AUD-Lesson 6 Flashcards
What should be included for the Auditor’s address?
The City and State where located
What is Management Responsible for in regards to the Financial Statements?
Preparation and Fair Presentation of Financial Statements in accordance with the Applicable Financial Reporting Framework
What is Management Responsible for in regards to Internal Control?
Internal Control Design, Implementation, Maintenance
What are the headings in the Audit Report for an Unmodified Opinion for a Non-Issuer?
(TIM-AA) Title Introduction Management Responsibility Auditor Responsibility Audit Opinion
What are the headings in the Audit Report for an Modified Opinion for a Non-Issuer?
(TIMA-BA) Title Introduction Management Responsibility Auditor Responsibility Basis for (Modified) Opinion Audit Opinion
In an Non-Issuer Unmodified Opinion with Emphasis-of-Matter / Other-Matter sections, what is the order of the headings?
(TIM-AA EMO) Title Introduction Management Responsibility Auditor Responsibility Audit Opinion Emphasis-of-Matter Other-Matter
What are the requirements for referencing a Component Auditor in the Audit Report?
Component Financial Statements must be prepared using same Financial Reporting Framework as the Group Financial Statements; Component Auditor must have performed audit in accordance with GAAS or PCAOB Standards.
What must the Group Engagement Partner do if they assume responsibility for the Component Auditor’s work?
Perform additional audit procedures; Be involved in Component Auditors work; Perform Risk Assessment procedures; Assess Risk of Material Misstatement
Which clients can have compilation engagements?
Non-SEC (non-public) registrants only.
What is a Forecast?
A prospective financial statement that uses normal circumstances. General and limited use allowed.
What is a Projection?
A prospective financial statement using hypothetical situations. Only limited use by the client is allowed.
What disclosures are required for remote likelihood of losses?
No disclosure required.
What disclosure is required for a probable loss contingency?
Accrue if estimable. Emphasis-of-Matter paragraph if not estimable.
What disclosure is made if a loss contingency is reasonably possible?
Auditor assesses need for Emphasis-of-Matter paragraph based on loss likelihood.
How is a gain contingency reported?
Gain contingencies are not reported.
How does an immaterial GAAP issue affect the audit opinion?
It doesn’t. Opinion is Unmodified.
How does a very material GAAP issue affect the Audit Report?
Modified-Adverse Opinion is issued. Emphasis-of-Matter paragraph is added after Opinion paragraph.
How do GAS standards compare to GAAS?
GAS is more strict than GAAS.
What is required under the Single Audit Act?
Funding Threshold is $750,000. An audit performed under governmental auditing standards (GAS). A report on internal control is required. GAAS and GAS don’t require the I/C report.
In the Audit Report, what is the Auditor’s responsibility?
Express an opinion in accordance with GAAS
Obtain reasonable assurance that F/S are free from material misstatement
Does not express an opinion on internal control
Audit evaluates accounting policies and significant estimates
In the Audit Report, what is the Management’s responsibility?
Fair presentation of financial sheets in accordance with GAAP
Design, Implementation, and Maintenance of Internal Controls
The financial statements are free from material misstatement whether due to error or fraud.
What are the sections of the report for a Unqualified Opinion for an Issuer?
Title Introduction Scope Opinion Explanatory Paragraph to Reference to auditor's report on internal controls (If applicable)
