A1 - Audit Reports Flashcards
GAAS
- Measures of the quality of the auditor’s performance
- Guide the auditor in the performance of a properly planned and executed audit
In order to obtain reasonable assurance:
- Plan the work and properly supervise assistants
- Determine and apply materiality levels
- Identify and assess risks of material misstatement, whether due to error or fraud
- Obtain sufficient appropriate audit evidence
Inquiring of prior year engagement personnel regarding their assessment of management’s honesty and integrity:
Is NOT an example of the application of professional skepticism
Critical Audit Matter
- A matter that was communicated or is required to be communicated to the audit committee
- Involves an especially challenging judgement made by an auditor
For issuers, CAMs should be communicated in the CAMs section, which is where?
- Immediately follows the Basis for Opinion section
Auditor will include the following info related to a CAM in the audit report:
- Reference to relevant FS accounts that relate to the CAM
- Description of the principle considerations that led the auditor to determine that the matter was a CAM
- Description of how the CAM was addressed in the audit
Which type of audit report has a Scope Paragraph?
- Issuer
Which section of a NONissuer’s audit report communicate the nature of the engagement and the specific FS covered by the audit?
- Opinion
If management refuses to sign the management representation letter:
- Disclaimer of opinion
Inadequate disclosure does not result in:
- A disclaimer of opinion
- It results in a qualified or adverse opinion
Example of an opinion paragraph for a qualified opinion:
- In our opinion, except for the omission of the info described in the basis for qualified opinion section of our report
If an auditor lacks independence with respect to the audited entity:
- The auditor must disclaim an opinion on the FS
- Qualified opinion is not an option
When an auditor qualifies his opinion because of a scope limitation, the wording in the opinion paragraph should indicate:
- That the qualification pertains to the possible effects on the FS and not to the scope limitation itself
An auditor who is unable to form an opinion on a new client’s opening inventory balances may issue an unmodified opinion on the current year’s:
- Balance sheet only
A disclaimer of opinion is issued when:
- There is a significant scope limitation
- When the auditor is not independent
- When the FS are not audited
A qualified opinion requires modifications to both:
- The Opinion section and the Basis for Opinion section
A change in an accounting estimate (such as achange in the useful life of a depreciable asset) is accounted for prospectively and does not affect the comparability of FS between periods. Therefore:
- No modification to the report is required
A change in accounting principle results in:
- The addition of an emphasis-of-matter paragraph
An auditor should restrict the use of the auditor’s communication related to the audit of a nonissuer’s FS by including an alert when the written communication:
- Is based on a measurement or disclosure criteria that the auditor determined to be suitable only for a limited number of users who have adequate understanding of the criteria
If a contingent liability is probable, but not estimable,and it is disclosed in the footnotes:
- The auditor should issue an unmodified opinion
When a group auditor decides to make reference to a component auditor, the division of responsibility is expressed in the:
- Opinion paragraph
When a predecessor auditor’s report is not presented, the successor auditor should indicate the following items:
- That the stmts were audited by a predecessor.
- Type of opinion expressed by the predecessor (if modified opinion, why?)
- The nature of any EoM, Other Matter or Explanatory paragraph in the predecessor’s report
- The date of the predecessor report
When a CPA firm decides to take responsibility for another firm’s audit work, the CPA firm should:
- Review the other firm’s workpapers and perform a subset of audit tests
- Not reference the other firm’s work
When audited financial statements are presented in a client’s document containing other information, the auditor should:
- Read the other information to determine that it is consistent with the audited financial statements
With regard to supplementary information that is required by GAAP, there is no requirement to:
- Restrict the use of the report.
- Instead an auditor would:
- Include a statement within a separate section with the heading “Required Supplementary Info” and not express opinion
- State the auditor has applied the required procedures within that separate section
- Offer opinion on whether the supplementary info is fairly stated in all material respects to the FS as a whole
Types of Special Purpose Frameworks (including OCBOA (Other Comprehensive Basis Of Accounting))
- Cash Basis
- Tax Basis
- Regulatory Basis
- Contractual Basis
- Other Basis
Auditor’s report on FS prepared on the cash receipts and disbursements basis of accounting should include:
- An opinion as to whether the FS are presented fairly in conformity with the basis of accounting used
- A reference to the note to the FS that describes the basis of accounting
- A statement that the audited was conducted in accordance with GAAS
An auditor’s special report on FS prepared in OCBOA should include an EoM paragraph that:
- Refers to the notes of the FS describing the basis of accounting
The reporting accountants written report on the application of an applicable financial reporting framework should include
- Identification of the specific entity involved
- a brief description of the nature of the engagement;
- a statement that the engagement was performed in accordance with AICPA standards;
- a description of the specific transaction(s);
- a statement of the relevant facts; circumstances, assumptions and source of the information;
- a statement describing the appropriate application of the requirements of the applicable financial reporting framework to the specific transaction or type of report;
- a statement that the preparers of the financial statements are responsible for proper accounting treatment;
- a statement that any difference in facts, circumstances or assumptions presented may change the report;
- a separate paragraph restricting its use to specified parties;
- a statement indicating that the reporting accountant is not independent (if appropriate)
