ACG4651 Midterm Review Flashcards
Who establishes GAAS
Auditing Standards Board (ASB) of the AICPA
Why do we need audit
Auditing of financial info reduces info risk to the users of it
Opinion of internal control - COSO Integrated Framework
System of internal control designed to provide reasonable assurance that the company achieves its goals:
1. Reliability of reporting
2. Efficiency and effectiveness of operations
3. Compliance with laws & regulations
Users of financial info
Creditors, stockholders, banks, tax authorities, investors, managers, suppliers, employees
Qualified opinion
Usable for scope limit or departure from GAAP but only when auditor concludes the FS are fairly stated
Adverse opinion
Used when FS are materially misstated or misleading to the point that they do not present fairly the financial position of entity; rarely used
Disclaimer of opinion
Used when auditor cannot form an opinion of FS due to lack of scope limit, lack of knowledge, or lack of independence
Audit committee effectiveness, importance, and possible downfall
Direct report key info from internal auditors to the committee
It deters fraud from senior management
Reports about lack of ethics; fraud
Different types of personnel in audit team and responsiblities
Staff assistant - performs most of detailed audit work
Senior/in-charge auditor - coordinates and responsible for audit procedures and reviews
Manager/senior manager - helps the lower auditors plan and manage the audit, review their work, and manages relations with clients. May work on more than 1 engagement at the same time
Partner - reviews overall audit work and involved in significant audit decisions; an owner of the firm and has ultimate responsibility over the audit and serving the client
Eight types of audit evidence
Physical examination - inspection or count of tangible asset by the auditor
Confirmation - receipt of direct written response from a third party verifying the accuracy of info requested by the auditor
Inspection -
