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AUD > A5 - Integrated Audits, Attestation, Engagements, Compliance, and Government Audits > Flashcards

A5 - Integrated Audits, Attestation, Engagements, Compliance, and Government Audits Flashcards

1
Q

What is the top-down approach?

A

Understand the risk of internal control at the FS level first. It is used in selecting controls to test in an integrated audit.

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2
Q

What is an integrated audit?

A

An audit that includes FS and internal controls.

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3
Q

What are the entity-level types of control?

A
  1. Control environment.
  2. Risk assessment process.
  3. Policies over risk management practices.
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4
Q

What factors are considered during the planning state of an integrated audit?

A
  1. Preliminary judgements about the effectiveness of the internal controls.
  2. Extent of recent changes in the entity and its operations.
  3. Type of available evidential matter pertaining to the effectiveness of the internal controls.
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5
Q

What kind of opinion does the auditor express when an auditor identifies material weaknesses in an integrated audit?

A

An adverse opinion.

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6
Q

What should you do if the client refuses to give you a rep letter?

A

Disclaimer of opinion or withdraw from the engagement.

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7
Q

When would an engagement be voluntary?

A

When a PTC believes it has gotten rid of a material weakness noted in its assessment of internal control, and hires another company to attest to the improvements.

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8
Q

What is SSAE?

A

Statements on Standards for Attestation Engagements.

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9
Q

What is an attest engagement?

A

An engagement where the CPA is to issue an examination, review, or an agree-upon procedures report on subject matter, or on an assertion about the subject matter, that is the responsibility of a party other than the practitioner.

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10
Q

What are the attestation services allowed by SSAE

A

Attestation on:

  1. Forecast.
  2. Agreed-upon procedures.
  3. Reporting on controls.
  4. MD&A.
  5. ProForma FS.
  6. Compliance.
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11
Q

When is negative assurance expressed?

A

When an accountant is requested to report on the results of performing a review of management’s assertion.

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12
Q

In an attest engagement, when should the report be not be restricted to specific parties?

A

When reporting on an assertion about the subject matter instead of reporting directly on the subject matter.

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13
Q

What do attestation engagement exclude?

A
  1. Consulting services.
  2. Advocacy services.
  3. Return prep.
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14
Q

What conditions need to exist so a CPA can perform agreed-upon procedures on an attestation engagement?

A

I AM SURE

  1. Independence.
  2. Agreement of the parties.
  3. Measurability and consistency.
  4. Sufficiency of the procedures.
  5. Use of the report: Gral or certain ppl.
  6. Responsibility of the subj matter.
  7. Engagements to perform AUP on prospective FS.
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15
Q

What are the required elements on an AUP report?

A
  1. Stmt = subj matter is responsibility of the responsible party.
  2. Stmt = Engaging party acknowledges that procedures performed were appropriate to meet the goals of the engagement.
  3. Stmt = Report may not be used for purposes other than the engaging purpose. Users are responsible for determining if the procedures are appropriate for their intended use.
  4. Stmt = Engagement party acknowledges AUP were appropriate for the engagement goals.
  5. Stmt = Engagement complies with AICPA attestation stds.
  6. Reports procedures and its findings. Not an opinion! Also, materiality thresholds established for reporting exemptions.
  7. Stmt = CPA was not hired to review or give an opinion.
  8. Stmt = CPA is independent.
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16
Q

Who are prospective FS considered financial projections examinations restricted to?

A
  1. Responsible party.

2. 3rd parties that the responsible party is negotiating with. (Bank to get a loan).

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17
Q

What does the CPA need to state on a forecast report?

A
  1. Results may not be achieved.
  2. Limitations on the report = There are differences between actuals and forecast.
  3. An accountant does not give any assurance on projected FS.
  4. Mgmt is responsible for prospective financial info.
  5. CPA is not responsible to update the report for events after the report date.
18
Q

What does an examination of financial forecast involve?

A
  1. Evaluating the preparation & presentation of prospective FS.
  2. Evaluating the support of the underlying assumptions.
  3. Issuing an examination report.
19
Q

What’s the main difference between prospective FS considered financial projections and prospective FS considered financial forecasts?

