Area 4 Forming Conclusions and Reporting Flashcards
What is the subsequent period for a company being audited?
The end date of the financial statements (end of year) and the audit report date.
What is the earliest date and audit report can be dated?
When the auditor has sufficient information to disclaim an opinion.
What is the audit report format?
Title Addressee Opinion Basis for Opinion X emphasis/other/key (if applicable) Management responsibilities Auditor responsibilities Legal/Regulatory requirements Signature State Date
What is the difference between SSAEs and SSARS?
Statements on Standards for Attestation Engagements, SSAE, apply to examination, review, or agreed-upon procedures on subject matter or assertions on subject matter that is the responsibility of another party.
Statements on Standards for Accounting and Review Services, SSARS, apply to compilations and reviews of financial statements.
SSAEs do not apply to litigation.
What are the procedures involved in a review?
Analytical procedures
Inquiries
Reading Financial Statements and considering whether any information has come to the accountant’s attention to indicate that such Financial Statements do not conform to the applicable financial reporting framework
Obtaining Management Representation
Audit report format.
TAOBXMALSD
Title
Addressee
Opinion
Basis for Opinion
X - Emphasis of Matter - Other Matter - KAM (non-ssuer) - CAM (Issuer) - Going concern
Management’s responsibilities
Auditors Responsibilities
Legal & Regulatory Requirements
Signature (Audit Tenure for public companies is included)
State & City
Date
Which engagements is independence not required?
Preparation engagement
Compilation Report
Consulting Services
Which Sampling techniques are used for Controls and which are used for substantive tests?
Control Tests = Attribute Sampling
Substantive Tests = Variables Sampling and Probability Proportionate to Size Sampling
What are the Characteristics of Attribute Sampling?
Used for controls
Errors are stated in terms of %
On Exam if they refer to errors as a % they are referring to controls
Tolerable Rate - Error rate in population that is acceptable
Audit Sampling Equation
SER + ASR < TER
Sample error rate + Allowance for Sampling Risk < Tolerable Error Rate
Types of Sampling
Systematic Sampling
- Every certain # of population is selected
- Population needs to be randomly ordered
- Does not require pre-numbering
Sequential Sampling - “Stop or Go” Sampling
-Each audit step determines the next step
Discovery Sampling
-Audit testing an area that is crucial to have zero population errors
Block Sampling
-Easiest to implement but WORST method of sampling
Data Analytics
Covered Member Requirements
On engagement team
- Significant influence on audit
- Managing Partner in CPA Firm
- Share an office with a partner involved in the engagement
- Firm personnel who does more than 10 hours of non-attest work (taxes)
Requirements of covered members to not impair independence.
No Direct Financial Interest
No material indirect financial interest
Family cannot own more than 5% stock
Family cannot be in Key Positions
Contingent fees - not allowed if member performs a service where independence is required
- Commissions or referrals are not allowed for covered members
- If no covered member services are conducted than commissions
and referrals are ok.
Threats to independence
Self-Review - Audit own work
Advocate of the client
Adverse interest - Lawsuit against the client
Familiarity with Client - Could impair appearance of independence
Management Participation
Self-Interest
Undue Influence
How are material misstatements treated in a review?
Include in the notes to the financial statements or on each page of the financial statements.
A disclaimer should only be present if it is not possible to include “No Assurance Provided” on each page of the financials
