Area 1 Ethics, Professional Responsibilities and General Principles Flashcards
Who is responsible for issuing international standards on auditing?
International Auditing and Assurance Standards Board
Who is responsible for issuing standards for auditing federally assisted programs?
U.S. Government Accountability Office GAO
The GAO Issues GAS Governmental Auditing Standards
What are the required elements of the terms of engagement?
The required elements of the terms of the engagement are:
The objective and scope of the audit.
The responsibilities of the auditor.
The responsibilities of management
A statement regarding the inherent limitations of an audit.
Identification of the applicable financial reporting framework for the preparation of the financial statements.
Reference to the expected form and content of any reports to be issued by the auditor and a statement that circumstances may arise in which a report may differ from its expected form and content.
What are managements responsibilities in an audit engagement?
Preparation & fair presentation of Financial Statements
Design, implementation, and maintenance of Internal Control over financial reporting
Providing the auditor with access to all relevant financial records, any related information requested and to persons within the entity as the auditor determines necessary
Providing written representations to the auditor
How long does the auditor have after the report release date to provide a final set of audit documentation? PCAOB
PCAOB -45 Days
Non-Public 60 days for everything else
How long does the auditor have after the report release date to provide the final audit file of a non-issuer?
60 Days
What best describes the preconditions for an audit?
The preconditions for an audit are the use by management of an ACCEPTABLE financial reporting framework in the preparation and fair presentation of the financial statements and the agreement of management and, when appropriate, those charged with governance, to the PREMISE on which an audit is conducted.
Elements of a System of Quality control include:
Tone at the top (leadership responsibilities for quality within the firm)
Ethical Requirements (independence)
Acceptance & continuance of client relationships & specific engagements
Human Resources
Monitoring
Engagement performance
When is it acceptable for an Auditor to provide a service to a client for a commission or contingent fee?
Contingent fees are permitted where they are based on amounts fixed by courts or other public authorities (e.g., representing a client in an examination of a tax return by IRS agent).
Everything else is prohibited. Including tax services for a contingent fee.
Tax Return preparation is acceptable as long as there is no fee attached.
Providing a comfort letter in regard to the client’s meeting the debt covenant requirements and Issuing a report on management’s assessment of the client’s internal controls are acceptable non-audit services as long as there is no fee attached.
What is included in an audit agreement?
OLMA
Objectives of Audit
Limitations of Audit
Management’s responsibilities
Auditor’s Responsibilities
Can an auditor provide and opinion on a component of rhe financial statements if it has disclaimed an opinion or has an adverse opinion on the financial statements as a whole?
No. “Piecmeal” opinions are not acceptable as they overshadow the original disclaim or adverse opinion.
However, an auditor can express an opinion on a separate element if it is in a separate report.
