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AUD > Audit 1 > Flashcards

Audit 1 Flashcards

1
Q

Auditor is responsible for

A
  1. C-ompliance with laws, regulations and ethics
  2. A-ppropriate competence and capabilities
  3. P-rofessional skepticism
  4. P-rofessional judgment
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2
Q

Reasonable assurance

A
  1. P-lan the work and properly supervise any assistants
  2. R-isks of material misstatements, fraud or error must be identified and assessed
  3. O-btain sufficient appropriate audit evidence
  4. M-ateriality levels get determined and applied
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3
Q

Inherent limitations

A
  1. Nature of Financial reporting and Audit procedures

2. Timeliness of financial reporting and the balance between Cost and Benefit

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4
Q

Auditors ultimately evaluate

A
  1. W-arranties
  2. I-ntangibles
  3. A-sset life/salvage value
  4. L-iabilities
  5. I-mpairment
  6. B-ad Debts
  7. Y-bought a letter
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5
Q

PCAOB consists of these types of members-ISSUERS

A
  1. 2- must be CPA’s, other 3 must not be CPA’s
  2. P-ublic accounting firms must register with PCAOB to audit public companies
  3. A-bought a letter
  4. C-an act as the chair of the board if they have not practiced for the last 5 years
  5. C-annot receive payments from public accounting firms
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6
Q

3 levels of auditing guidance

A
  1. SAS-AICPA Statements on Auditing Standards and PCAOB Auditing Standards-
  2. IP-Interpretive Publications
  3. OAP-Other Auditing Publications
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7
Q

Auditors should be alert for

A
  1. C-ontradicting audit evidence
  2. R-eliability of documents and responses to inquiries that may be used as audit evidence
  3. A-dditional audit procedures (because of circumstances) in addition to those required by GAAS.
  4. F-raud conditions(pressure, Rationalization, opportunity)
  5. T-bought a letter
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8
Q

Independence

A
  1. Fact

2. Appearance

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9
Q

Professional judgment is necessary when making decisions about

A
  1. M-ateriality
  2. A-udit risk
  3. J-udgments made by management in applying the applicable financial reporting framework
  4. E-vidence is sufficient, and appropriate that has been obtained
  5. C-onclusion based on the audit evidence obtained
  6. NET-The nature, extent and timing of audit procedures
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10
Q

Fair Presentation means

A
  1. D-isclosures are adequate
  2. I-nformation is: Relevant, reliable, comparable, and understandable
  3. E-ffect of material transactions and events is understood
  4. T-erminology is appropriate
  5. S-tructure is fairly presented
  6. F-/S represent the underlying transactions and events
  7. E-stimates are reasonable
  8. G-AAP application is consistent
    COLA
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11
Q

Unmodified audit opinion

A
  1. Title-“Independent”
  2. Addressee(GR: not to management)
  3. Introductory Paragraph
  4. MR- Management’s Responsibility for the financial statements
  5. DIM-this responsibility includes: Design, Implementation, Maintenance
  6. Auditor’s responsibility(GAAS)
  7. Auditor’s Opinion(GAAP and other applicable Financial Reporting Frameworks)
  8. Emphasis of matter paragraph
  9. Other Matters paragraph
  10. Other reporting Responsibilities
  11. Signature of the auditor
  12. Auditor’s address
  13. Date of the audit report
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12
Q

Addressee is not to whom GENERALLY?

A

Management

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13
Q

Auditor’s responsibility(GAAS)

A

a. R-esponsibility word in heading
b. E-xpress an opinion on the F/S based on the audit
c. P-lan the audit
d. P-erform the audit
e. O-btain audit evidence
f. R-isk, assement of the risk of material misstatement
g. T-est Internal Controls
h. S-tatements(F/S)- relevant to the entities preparation and fair presentation of the F/S

i. C-ontrol, but not for the purpose of expressing an opinion on the effectiveness of the entities internal Control
j. R-easonableness of accounting estimates
k. A-accounting estimates
l. M-anagement, estimates made by management
m. E-valuating the overall presentation of the F/S

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14
Q

Auditor’s Opinion paragraph

A

A statement that :the F/S present fairly, in all material respects, the financial position of the entity as of the balance sheet date and the results of operations and its cash flows for the period then ended, in accordance with the applicable financial reporting framework.