A

Prospective FS considered financial projections are restricted to the responsible party and third parties in negotiation with, while prospective FS considered financial forecasts are for general use.

20
Q

What are partial presentations?

A

Prospective financial info that omits:

  1. Sales/Revenue.
  2. Gross profit/COGS.
  3. Discretes.
  4. Tax provision.
  5. Disc Ops.
  6. Op income.
  7. Net income.
  8. EPS.
  9. Changes in financial position.
21
Q

What are the engagements that provide limited assurance?

A
  1. Review of proforma financial info = Limited assurance about the effect of hypothetical events .
22
Q

What are the engagements that provide no assurance?

A
  1. Compilation engagement.

2. AUP engagement.

23
Q

What are te engagements that provide reasonable assurance?

A
  1. Examination engagement.

2. Audit Engagement.

24
Q

What’s the main difference between SSAE and SSARS?

A

SSARS = preparation, compilation, and review (of historical financial statements).

SSAE = All others (examination, agreed-upon, review of PRO FORMA FS, etc.) you use SSAE.

25
Q

What is a SOC 1 report?

A

SOC 1 - For service organizations: Internal Control Over Financial Reporting

  • A report that is used by the client and its auditor to evaluate the impact that certain relevant controls at the service provider have on the FS of the client.
  • It is restricted to mgmg of svc org, user entity, and user auditor.
26
Q

What is a SOC 2 report?

A

SOC 2 - For service organizations: Trust Service Criteria

- A report intended to give assurance to users regarding the controls in place relevant to security and privacy.

27
Q

What is a Type 1 report?

A
  • A report that helps the auditor obtain an understanding of controls.
  • This report is provided when tests of controls were not performed, so it can’t be used to reduce control risk assessment.
28
Q

What is a Type 2 report?

A
  • A report that helps the auditor obtain assurance about the design, implementation, and effectiveness of internal controls.
  • It can be used to reduce control risk assessment.
29
Q

What needs to be documented in an examination of an entity’s compliance with specified requireements?

A
  1. Assessed risk of material noncompliance.
  2. Responses to risk assessment.
  3. Basis or rationale for materiality levels.
  4. Compliance with supplemental requirements in an examination.
30
Q

What’s the relation between risk of material noncompliance and detection risk?

A

Inverse.
The less detection risk, the more risk of material noncompliance.

Same as RMM and Detection Risk!

31
Q

What is attestation risk composed of?

A

Control, inherent, detection risk.

32
Q

When will the auditor need to test the effectiveness of internal control on a compliance audit?

A

When:

  1. The risk assessment includes an explanation of the operating effectiveness of controls over compliance.
  2. Substantive procedures do not provide enough evidence to support a conclusion.
  3. Test of controls are required by the applicable governmental audit requirements.
33
Q

What are the three types of engagements under GAGAS?

A
  1. Financial audits.
  2. Attest engagements.
  3. Performance audits.
34
Q

What’s the main difference between GAGAS and GAAS?

A

Under GAGAS you must report the scope of testing of compliance an internal control.

35
Q

What are the objectives of a Single Audit?

A
  1. Audit of the entity’s FS and reporting on a separate schedule of expenditures of fed awards in relation to those FS.
  2. Compliance audit of fed awards expended during the year as a basis for issuing additional reports on compliance related to major programs and on internal controls over compliance.
36
Q

How is materiality determined in a single audit?

A

Separately; per program. Not FS as a whole.

37
Q

What is the risk-based approach, in a single audit, designed to?

A

Focus the audit on high risk programs.

38
Q

What’s the difference between type A and type B programs?

A

Type A = Larger programs.

Type B = Smaller programs.

39
Q

What approach is used to determine major programs?

A

Risk-based approach.

40
Q

What are the considerations on a risk-based approach?

A
  1. Current and prior audit experience.
  2. Oversight of federal agencies.
  3. Inherent risk.
41
Q

What are the 4-steps for a risk-based approach?

A
  1. Identify type A and type B programs.
  2. Identify type A programs that are low risk.
  3. Identify type B programs that are high risk.
  4. Major programs = A programs, not low risk + B programs that are high risk.
42
Q

What is a cognizant agency?

A

The lead agency that provides the most funding to the recipient and the one that receives and distributes the reports.

AUD (8 decks)

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