AUD 1 Flashcards
What word defines audit evidence?
Appropriate
Audits should be prepared with..
Professional skepticism
Reasonable assurance is defined as
A high but not absolute level of assurance to allow an auditor to detect a material misstatement.
To obtain reasonable assurance…
Auditors should plan the work properly and supervise any assistants
Audit requirements are in accordance with…
Both GAAS and government auditing standards GAGAS
GAAS provides guidance and measures the quality of the auditor’s performance. GAAP does what?
GAAP provides applicable financial reporting framework
Qualified or adverse opinion
If FS fail to disclose info that is generally required by GAAP
Adverse opinion
When mateial and persuasive
When an auditor lacks independence…
a disclaimer of opinion should be issued
Disclaimer of opinion is for
significant scope limitation
FS are not audited
auditor is not independent
Emphasis of matter paragraph is required to
describe a justified change in accounting principle that is material to the financial statements
CPA doesn’t have to be independent to perform what?
Compilation-since these do not provide assurance
They need to state they are not independent.
Decrease in tolerable misstatement means
Increase in sample size
When is a disclaimer of opinion offered?
Significant scope limitation
Auditor is not independent
Financial statements are not audited
What is the most authoritative guidance?
General guidance provided by a Statement on Auditing Standards
Sound accounting policies is an implicit part of…
management’s responsibilities, not the auditor’s
GAAS measures what?
The quality of the auditor’s performance and guides the auditor in a properly planned and executed audit
Management not letting auditors use legal counsel results in what type of opinion?
Result in disclaimer of opinion or removal from the audit
If material and persuasive, then issue what type of opinion?
Adverse
With required supplementary information…
apply limited procedures and include “required supplementary information” as a section to the audit report
If an auditor can’t get the F/S of a consolidated investee -
they cannot issue an unmodified opinion
Omissions by SEC will be included where and what type of report is issued?
Other matter paragraph - unmodified report
Lack of sufficient appropriate audit evidence and restrictions of the scope of the audit both can result in what type of opinions?
Qualified opinion
Disclaimer of opinion means no opinion - one reason could be what?
Not enough audit evidence
Audit of a nonissuer should conduct the audit according to what standards
ASB only is required but they may choose to follow PCAOB as well
Inadequate disclosure of material information is a departure from GAAP and results in what type of opinion?
Adverse or qualified - depending on materiality
Adverse is material and persuasive
Auditor decisions need to be made by the auditor - they cannot go to the audit committee of the client for advice on procedures. Instead, an auditor should..
exhibit professional judgement for the procedures
An auditor should change the PY previous issued opinion when issuing comparative financial statements when…
the PY financial statements were restated
If an auditor’s contract is up, and they discover a fact that could have changed the FS but they have already issued the report, the auditor is required to do what?
Required to determine whether the information is reliable
and whether the facts existed at the date of the report
Emphasis of matter paragraph is required …
to describe a justified change in accounting principle that is material
Adverse opinion is when
FS are represented not in accordance with GAAP
When lacking independence, what type of opinion can be issued?
Disclaimer of opinion
The opinion paragraph in an auditor’s report should include
identifying the applicable financial reporting framework and its origin
Independence is not required for what type of report?
Compilation.
When is the rep letter dated?
At the end of an audit report by management.
The audit report is signed before the rep letter is signed.
Quick ratio
Current assets excluding inventory and prepaid expenses / current liabilities
