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AUDIT EXAM > A1- Audit Reports > Flashcards

A1- Audit Reports Flashcards

1
Q

Statements on auditing standards (SAS)
1- standard setting body
2- public or private

A

1- AICPA auditing standards board
2- private (non-issuers)

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2
Q

Public company accounting oversight board auditing standards (PCAOB AS)
1- standard setting body
2- public or private

A

1- PCAOB
2- public (issuers)

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3
Q

Three levels of auditing guidance in order starting with most authoritative

A

1- SAS (private) PCAOB (public)
2- interpretive publications
3- other auditing publications

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4
Q

5 steps of audit process

A

1- engagement acceptance
2- assess risk and plan response
3- perform procedures and obtain evidence
4- form conclusions
5- reporting

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5
Q

Purpose of an audit

A

Provide financial statement users with an opinion on whether the financial statements are reported fairly in all material respects in accordance with the applicable financial reporting framework

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6
Q

3 main management responsibilities

A

1- preparation and fair presentation of financial statements
2- internal control
3- provide auditors with access to information

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7
Q

3 components of fair preparation of financial statements

A

1- identify proper financial reporting framework
2- prepare FS in accordance with framework
3- include description of framework in FS

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8
Q

3 components of fraud triangle

A

1- pressure
2- opportunity
3- rationalization

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9
Q

The auditor must remain independent unless…
1-x
2-x

A
  1. GAAS provides otherwise
  2. The auditor is required by law or regulation to accept engagement
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10
Q

4 steps to obtain reasonable assurance

A

1- plan the work & properly supervise any assistants
2- determine and apply appropriate materiality levels
3- identify & assess risks of material misstatement
4- obtain sufficient appropriate audit evidence

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11
Q

Non issuers can choose between which two types of audits

A

1- a financial statement audit only
2- an integrated audit

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12
Q

Public companies must do which type of audit

A

Integrated audit

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13
Q

2 objectives of financial statement audits

A

1- to obtain reasonable assurance
2- to report on the financial statements

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14
Q

2 objectives of the audit of internal control over financial reporting

A

1- expressing an opinion on effectiveness
2- perform audit to obtain reasonable assurance about whether material weaknesses exist

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15
Q

Departure from GAAP is permissible if

A

Financial statements would be otherwise misleading

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16
Q

The auditor relies on XXX on how to perform audit and YYY to evaluate whether transactions are recorded correctly

A

XXX= GAAS
YYY= GAAP

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17
Q

Term for clean opinion (public and private)

A

Unqualified (public) and unmodified (private)

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18
Q

The auditors report should be modified when
1-?
2-?

A

1- financial statements as a whole are materially misstated
OR
2- auditor is unable to obtain sufficient evidence to determine

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19
Q

Qualified opinion

A

Except for the effects of the matters the qualification relates, the financial statements are fair (GAAP or GAAS)

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20
Q

Adverse opinion

A

Financial statements are not fairly stated (GAAP)

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21
Q

Disclaimer of opinion

A

Auditor does not express an opinion on FS (GAAS)

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22
Q

Pervasive definition

A

VERY material

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23
Q

Contents of clean audit report for private companies (13)

A

1- title
2- addressee
3- auditors opinion
4- basis for opinion
5- going concern (when relevant)
6- KEY audit matters
7- management responsibility of FS
8- auditors responsibility for audit of FS
9- other information (when relevant)
10- other reporting responsibilities
11- signature of auditor
12- auditors address
13- date of auditors report (no earlier than sufficient evidence obtained)

24
Q

Contents of clean audit report for public companies (issuers) (7)

A

1- title
2- addressee
3- opinion section
4- basis for opinion section
5- CRITICAL audit matters
6- signature, tenure, location
7- report date

25
Q

For each CAM identified, the audit report should include

A

IPAD
I- identification of CAM
P- principal considerations leading auditor to determine CAM
A- how was CAM Addressed
D- reference to relevant Disclosure

26
Q

Integrated audit definition

A

Additional opinion is rendered on operating effectiveness of internal control

27
Q

Governing bodies for:

1-Basis for opinion section
2-Opinion on FS section

A

1-PCAOB
2- GAAP

28
Q

What form must be filed with the PCAOB for each audit report issued and when does it need to be filed

A

Form AP (audit participant) … filed by 35th day after audit report is first filed with SEC or 10 days if audit report is included in registration statement

29
Q

If a company issues financial statements that omits statement of cash flows what opinion will auditor usually issue

A

Qualified opinion

30
Q

When auditor is not independent but required by law or regulation to report, what should the auditor do?

