A1 M2 Audit Engagements

Question 1

What is management and those charged with governance responsible for in an audit?

Answer 1

1) prep and fair presentation of F/S per applicable financial reporting framework
2) design, implementation, and maintenance of IC
3) providing auditor access to info and persons to complete audit

Question 2

What does prep and fair presentation of F/S require?

Answer 2

1) identifying applicable financial reporting framework
2) prep and fair presentation of F/S per framework
3) adequate description of framework of F/S
4) adoption of sound accounting policies

Question 3

What are the auditor’s responsibilities in an audit?

Answer 3

1) professional skepticism
2) comply with relevant ethical requirements
3) exercise professional judgment
4) obtain sufficient, appropriate audit evidence
5) comply with GAAS
6) express an opinion on F/S

Question 4

What is professional skepticism?

Answer 4

an attitude to have to make professional judgments that give auditor a basis for actions

Question 5

What are some examples of applying professional skepticism?

Answer 5

1) audit evidence that contradicts other audit evidence
2) information that questions reliability of documents and responses to inquiries used as audit evidence
3) conditions indicating fraud
4) audit procedures in addition to those required by GAAS
5) audit evidence that impacts risk of material misstatement

Question 6

Can an auditor draft an entity’s F/S from mgmt accounting system?

Answer 6

Yes, for a compilation engagement

Question 7

Can an auditor adopt more than one standard?

Answer 7

Yes, they can adopt more than just GAAS standard, such as:

PCAOB
ERISA
IFRS
GAGAS etc.

Question 8

How can an auditor obtain reasonable assurance of an audit?

Answer 8

1) plan the work and properly supervise assistants
2) determine and apply appropriate materiality levels
3) identify and assess RMM, whether due to fraud or error
4) obtain sufficient appropriate audit evidence

Question 9

What are the inherent limitations to absolute assurance?

Answer 9

1) nature of financial reporting
2) nature of audit procedures
3) timeliness of financial reporting and balance between cost and benefit

Question 10

What are the objectives of audit of IC over financial reporting?

Answer 10

1) express opinion on effectiveness of company’s IC over financial reporting
2) obtain sufficient appropriate audit evidence about any material weaknesses