A1 Flashcards
GAAS Hierarchy
3 levels
- AICPA Statements on Auditing Standards (SASs) and PCAOB Auditing Standards
- Interpretive Publications
- Other Auditing Publications
Do nonissuers and issuers comply with the same auditing standards?
y/n
NO
- auditors are required to comply with SASs published by the Auditing Standards Board for audits of nonissuers
- and comply with PCAOB Auditing Standards for audits of issuers
overall objs of the auditor:
- to obtain reasonable assurance
- to report on the financial statement
general requirements related to the conduct of the audit as an auditor:
- professional skepticism (recognition of material misstatement)
- ethical requirements (independence in both fact and appearance)
- professional judgment (materiality, NET (Nature, Extent, Timing)
- sufficient appropriate audit evidence and audit risk
- compliance with GAAS
conditions that indicate fraud
- pressure
- opportunity
- rationalization
weak internal control DOES NOT EQUAL
an adverse opinion
fair presentation of an audit opinion
- unmodified opinion
- adequately disclose
- consistent
- reasonable
- relevant, reliable, comparable, understandable
- understand effect of material transactions
- terminology
- presented fairly
Unmodified audit opinion
The auditor’s report should have in writing
- title
- addressee (addressee to board, stockholders, not to management)
- introductory paragraph
- management’s responsibility for the f/s
- auditor’s responsibility
- Auditor’s opinion (explicit statement)
- Other reporting responsibilities
- Signature of the Auditor
- Auditor’s address
- Date of the Auditor’s Report (no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence.
Mr. DIM mnemonics
for management reports
Mr. = Management’s Responsibility
D- design
I.- implementation
M - Maintenance
REPPORTS CRAME mnemonics for auditor’s responsibility
R - responsibility E - express an opinion P - plan and perform the audit P - performing procedures O - obtain audit evidence R - risk assessment T - test internal controls S - f/s presentation
C - control (internal) no expressing an opinion for controls
R - reasonableness of
A - accounting estimates by
M - management
E - evaluating the overall presentation of the F/s
where is GAAS and GAAP in an auditor’s report?
GAAS is in the sssscope paragraph (auditor’s responsibility paragraph)
GAAP is in the opinion paragraph
Reference to the component auditor should not be made in the auditor’s report on the group financial statments unless:
- the framework are similar
- the group engagement team has obtained sufficient appropriate audit evidence to evaluate the appropriateness of the adjustments
types of opinions:
- qualified “except for” GAAP
- adverse GAAP
- qualified “ except for” GAAS
- disclaimer GAAS
- Withdraw
qualified “except for” GAAP
(Material problems)
- accounting policy
- presentation
- disclosures
- estimates
- adverse GAAP
(very material problems) Pervasive
- accounting policy
- presentation
- disclosures
- estimates
qualified “ except for” GAAS
(Material problems)
- insufficient evidence
disclaimer GAAS
(very material problem)
- insufficient evidence
- going concern
- lack of independence
withdrawal opinioin
- false
- fraudulent
- deceptive
- misleading
unmodified opinion
- Emphasis of matter paragraphs
- other matter paragraphs
(does not affect the auditor’s opinion)
emphasis of matter paragraph - is included in the auditor’s report when required by GAAS or at the auditor’s discretion. Used when referring to a matter that is appropriately presented or disclosed in the financial statements
other matter paragraphs - when required by GAAS or at the auditor’s discretion, other than those presented or disclosed
Emphasis of matter paragraph
- Report requirements
- goes after opinion paragraph
- describe the matter
- indicate the opinion is not modified
- heading “emphasis of matter” - Use of emphasis paragraph (required when)
- going concern
- consistency
- changing prior opinion
- special purpose framework - use may be necessary if
- uncertainty related to the outcome of unsually important litigation or regulatory action
- major catastrophe
- related party transactions
- subsequent events
other matter paragraphs
- report requirements
- goes after opinion and after any emphasis of matter paragraphs
- heading “other-matter”
- describe the matter - use required (when)
- restricts the use
- change in audit opinion
- predecessor’s audit report is not reissued
- current f/s presented in comparative form, complied or reviewed f/s for the py OR py f/s not audited, reviewed, or complied
- identifies a material inconsistency in other information
- report on supplementary information
- refer to required supplementary info
- restrict the use, special purpose f/s
- compliance - use may be necessary if:
- reasons why cant be withdrawn
- law, reg, require or permit the auditor to provide further explanation
- engaged to report on more than 1 set of f/s
going concern has 2 components
verification and classification
Procedures of going concern
ADMITS
A - analytical procedures D - Debt compliance M - minutes from meetings I - inquiry of client;s legal counsel T - third parties S - subsequent events review
conditions and events of going concern (client admits)
FINE
F - financial difficulties
I - internal matters
N - negative trends
E - external matters
