid subpoena 2. To comply with applicable legal and regulatory requirements
- To respond appropriately to successor auditor’s inquires when the former client has given permission to the predecessor
- To report illegal acts to the applicable funding agency under the requirements of government Auditing standards.
What reference to a specialist may an auditor make when expressing an unmodified opinion?
The auditor should NOT reference the specialist in an unmodified opinion.
What considerations should be made when auditor is selecting a specialist?
The auditor should consider the specialist’s competence, capabilities, and objectivity ( including professional credentials, reputation, and any relationship in the client).
Define the term specialist
An individual or organization possesing expertise in a field other than accounting or Auditing, whose work in that field is used by the auditor to assist the auditor in obtaining sufficient appropriate audit evidence.
List some examples of specialists.
Actuaries, appraisers, engineers, geologists, etc.
What reference to a specialist may an auditor make when expressing a modified opinion?
The auditor may reference the specialist, if that will facilitate the readers understanding of the reason(s) for the modified opinion.
What is the auditor’s basic responsibility regarding communication with those charged with governance,?
The auditor Must communicate
Those matters that are “significant” and relevant to the responsibilities of those charged with governance in overseeing the financial reporting process.
What matters are the auditor required to communicate to those charged with governance?
The auditor’s responsibility under GAAS
The planned scope and timing of the audit
Significant findings from the audit
Define what is meant by the term those charged with governance.
The person(s) or organization (s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity.
