AUDIT #1 Flashcards
TIPICANOE
1.02 - What are the three categories that the overall responsibilities and objectives of an audit can be broken down into?
- Responsibilities
- Performance
- Reporting
1.02 What Responsibilities are applicable through out the audit?
- Training & Professional judgement
- AU-C 200 - Independence & Other Ethical Requirements, including Due Care
- AU-C 200 - Professional Skepticism
- AU-C 200
1.02 What Performance objectives are required during an audit?
- Internal Controls
- AU-C 315 - Corroborative Evidence (Substantive Testing)
- AU-C 200
1.02 What Reporting objectives are required during an audit?
- Accounting principles are in conformity with Applicable Financial Reporting Framework (AFRF)
- AU-C 700 - No new accounting principles applied. (Comparability/ Consistency) implied
- AU-C 708 - Omitted financial disclosures - NONE
- Expression of an opinion
- AU-C 700
1.02 The overall objectives & responsibilities in an audit can be summarized using the acronym TIPICANOE. What does it stand for?
- Training and Professional Judgement
- Independence & Other Ethical Requirements
- Professional Skepticism
- Internal Controls
- Corroborative Audit Evidence (substantive)
- Accounting Principles (conformity AFRF)
- No new Accounting Principles (Consistency / Comparability)
- Omissions & Disclosures None
- Express an Opinion
1.03 What are the two KEY considerations to accepting an Audit?
- Determining the acceptability of the AFRF
- Obtaining managements agreement that it understand and accepts certain responsibilities:
- Financial Statements
- Internal Controls
- No client-imposed scope limitation
1.03 In a first year audit inquiries with the predecessor auditor should include (RID-C-U)
- Reason for the Change
- Integrity of management
- Disagreements during audit
- Communication with management or those charged with governance
- Understanding of related party relationships/transactions and significant unusual transactions
1.03 In recurring audits what reasons might cause revision to the terms of the preceding engagement?
- Indications that management does not understand the objectives and scope of the engagement
- Revision or special terms
- Significant changes to the entity size or nature of business
- Changes to senior management or significant changes in ownership
- Regulatory requirements changes
- Change in AFRF
1.04 Under AU-C 260 the auditor is required to communicate with those charged with governance, who does that include?
Management includes those with executive responsibility for the conduct of the entity’s organization?
- Board of Directors (YES)
1a. Audit Committee (NO) - Management (YES)
- Stockholders (NO)
1.04 What is the Audit Committee and what is it for?
The Audit Committee is a sub-committee made up of board members who are not officers or employees of the company (ie. they must be independent). The committee members will have no special interest in supporting the financial representation of management, which provides objectivity. They do the following:
- serve as members of the BOD and are disinterested in the day-to-day operations
- hire/fire external auditor
- receive external auditor reports and communications
- oversee the internal audit function
***1.04 What matters need to be communicated to management or those charged with governance?
- Planned scope and timing of the engagement (significant risk - that many require special consideration)
- Deficiencies and material weaknesses in internal control
1.05 When is the client representation letter required?
The client representation letter cannot be obtained until the end of the audit field work. It must however, be obtained prior to issuing the report.
1.05 Once the auditor has made the decision to accept the audit engagement it is required to send out an Engagement Letter. What is included in the Engagement Letter?
- Objective and scope
- Auditor Responsibilities
- Client (Management) Responsibilities
- A statement of inherent limitation of an audit and I/C
- Identification of AFRF
- Reference to the expected form and content of the report with an indication that the actual report may differ
- Other…
1.05 What are the elements of the Engagement Letter (FACSIMILE)
- Fees
- Auditors responsibility
- Confirmation of Engagement
- Scope & Objective of Engagement
- Internal Control
- Management Responsibility
- Irregularities - Fraud
- Illegal Acts
- Errors
1.06 What are some items that may impact the Nature, Timing and Extent of an audit?
- The size and complexity of an entity
- The auditors experience with the entity
- knowledge of the entity’s business and industry
- knowledge of the entity and its environment (including I/C)
1.06 What are the three preliminary engagement activities?
- Performing quality control procedures regarding Acceptance & Continuance
- Evaluating Ethical Requirements
- Engagement Letter