A1 - Audit Reports

Question 1

Issuer’s guidance?

Answer 1

PCAOB auditing standards

Question 2

Non-issuers guidance?

Answer 2

ASB standards

Question 3

What do generally accepted auditing standards measure?

Answer 3

Measure the quality of the auditor’s performance

Question 4

Reasonable assurance?

Answer 4

High, but no absolute, level of assurance to allow an auditor to detect a material misstatement

Question 5

What is required for an auditor to obtain a reasonable level of assurance about whether the financial statements are free from material misstatement, whether due to error or fraud?

Answer 5

The auditor must:

1. Plan the work and properly supervise any assistants
2. Determine and apply appropriate materiality levels
3. Identify and assess risks of material misstatement, wether due to error or fraud
4. Obtain sufficient appropriate audit evidence

Question 6

Can an auditor be required to comply with audit requirements in addition to GAAS?

Answer 6

YES

The auditor should add additional language to the Auditor’s Responsibility paragraph to state that the audit was conducted in accordance with both sets of auditing standards

Question 7

Sufficient, appropriate?

Answer 7

Refers to the required level of evidence an auditor must obtain to afford a reasonable basis for the opinion

Question 8

When will an auditor most likely modify the audit opinion?

Answer 8

When the auditor identifies an immaterial misstatement in the financial statements or when the auditor is unable to obtain sufficient appropriate evidence

Question 9

Unmodified or Unqualified Opinion (clean)?

Answer 9

states that the financial statements present fairly in all material respects the information of the entity in conformity with the applicable financial reporting framework

“Unmodified” is used for nonissuers
“Unqualified is used for issuers

Question 10

Three types of modified opinions:

Answer 10

1. Qualified opinion
2. Adverse opinion
3. Disclaimer of opinion

Question 11

Qualified opinion?

Answer 11

Outside of the effects of the matter to which the qualification relates, the financial statements are presented fairly

Question 12

Adverse opinion?

Answer 12

States that the financial statements are not presented fairly

Question 13

Disclaimer of Opinion

Answer 13

States that the auditor does not express an opinion

Question 14

What is the earliest date an audit report may be dated?

Answer 14

When the auditor has obtained sufficient appropriate audit evidence to support an opinion

Question 15

How are management’s responsibility and the auditor’s responsibility represented in the auditor’s report of a nonissuer?

Answer 15

They are stated explicitly in the auditor’s report, there is a Management’s responsibility paragraph and an Auditor’s responsibility paragraph

Question 16

Is language that can be viewed as disclaiming, qualifying, restricting, or minimizing the auditor’s responsibility for the critical audit matters appropriate?

Answer 16

No, an auditor will still have the responsibility of an opinion on a critical audit matter

Question 17

Which paragraph of a nonissuer auditor’s report refers to GAAS and which paragraph refers to GAAP?

Answer 17

1. The auditor’s responsibility paragraph refers to GAAS

2. The opinion paragraph refers to GAAP

Question 18

What is a basic element of the independent auditor’s report that is specifically mentioned within the report?

Answer 18

“An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the FS”

Question 19

Who should an auditor address the report to?

Answer 19

Auditor should address their report to the entity that engage them

Question 20

Statements of Auditing Standards (SAS):

Answer 20

Standard setting body: AICPA

Description: provides GAAS for audits of nonissuers (private Co.)

Question 21

Public Company Accounting Oversight Board Auditing Standards (PCAOB AS):

Answer 21

Standard setting-body: PCAOB

Description: provide GAAS for the audits of issuers (public Co.)

Question 22

Generally Accepted Government Auditing Standards (GAGAS):

Answer 22

Standard setting-body: Governmental Accountability Office

Description: provide guidance for audits of government organizations, programs, activities, and of entities that receive government funds

Question 23

Statements on Standards for Attestation Engagements (SSAE):

Answer 23

Standard setting-body: AICPA

Description: provides guidance on attestation engagement (examination, a review or agreed-upon procedures report)

Question 24

Statements on Standards for Accounting and Review Services (SSARS):

Answer 24

Standard setting-body: AICPA

Description: provide guidance for unaudited FS for nonissuers (private Co.)

Question 25

Code of Professional Conduct:

Answer 25

Standard setting-body: AICPA

Description: provides AICPA members with guidelines for behavior

Question 26

Statement on Quality Control Standards (SQCS)

Answer 26

Standard setting-body: AICPA

Description: provides guidance to CPA firms about a quality control system