“and the report of the other auditors”

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15
Q

Emphasis of matter paragraph MAY be necessary for

A

i. Uncertainty in situations
ii. Major catastrophe
iii. Related party transactions
iv. Subsequent events

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16
Q

Emphasis of matter paragraph MUST be necessary for

A
  1. Change in accounting principle
  2. G-oing concern problems(MUST STATE IN REPORT)
  3. P-repared in accordance with special purpose framework
  4. S-ubsequent discovery of facts-leadsChange in accounting principle to change in opinion
17
Q

Other Matters paragraph Use Required

A

i. Restricts the use of the report
ii. Change in audit opinion
iii. Not reissued predecessor auditor’s report not reissued
iv. F/S are in comparative form
v. Material inconsistency in other information
vi. Choses to report on supplementary info in auditor’s report rather than in separate report
vii. Refers to required supplementary information

18
Q

Other Matters paragraph May be necessary

A

i. Cant withdraw
ii. Legal issues regarding mandatory disclosures
iii. More than 1 set of F/S

19
Q

Date of the audit report

A

The auditor’s report should be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence

20
Q

What to test for going concern issues

A
  1. A-nalytical procedures
  2. D-ebt compliance
  3. M-inutes
  4. I-nquiry
  5. T-hird parties
  6. S-ubsequant events
21
Q

What might indicate that the client has a going concern problem?

A
  1. F-inancial difficulties
  2. I-nternal matters
  3. N-egative trends
  4. E-xternal matters
22
Q

Changing prior year opinion format(in emphasis or other matter paragraph)

A
  1. D-ate of the auditor’s previous report
  2. O-pinion type previously issued
  3. R-eason for the prior opinion
  4. C-hanges that have occurred
  5. S-tatement that the “Opinion … is different”
23
Q

The old CPA should in a change of auditor situation-report on predecessor auditor presented

A
  1. C-ompare the statements audited with the current period statements
  2. R-ead the statements for the current period
  3. I-nquire of and obtain a letter of representation from management at/near date of reissuance
  4. D-ate the report as appropriate
    a. Unrevised- same as original report date
    b. Revised- Dual Date
  5. O-btain a letter of representation from the successor auditor
24
Q

The New CPA should in a change of auditor situation-report on predecessor auditor NOT presented (Express an opinion in other-matters paragraph on this year’s statements only)

A
  1. D-ate of the predecessor auditor’s report
  2. O-pinion type and if changed
  3. N-ature of emphasis or other matters paragraph included in report
  4. S-tate that F/S were audited by predecessor auditor
25
Q

Prior Period not audited maybe compiled or reviewed (other matter paragraph)

A
  1. M-aterial modifications in report description
  2. S-tatement that the service was less in scope
  3. D-ate of prior period report
  4. S-ervice performed
26
Q

Subsequent event procedures

A
  1. P-ost balance sheet transactions
  2. R-epresentation letter should be obtained by management
  3. I-nquiry
  4. M-inutes of stockholders meetings
  5. E-xamine latest available interim F/S
27
Q

Subsequent discovery of facts after release date (what auditor should do if changes report)

A
  1. R-evised F/S along with new audit report (is advised)
  2. I-nformation may not be relied on is advised to users
  3. D-isclose information and its impact on the F/S
28
Q

What to do to prevent further reliance on F/S

A
  1. D-issocociate
  2. A-lert agencies
  3. R-elying parties
29
Q

We forgot to audit an area

A
  1. P-romptly undertake to apply omitted procedure if no alternatives exist
  2. O-ther audit procedures were adequate
  3. P-roceed as if it were a subsequent event if new information is found
30
Q

Material inconsistency not fixed by management

A
  1. W-ithhold use of the report
  2. O-ther matters paragraph describing the issue is included in report
  3. W-ithdraw from the engagement
    a. False/fraudulent/deceptive/misleading
31
Q

Duties for supplementary information (in other matters paragraph or separate report)

A
  1. P-resentation is evaluated

2. R-eport on Supplementary Information

32
Q

Limited procedures for supplementary information

A
  1. W-ritten management representations management rep letter
  2. I-nquire of management
  3. C-onsistent Information

AUD (16 decks)

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