A

Disclaim an opinion and specifically state that the auditor is not independent, if they choose to provide reasons they must include all reasons

31
Q

If FS are fraudulent or misleading and management won’t correct them the CPA should consider what

A

Withdrawing from engagement

32
Q

Material misstatement related to uncertainty - which opinion

A

Qualified or adverse

33
Q

Insufficient evidence (scope limitation) - which opinion

A

Qualified or disclaimer

34
Q

What is an emphasis of matter paragraph

A

PRIVATE COMPANIES- When a matter is appropriately disclosed in FS and is of such importance it is fundamental to readers understanding of FS - it does not affect auditors opinions

For public companies it’s an “explanatory paragraph”

35
Q

What is an other matters paragraph

A

PRIVATE COMPANIES- refers to matters other than those presented or disclosed in FS but are relevant to understanding of audit

Public company - explanatory paragraph

36
Q

What is an explanatory paragraph

A

PUBLIC COMPANY- when something disclosed or not disclosed needs to be explained

37
Q

Emphasis of matter, other matter, and explanatory paragraphs represent which opinion

A

Unmodified (unqualified)

38
Q

When PY FS were not audited and CY FS are being audited, what may be required

A

Disclaimer of opinion

39
Q

If updated opinion differs from previous audit opinion, auditors should disclose the reasons in an EOM paragraph, OM paragraph, or EXP paragraph and should disclose what??? (DORCS)

A

D- date of auditors previous report
O- opinion type previously issued
R- reason for prior opinion
C- changes that have occurred
S- statement that the opinion is different

40
Q

Subsequent event definition

A

Occurs after Balance Sheet date but before financial statements are issued or available to be issued

41
Q

Recognized subsequent events

A

Conditions that existed as of the balance sheet date

42
Q

Non-recognized subsequent events

A

Occurred after the Balance Sheet date (footnote)

43
Q

Public companies evaluate subsequent events through

A

Date FS are issued

44
Q

Private companies evaluate subsequent events through date

A

FS are available to be issued

45
Q

If auditor believes FS need to be revised to reflect a subsequent event and management does not make the revision what opinion should auditor express

A

Qualified or adverse

46
Q

5 special purpose frameworks

A

PRIVATE COMPANIES
1- cash basis
2- tax basis
3- regulatory basis
4- contractual basis
5- other basis

47
Q

Cash basis, tax basis, regulatory basis are referred to what

A

OCBOA - other comprehensive basis of accounting

48
Q

If auditor was unable to obtain sufficient evidence then what opinion do they issue

A

Disclaimer of opinion

49
Q

Does the auditor have to include documentation including the SAS section and paragraph numbers?

A

No

50
Q

When expressing an unmodified opinion
1: consistent application of GAAP (explicit or implicit)
2: in accordance with GAAP in the USA (explicit or implicit)

A

1- implicit
2- explicit

51
Q

A change in accounting principle that is inseparable from a change in estimate should be treated as

A

A change in estimate

52
Q

If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, what should the successor auditor do (4 things)

A

1- explanatory paragraph that FS of prior period were audited by predecessor
2- the type of opinion expressed by predecessor and why
3- nature of any emphasis of matter or other matter paragraphs in predecessor report
4- date of predecessors audit report

53
Q

Explain a dual date

A

When a single item is changed in the financial statements after the original date of the auditors report, the auditor would likely return to examine the event then dual date the report

54
Q

What type of report would contain restricted use language

A

A report on compliance

55
Q

When a company omits statement of cash flows, auditor will typically express what opinion

A

Qualified

56
Q

Group audit- when should a group engagement partner reference the component auditor

A

When the group component officer is unable to review their work

AUDIT EXAM (7 decks)

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