AUD I Blake CPA Flashcards
What is the qualified opinion phrase included in the opinion paragraph when auditor expresses a qualified opinion?
“In our opinion, except for [reference to matter giving rise to qualification] described in the Basis for Qualification section of our report….
What are the 6 elements of Quality Control for a CPA firm? “HELP ME”
H - Human Resources (personnel advancement)
E - Engagement/ Client acceptance & Continuance
L - Leadership Responsibilities
P - Performance of the engagement (Reviewing audit documentation & engagement reports)
M - Monitoring
E - Ethical Requirements
What are the factors that a firm should consider when assigning personnel to an engagement?
- Engagement Size and complexity
- Personnel Availability
- Special expertise required
- Timing of the work to be performed
- Continuity and periodic rotation of personnel
- Opportunities for on-the-job training
What are the factors effecting the nature and extent of an audit?
- Risk of material misstatement
- Extent to which judgement was required in performing the work and evaluating the results
- The nature of the specific auditing procedure
- The significance of the evidence obtained
- The nature and extent of any problems identified
- The need to document conclusions that may not be obvious
What is a successor auditor?
What is a predecessor auditor?
Successor auditor: Independent CPA from a different firm who replaces predecessor auditor
Predecessor auditor: Independent CPA from a diff firm who was engaged to perform but did not complete in audit of the F/S or is an independent auditor who has reported on most recent audited F/S
When are representation letter from management received and dated?
Not dated earlier than the date of the auditor’s report
Obtained at the end of the audit
What are the F/S assertions?
Valuation
Allocation & Accuracy
Completeness
Understandability of presentation & Classification
When is analytical procedures required?
During the planning Stage
During the Overall review stage
Which F/S can be tested at an interim period?
I/S not B.S.
B.S. is a snapshot at a point in time
When a decrease of the amount of misstatement occurs during an audit, what happens?
Increase in the amount of audit procedures closer or at the B.S. date and less during interim periods
What are analytical procedures?
What are the two areas during the planning phase need to be answered?
Evaluations of financial information made by a study of plausible relationships among data, include comparisons btw CY & PY financial information
- Enhance understanding of transactions and events that have occurred since last audit
- identify areas that may represent specific risks relevant to the audit
ex: Compared current-year Gross Margin with PY Gross-Margin to determine reasonability of cost of sales
Test of details
audit procedures used to gather evidence to support SPECIFIC account balances
ex: Scanning payroll files to terminated employees
Confirmation of A/P
Recalculating interest expense based on N/P
Tests of transactions
selecting specific transactions and evaluating whether they were properly recorded
Tests of controls
evaluate effectiveness of controls
Analytical procedures during the planning phase use what types of data?
Use Financial and non-financial data aggregated at a High LVL
ex: Comparing recorded amounts to expectations
Used to identify risks of material misstatement due to fraud
