AUD 1 Outline/MCQs Flashcards
What standard is issued by AICPA?
SAS - conducted for audits of NON-issuers or(ABS)
What standard is used for issuers?
PCAOB
What is the auditing guidance hierarchy?
1) SAS - PCAOB, 2) Interpretive publications 3) Other publications but they have no authoritative status. NOT AICPA specific guidance
What is meant by the term GAAS?
Measures the quality of the auditor’s performance
What is meant by the term GAAP?
Encompasses the conventions, rules and procedures governed by the AICPA
Which of the following terms identifies a requirement for audit evidence?
Sufficient & Appropriate
What is the first step for forming an opinion on “Comparative” F/S
Consider whether the comparative information for the prior period meets the requirements for the applicable financial reporting framework
What does the opinion section indicate?
1) Nature of engagement 2) F/S being covered 3) Name of the entity 4) Dates covered
What are basic elements in the auditors report
In performing an audit in accordance with GAAS, elements are 1) evaluate the appropriateness of accounting policies 2) evaluate the estimates made by mgmt.
In which sections are GAAP/ GAAS mentioned
GAAP (Opinion and mgmt responsibility sections) GAAS (Opinion and basis of opinion)
What information is reported on a CAM
CAMs must include 1) description of the principal consideration 2) how it was addressed 3) Relevant accounts within that CAM - Auditors do not disclaim responsibility of cams
How does the “opinion” section change when auditor concludes it is needs to be modified.
The opinion section should include a direct reference to a seperate section disclosing the basis of the opinion.
What is the impact of mgmt refusing to acknowledge its responsibility for the fair presentation of the F/S
Results in a scope limitation - sufficient enough to prevent an unmodified opinion
What does the auditor do if there is an identified change in comparability?
Refer to the EOM - should identify the nature of the change and refer to the F/S note that discusses the change in detail
When are EOMs required?
1) F/S prepared using special purpose framework like cash basis. 2) Justified change in accounting principle that effect future periods (has to be material)
The EOM would have its own title on it.
Identify the lawsuit hierarchy
Reasonably possible - only requires disclosure
Probable - requires an adjustment
When would an other matter paragraph be added?
1) When current period F/S are presented comparatively with the prior period reviewed F/S. Even if there is a change of auditor add the other matters
When would an explanatory paragraph be issued?
The client is a “Issuer” - going concern that is correctly reported would result in the explanatory paragraph or change in auditor
When the group engagement partner divides responsibility, what section of the audit report is changed?
The opinion section - it would state ,”We did not audit the F/S of XYZ”
When is testing for subsequent events done?
Date of the F/S through the report date
What is the auditor’s responsibility regarding subsequent events?
Determine that all subsequent events that require adjustment of or disclosure have been identified
What procedures would the auditor do to determine subsequent events?
Inquire about transactions posted on the basis of preliminary data
What is the auditors responsibility to supplementary info that is outside the F/S but “required” by GASB?
Apply limited procedures and add a seperate section to the auditors report
What is the auditors responsibility to supplementary info is not required?
Read and consider whether it contains a material misstatement of fact
What is the auditors responsibility to supplementary info is not required and it is “Incorrect”
Request the client to revise the supp info - if it is not revised then communicate w TCWG
What is determined in when engaged to report on supplementary info
That the supp info is fairly stated, in all material respects, in relation to the F/S - We are not providing negative assurance
What are the special purpose frameworks and what are they issued with?
1) Cash Basis 2) Tax Basis 3) Contractual Basis 4) Regulatory Basis - issued with compliance reporting requirements for regulatory agency’s / EOMs
How does special purpose framework modify the report?
EOM is included that mentions the special purpose framework and it refers to the notes on the F/S that describes it more detail
Is an EOM required if litigation is disclosed correctly?
NO EOM is not required
How is the report modified if sup info is required but not provided
Keep the report as unqualified however add an explanatory or EOM paragraph
Where can subsequently discovered facts appear within the auditors report?
In both EOM and opinion
What happens is required supplementary info is missing from the F/S
Opinion would be UNqualified with explanatory or EOM/Other matters
