AUD REVIEW 4 Flashcards
What is the difference between the Report Release Date and the Documentation Completion Date?
The Report Release Date is the date the auditor grants permission to use the report and often the date that is delivered to the client. This will also be defined as the beginning of the retention period of audit reports (five years).
The Documentation Completion Date when the audit team completes the documentation file. After this date existing documentation must not be deleted and any additions should be documented as such. Under the GAAS this is defined as 60 days after the Report Release Date and under PCAOB this is defined as 45 days after the Report Release Date.
How do the data analytic types differ from one another?
-Prescriptive
-Predictive
-Diagnostic
-Descriptive
Prescriptive analytic: This is used to prescribe recommended actions to be taken based on Advanced Data Analytics (ADA) to reach a desired goal.
Predictive analytic: This takes historical data and develops predicted outcomes that are expected from the data.
Diagnostic analytic: This is used to explain why something happened. Identification of drivers that explain the value of an output.
Descriptive analytic: This is used to describe or summarize what happened within a dataset.
What are the standards that apply to the different services a CPA may provide?
Audit Engagements:
- SAS for nonissues
- PCAOB for issuers:
Review, Compilation, and Preparation Engagements: SSARS
Attestation Engagements: SSAE
What standards govern non-audit engagements for non-issuers?
SSARs = Statements on Standards for Accounting and Review services.
Reviews: Provide limited assurance and is attest
Compilations: Provide no assurance and is attest
Preparations: Provide no assurance and is NOT attest
What standards govern non-audit engagements for issuers?
SSAE = Statements on Standards for Attestation Engagements.
Examination engagements: Gives opinion and obtains reasonable assurance about a subject matter or specific criteria
Review engagements: Gives conclusion obtains limited (negative) assurance about a subject matter or specific criteria
Agreed-upon procedures: Gives list of findings and procedures performed and obtains NO assurance.
How should an auditor address information regarding litigation?
An auditor should inquire with management any litigation or claims the company is involved with.
To corroborate this information an auditor will request that management prepares a Letter of Inquiry to the responsible client attorney but the letter should be sent by the auditor.
If an auditor believes that there is substantial doubt about an entity’s ability to continue as going concern what can the entity do to demonstrate to alleviate the doubt and concern?
Appropriate mitigating factors surround the actions of events demonstrating the generation of adequate cash flow at least through the next year.
This could be the ability to restructure debt or reducing ongoing expenditures. On the other hand the plans to convert liquid assets into cash would also suffice
What type of sampling techniques are there and when are they used?
There is attribute sampling for test of controls and variable sampling for substantive testing.
Attribute sampling is often used to determine if the control was either performed or not.
Variable sampling is utilized for determing reasonableness of account balances and will be sampling dollar amounts. An auditor will test all transactions that are individually material in addition to the population being sampled.
- Population size has little to no effect on sampling size
For comparative financial statements what are the proper reporting of adjustments made to prior stated financials?
For audited prior period statements if the opinion changes and emphasis of matter paragraph would be used to describe the reasons for the change, the date of the previous report, the previous opinion expressed and the updated opinion.
For non-audited statements an other-matter paragraph will be added to describe what service was provided on the previous period and a statement that it was less than a scope of an audit and no opinion was expressed.
In relation to written representation from management what language needs to be used for uncorrected misstatements?
The belief that management believes that the effects of the uncorrected misstatements are immaterial individually or in aggregate to the financial statements as a whole.
What procedures are performed for walkthroughs of an issuers integrated audit?
- Inquiry
- Observation
- Inspection of relevant documentation
- Reperformance of controls
What reporting options does an auditor have with reporting on financial statements prepared in accordance with a financial reporting framework generally accepted in a country other than the United States
1) Use the report of the other country under the conditions that the auditor obtained sufficient appropriate audit evidence and complied with the reporting standards of that country.
2) Use a U.S. Form of Report, and indicate that the financial statements being reported on have been prepared in accordance of a framework accepted in another country. This includes all the elements required in a U.S. form report and refers to the notes in the financial statements that describe the basis of presentation.
The main responsibility of the auditor is to understand the principles that are generally accepted in the other country or the applicable framework and evaluate if the statements were prepared in accordance with those standards.
When an auditor determines that there is substantial doubt about the the issuers ability to continue as a going concern for reasonable period of time what opinion and form should be issued?
Under the conditions that there are no other significant audit findings an auditor would issue an unmodified opinion and use the explanatory paragraph to elaborate on the substantial doubt to continue as a going concern.
When engaged in an integrated audit what is the best approach to test internal controls and what order of procedures should an auditor follow in approach to select controls to test?
A top-down approach is used in selecting controls to test. This should be done by:
1)Evaluation of risk at the financial statement level
2) Consideration of risk at the entity level
3) Focus on accounts, disclosures, and assertions where there is a reasonable possibility of material misstatement.
When auditing a clients year end cash balance the auditor is using standard bank confirmations and performs tests of client’s year-end bank reconciliations. What assertions are being tested?
Completeness, Valuation and Allowance
