A1 - Audit Reports Flashcards
Issuer’s guidance?
PCAOB auditing standards
Non-issuers guidance?
ASB standards
What do generally accepted auditing standards measure?
Measure the quality of the auditor’s performance
Reasonable assurance?
High, but no absolute, level of assurance to allow an auditor to detect a material misstatement
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?
The auditor must:
- Plan the work and properly supervise any assistants
- Determine and apply appropriate materiality levels
- Identify and assess risks of material misstatement, wether due to error or fraud
- Obtain sufficient appropriate audit evidence
Can an auditor be required to comply with audit requirements in addition to GAAS?
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
Sufficient, appropriate?
Refers to the required level of evidence an auditor must obtain to afford a reasonable basis for the opinion
When will an auditor most likely modify the audit opinion?
When the auditor identifies an immaterial misstatement in the financial statements or when the auditor is unable to obtain sufficient appropriate evidence
Unmodified or Unqualified Opinion (clean)?
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
Three types of modified opinions:
- Qualified opinion
- Adverse opinion
- Disclaimer of opinion
Qualified opinion?
Outside of the effects of the matter to which the qualification relates, the financial statements are presented fairly
Adverse opinion?
States that the financial statements are not presented fairly
Disclaimer of Opinion
States that the auditor does not express an opinion
What is the earliest date an audit report may be dated?
When the auditor has obtained sufficient appropriate audit evidence to support an opinion
How are management’s responsibility and the auditor’s responsibility represented in the auditor’s report of a nonissuer?
They are stated explicitly in the auditor’s report, there is a Management’s responsibility paragraph and an Auditor’s responsibility paragraph
Is language that can be viewed as disclaiming, qualifying, restricting, or minimizing the auditor’s responsibility for the critical audit matters appropriate?
No, an auditor will still have the responsibility of an opinion on a critical audit matter
Which paragraph of a nonissuer auditor’s report refers to GAAS and which paragraph refers to GAAP?
- The auditor’s responsibility paragraph refers to GAAS
2. The opinion paragraph refers to GAAP
What is a basic element of the independent auditor’s report that is specifically mentioned within the report?
“An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the FS”
Who should an auditor address the report to?
Auditor should address their report to the entity that engage them
Statements of Auditing Standards (SAS):
Standard setting body: AICPA
Description: provides GAAS for audits of nonissuers (private Co.)
Public Company Accounting Oversight Board Auditing Standards (PCAOB AS):
Standard setting-body: PCAOB
Description: provide GAAS for the audits of issuers (public Co.)
Generally Accepted Government Auditing Standards (GAGAS):
Standard setting-body: Governmental Accountability Office
Description: provide guidance for audits of government organizations, programs, activities, and of entities that receive government funds
Statements on Standards for Attestation Engagements (SSAE):
Standard setting-body: AICPA
Description: provides guidance on attestation engagement (examination, a review or agreed-upon procedures report)
Statements on Standards for Accounting and Review Services (SSARS):
Standard setting-body: AICPA
Description: provide guidance for unaudited FS for nonissuers (private Co.)
Code of Professional Conduct:
Standard setting-body: AICPA
Description: provides AICPA members with guidelines for behavior
Statement on Quality Control Standards (SQCS)
Standard setting-body: AICPA
Description: provides guidance to CPA firms about a quality control system
