A2 Flashcards
What are the steps of the audit
Engagements acceptance
Assess risk and plan response
Perform procedures and obtain evidence
Form conclusion
Reporting
What are the elements of audit and assurance engagement quality for CPA firms(Interrelated quality control)
HELPME
Human resources
Engagement/Client acceptance and continuance
Leadership responsibilities
Performance of the engement
Monitoring
Ethical requirements
What is a system of quality control
A system of quality control establishes policies and procedures that provide reasonable assurance of conforming with professional standards.
The primary purpose of establishing quality control policies and procedures for deciding whether to accept new clients is to:
Minimize the likelihood of association with clients whose management lacks integrity.
How long do auditors keep work papers for issuers and non issuers
Issuers 7 years
Non-issuers 5 years
How long do auditors have to finish assembling their files so basically wrapping up their engagements
Non issuers 60 day
Issuers 14 day
Which of the following is a primary purpose of audit documentation?
To support that the audit was performed in accordance with GAAS.
Management Vs. Those charged with governance
Management are those that are responsible for the day-to-day operation of the firm
Those charged with governance are those who bear the responsibility of overseeing the obligations and strategic direction of the entity including the FS reporting process
What is the audit committee
A committee is generally made up of 3 to 5 outside directors or directors that are not employees and have to financial interest in the company
Who provides the engagement letter
Auditor to audit committee
An inadequate quality control system
This does not imply a lack of compliance with GAAS
What does the audit plan contain
Nature extent and timing of the audit NET
What doe the audit strategy cointain
Outline reporting objectives.
Provide the scope of the audit.
Provide a preliminary assessment of materiality and tolerable misstatement
What does an audit strategy do
Sets up the basis for a more detailed audit plan.
What accounts are more likely to be tested at year-end
Balance sheet accounts
What accounts are to be tested before year-end
Income statement accounts
What should an auditor consider when assessing the competence of a client’s internal auditor
Internal auditor’s compliance with professional internal auditing standards.
What should an auditor consider when assessing the objectivity of a client’s internal auditor
Determine the organizational level to which the internal auditors report.
What would an auditor most likely use in determining the auditor’s preliminary judgment about materiality
The entity’s financial statements of the prior year.
Should use the amount of preciously identified misstatements to develop tolerable misstatements threshold
Formula for audit risk
AR=RMM(IRCR)DR
Risk of material misstatement
Is assessed by the auditor and is independent from the audit.
The existence of audit risk is recognized by the statement
Obtains reasonable assurance about whether the financial statements are free of material misstatement.
For significant transaction calssess
Substantive procedures will always be necessary
any indication of fraud including Immaterial fraud is reported to
The appropriate level of management
what does embezzling mean
missapropriation/ theft of things
Which of the following is true about appointing the external auditor after year-end?
It is permitted as long as the auditor has considered and discussed with the client any limitations that may be caused by the late appointment.
Which of the following is not true about the five components of internal control?
The auditor is required to classify relevant controls into one of the five component categories.
What can internal auditor help an auditor do
Perform substantive test
Perform test of controls
Assist the external auditor in obtaining an understanding of internal control
Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor’s:
Understanding as to the reasons for the change of auditors
The review of the predecessor’s work is done once the audit has been accepted
When an auditor has expressed an adverse opinion or disclaimer of opinion on the financial statements, the auditor should issue a report on compliance only when
instances of noncompliance are identified.
