AUD IIII Blake CPA Flashcards
Compilation report
Auditor does not need to be independent
Read F/S for obvious material misstatements
No assurance
May be used to obtain credit
MGT Rep letter not required
report states: accountant does not express an opinion, conclusion, or provide and form of assurance on F/S
Compiled F/S should be attached to the compilation report stating compilation was conducted in accordance with SSARS
Date on compilation report should be the date of completion of the compilation
No title
Lack of independence is stated in last paragraph of report
Disclaims an opinion (no opinion expressed)
Review Report
Analytics and Inquiry
Need Representation letter
Limited assurance
Engagement letter
In accordance with SSARS
No consideration of IC
Independence required
No opinion is expressed
No risk of fraud assessment
Report attached to review stating that reviews are substantially less in scope than audit
See Independent Accountant’s report on each page
Audit procedures: Test of details
Substantive procedures:
Inspection, observation, confirmation
Interim review
WHERE THE ANNUAL FINANCIALS ARE AUDITED FALL UNDER SAS OR PCAOB requirements of a nonissuer or issuer this would require an understanding of internal control
CORROBORATE
CONFIRM OR GIVE SUPPORT
When is ratio analysis used?
often used to examine relationships btw B.S. accounts
Trend analysis
best for examining Income statement accounts
Risk Analysis
evaluate relationships btw B.S. accounts
Statements on Auditing standards
PCAOB standards
Non-issuers for SARS
PCAOB for public firms
Existence & occurrence procedures: COV
- Confirmation of account with third parties
- Observation, inspection, and examination: of assets, processes and procedures. (persuasive forms of evidence)
- Vouching: of transactions from F/S to Supporting documents
Completeness procedures: TAO
- Tracing: source documents to accounting records to F/S
- Analytical review: Figure out how certain items might not be included in the account balance. Ex: unrecorded liabilities or omissions of pledged assets
- Observation: of processes and procedures
Cutoff procedures
Rights & Obligations procedures
Inspection of documentation supporting transactions, inspection of contracts Ect. (loan agreements) - better evidence
Positive Confirmations
Valuation procedures
NRV = Gross A/R - AFDA
1. Inspection of documentation supporting transactions
2. Footing and cross-footing schedules
3. INDEPENT RECALCULATION: ex: Aging of A/R to agree value & recalculation of Depreciation. ESTIMATES***
4. Reconciliation of supporting schedules to G/L items
uNDERSTANDABILITY of Presentation & Classification Procedures
- Inspection: of documentation supporting transactions
- Review of all related disclosures for compliance with GAAP
- Inquire of MGT regarding disclosures for the account and for related accounts
Trade A/R
Sales to customers
Non-Trade receivables
Related party: advances to officers, employees & subsidiaries - must be separated from Tade A/R
Inventory Turn over ratio
COGS/Average inventory-
Decrease compared to last year means inventory was slower moving do to product obsolescence, would make auditor to further inspect inventory
valuation assertion
Examination reports provide what type of Assurance?
What falls under
Positive Assurance (Opinion)
Prospective (Attestation) F/S in accordance with Statements on Standards for Attestation Engagements include?
Accountant ensures that the CLIENT discloses ALL Sig ASSUMPTIONS that are used for the Prospective Statements
-Historical F/S not REQUIRED
AUP Engagements
What is included in the AUP Report?
Must be independent
NO ASSURANCE - Disclaimer of Opinion
Be in the Form or PROCEDURES & FINDINGS
Engaging party takes responsibility accepting the adequacy of procedures for their purposes
May/may not be restricted - Depends
Practitioner AND Engaging party define criteria used to determine findings
Include ALL findings in the AUP Report
Provides NO Conclusion
Examination Engagement - Prospective Statements - Assumptions do not provide a reasonable basis for prospective F/S what type of Opinion is expressed?
Adverse Opinion
Attestation Engagements (SSAE)
Examination, Review or Agreed-Upon procedures on Subject Matter
May result in reported related to Compliance with Laws & Regulations
When a previously reported internal control weakness has been subsequently eliminated and management engages an auditor to attest to their improvement, what is the objective of the auditor?
Expresses and opinion on whether the weakness has been eliminated
Auditor must obtain design AND operating effectiveness of Identified Control
If Auditor is engaged to issue a report on client’s Compliance with contractual agreements or regulatory requirements in connection with F/S audit what is true?
Auditor must have issued a Qualified or Unmodified opinion - and may only issue NEGATIVE assurance on compliance
