A1 and A2 Flashcards
four things auditor must do to obtain reasonable assurance
1 - plan and supervise
2 - materiality level
3 - identify and assess risk of material misstatements
4 - find sufficient appropriate evidence
GAAS Hierarchy
1 - SAS and PCAOB
2 - Interpretive publications
3 - other auditing publications
who do non issuers follow
Auditing standards board
who do issuers follow
PCAOB standards
what opinion if it is material but not pervasive (both FS and audit issue)
qualified opinion
what opinion if no materiality issue (both fs and audit issue)
unmodified (unqualified) opinion
what opinion if FS issue is material and pervasive
Adverse opinion
what opinion if Audit issue is material and pervasive
disclaimer of opinion
what is qualified opinion wording
except for
what is adverse opinion wording
do not present fairly
Required sections for unqualified (issuer)
Opinion of FS
Basis for Opinion
Critical Audit Matters
Required Sections for Unmodified (Non Issuer)
Opinion (GAAP)
Basis for opinion (GAAS)
Responsibility of Mgt for FS (GAAP)
Auditors responsibility for Audit of FS (GAAS)
potentially Key Audit Matters
Name the special purpose frameworks
1 - cash basis and modified cash basis
2 - tax basis
3 - regulatory basis
4 - contractual basis
5 - other basis
When do you reference consistency in Emphasis of Matter?
Accounting Principal Change
when is an emphasis of matter required??
justified change in accounting principle that has a material effect of FS
what are examples of when a auditor MAY use emphasis of matter
- entity engaged in important lawsuit that could result in big loss
- major catastrophe has big effect of Financial position
- when entity engages in significant related party transactions
what are the quality control elements for a CPA firm
H - Human resourcE
E - engagement/client acceptance and continuance
L - Leadership responsibilities
P - Performance of the engagement
M - Monitoring
E - Ethical requirements
how long must WP of issuers be retained?
7 Years
how long must WP of non issuers be retained?
5 Years
how long following report release date should the audit of a non issuer be finalized
60 days
how long following report release date should the audit of a issuer be finailzed
45 days
what are the internal control components
- control environment
- risk assessment
- information and communication
- monitoring activities
- control activities
What are the categories of entity objectives
- reliability of financial reporting
- effectiveness and efficiency of operations
- compliance with laws and regulations
how dates work in kittign example
the receipt date per bank is recorded in the accounting period before the disbursement date.
what do Quality Control policies and procedures apply to
all professional activities of a firms practice
what do Generally Accepted Auditing standards apply to
individual audit engagements
what is audit risk and equation
risk that the FS are materially misstated but the opinion is not appropriately modified (does not reflect)
AR = RMM * DR or AR = IR * CR * DR
What is the Risk of Material Misstatement
risk that the FS are materially misstatedd
RMM = IR * CR
what is inherent risk
susceptibility of an assertion to a material misstatement assuming not related controls
possibility of an error/omission in the FS that in not due to failure of internal controls
What is Control Risk
likelihood that a company’s internal controls will not prevent or detect a material misstatement in a timely manner.
What is detection risk
the likelihood that an auditor will not catch a material misstatement in the FS data
only element that an auditor can control by varying NET of audit procedures
What relationship does Risk of material misstatement have with detection risk
inverse
what two things must be considered together when designing NET and what kind of relationship do they ahve
audit risk and materiality
inverse relationship
when is an emphasis of matter required
- to describe a justified change in accounting principal that has material effect
- subsequent discovered facts lead to a change in audit opinion
- FS are prepared in accordance with a special purpose framework
optional EoM - uncertainty about litigation or regulatory action
- major catastrophe have significant effect
- significant related parties
- unusually important subsequent events
- substantial doubt about ongoing concern but have been allivated
