A1 - Audit Reports Flashcards
If the auditor undertakes an engagement to audit a nonissuer’s complete financial statements and also a specific element of the financial statements, then the auditor should :
Issue separate audit reports for the complete financial statements and the specific elements of the financial statements
How should a change in accounting principal be referenced in the audit report if it is not material?
Not material, does not need to be referenced. If material, would be referenced in emphasis of matter paragraph
If a non issuer downgrades from an audit to a review, how should it be noted in the report?
Statement that a review is substantially less in scope than an audit. CPA must conclude there is reasonable justification for the change.
No reference to the original engagement, but can refrerence any work already performed
What reports are restricted?
- Aggreed upon procedures
- Comfort letters
- Financial PROJECTIONS (not forecasts)
- Compliance reports when connected to FS audit
What are management’s responsibilities ?
- Preparation and fair presentation of financials within the appropriate reporting framework
- Design, Implementation, and Maintenance of internal controls
- F/S free of material misstatement whether due to error or fraud
- Provide auditor with unlimited access to information and employees required to complete audit
What is GAAS?
- Generally accepted auditing standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies’ financial statements, ensuring the accuracy, consistency, and verifiability of auditors’ actions and reports. GAAS measures the quality of the auditor’s performance of audit procedures.
- Must be followed er the AICPAs code of Professional Conduct
- Issued by the AICPA Auditing Standards Board
What is the objective for reporting on supplementary information?
- Evaluate the presentation
- Report if fairly stated (consistent with info used for financials)
- Obtain management rep letter
- Reported opinion in Other Matters Paragraph, OR separate report
- If reported separately, referece F/S, and consider restricting use
What is included in Emphasis of Matter paragraph?
(TIMAA EMO)
AFTER the opinion paragraph, before Other Matters
Call to attention something that is already discussed in F/S disclosures
REQUIRED:
- G- Going concern
- A - Change in Accounting principal - material effect
- A- Subsequently discovered facts that lead to change in Audit opinion (could be EM or O)
- SP - Special Purpose framework
Professional Judgement
- uncertainty regarding litigation
- major catasrophe
- significant related party transactions
- important subsequent events
What is included in the Other Matters paragraph?
AFTER the Emphasis of Matter paragraph
Matters OTHER that what is presented in the F/S
Required:
- Restricts use of audit report
- Subsequently discovered facts that lead to change in Audit opinion (could be EM or O)
- Prior period issued by predecessor auditor, and not reissued
- presented in comparative form, and prior period not audited, reviewed or compiled
- material inconsistency in other information
- report on supplementary information presented with F/S
- Refer to
What level of assurance is provided about noncompliance with laws and regulations?
No assurance
Due to the inherent limiations of an audit , and audit performed in accordance with US GAAS provides no assurance that all noncompliance with laws and regulations will be detected or that any other contingent liabilities that resulted will be disclosed.
Within the unmodified audit report for a non issuer, where do references for GAAP and GAAS go?
GAAS - Auditor’s responsibility
GAAP - Management’s responsibility
What kind of phrases indicate negative assurance?
“nothing came to our attention”
“we are not aware of any material modifications”
Services with negative assurance :
- Review
- Compliance Report
Regarding a non-issuer’s compliance with laws and regulations, what is an auditor performing an audit of the entity’s financial statements responsibility?
Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework
