A5 Integrated Audit, Attestation Engagements, Compliance & Government Audits Flashcards
In an integrated audit of a non-issuer, who provides written assessment of the effectiveness of internal control and where does it get reported and on what day is it reported?
Management provides written assessment and it is reported along with the audit report. The date of the report is the same date as the financial statements not the assessment date.
What is a subrecipient as defined in the Title 2 of the Code of Federal Regulations (single audit requirements)?
Subrecipient is a nonfederal entity tat expends federal awards received from another entity to carry out a federal program.
Which prospective financial statements are appropriate for general use? Financial Forecast or Financial Projection?
Ans: Financial Forecast- general use
Reason: Financial Projection- for limited use
According to GAGAS, auditors should report ____________ deficiencies in __________ control.
Significant deficiencies in internal control
GAGAS; When should auditors report non compliance?
When it’s identified or suspected noncompliance with laws, regulations, contracts, or grant agreements that have a MATERIAL EFFECT on the financial statements.
Are auditors required to communicate significant changes in the entity’s internal control policies? Are they to express an opinion of the effectiveness of internal control over compliance?
No, No.
What standards apply to client’s compliance with debt covenants such as bank loans if an auditor is going to issue a report?
Compliance Attestation Standards.
SSAE
Statements on Standards for Attestation Engagements: the practitioner engaged to issue a report (issue an opinion) on a subject matter or assertion about the subject. Ex. sq footage of the warehouse, excludes services performed under SSARS. Ex. examination or review of MD&A since it’s review report on another’s assertion.
Statements on Standards for consulting services
applies to consulting services where practitioner develops the findings, conclusions and recommendations presented.
SSARS
Statements on Standards for Accounting and Review Services. Referred to when performing a preparation, compilation or review of historical financial statements for nonissuers. Ex. Review of financial statements of an non public company.
Attest engagements generally result in an _______ report, a ______ report, or an ________report on subject matter that is the responsibility of a party other than practitioner.
examination report, a review report, or an agreed upon procedure report
Expanded responsibilities for an audit performed with 2CFR 200 single audit include expanded procedures to test and report compliance with laws, rules, regulations and provision of contracts that have ________effect on major federal award programs.
a DIRECT and MATERIAL effect
What is the difference between testing and designing effectiveness of controls in an integrated audit?
Testing effectiveness requires reperformance and recalculation. Designing involves inquiry, observation, and inspection.
Under GAS standards, an auditor should report on the scope of their testing of compliance with __________ & _______ and of ___________.
Laws & regulations and of Internal controls.
Which is not an appropriate method to test the operating effectiveness of controls during an integrated audit? Recalculation? Reperformance? Confirmation? Inspection?
Confirmation because it’s done during testing of substantive procedures. Operating effectiveness of controls can be tested through 1. inspection 2. reperformance 3. recalculation
Risk of material noncompliance is inversely related to:
Detection risk of noncompliance. If the risk of material noncompliance increases, the detection risk of noncompliance decreases to reach desired level of overall audit risk of noncompliance. Same concept as RMM and detection risk.
For an attest engagement, use of auditor’s report is restricted to specific parties when performing an assertion-based examination (financial projection), the engaging party is not the responsible party, and a _________ ___________ has not been provided.
written assertion
Presumptively mandatory requirement is:
that the requirement must be followed in all cases where the requirement is relevant, except in rare circumstances when auditors agree on the departure and the departure is explained and is justified. GAGAS indicates that it “SHOULD” which indicates presumptively mandatory items.
Define: Limited Assurance
(AKA Negative assurance) is already provided or stated in review engagements.
Positive assurance is provided to examination engagements in the form of
an opinion.
In an examination of prospective financial statements, if the assumptions do not provide a reasonable basis for the prospective financial statements, then the practitioner should express a ___________ opinion.
Adverse.
For compliance in connection with a financial statement audit, the auditor must have audited and issued an unmodified or qualified opinion. What kind of assurance can be issued?
A negative assurance due to the unmodified or qualified opinion.
CPA needs to be independent is a requirement for which standards?
Assertion Based Examination Engagements (SSAE) and SAS
Must include in Management letter: Management’s interpretation of the compliance requirements are subject to different interpretations. True or False?
True.
