Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Audit > Audit 1 > Flashcards

Audit 1 Flashcards

1
Q

What is a purpose of an audit?

A

Is to provide FS users with an opin on whether the entity’s FS are presented fairly in all material respects in accordance with the applicable fin reporting framework.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the client management’s responsibilities?

A
  • The preparation of the FS in accordance with GAAP
  • Design, Implementation and maintenance of IC relevant to FS preparation and presentation
  • Providing the auditor with access to all necessary info needed to perform an audit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the auditor’s responsibility?

A

Expressing an opinion on the FS based on the results of the audit. The auditor is expected obtain reasonable assurance on whether the FS are free from material misstatement due to error or fraud

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is GAAS?

A

Generally Accepted Auditing Standards

  • Nonissuers : Follow SAS (Statement Auditing Standards) established by the AICPA Auditing Standards Board
  • Issuers: PCAOB (Public Company Accounting Oversight Board)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is GAGAS?

A

Generally Accepted Government Auditing Standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is ISAs?

A

International Standards Auditing = Made by International Auditing & Assurance Standards Board (IAASB) a standard setting board of the International Federation of Accountants

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is IESBA?

A

International Ethics Standards Board for Accountants

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the objectives of Auditor and the conduct of the Audit?

A
  • Obtain reasonable assurance

- Report on the FS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When is an unmodified opinion should be expressed?

A

On an audit report when the auditor concludes that the FS are presented fairly, in all material respects, in accordance with the applicable fin reporting framework

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the order of the Audit Report?

A
  • Title
  • Addressee
  • Introductory Paragraph
  • Management’s Responsibility for the FS
  • Auditor’s Responsibility
  • Auditor’s Opinion
  • Other Reporting Responsibilities
  • Signature of Auditor
  • Auditor’s Address
  • Date of Audit report
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is introductory paragraph state?

A

Stat that an audit was performed and indicate the individual FS that were audited

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is included in the management responsibility paragraph?

A

State that management is responsible for the preparation and fair presentation of the FS in accordance with the applicable fin reporting framework. Also, state that management’s responsibility includes the design, implementation, and maintenance of IC relevant to the preparation and fair presentation of FS that are free from material misstatement whether due to fraud or error

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does the Auditor’s responsibility paragraph?

A

Includes a statement on each of the following (a) the responsibility of the auditor is to express and opinion on the FS based on the audit (b) the audit was conducted in accordance with with auditing standards generally accpted in the USA (c) those standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the FS are free from material misstatement (d) The details or descriptions of what is involved in performing the audit and the rationale for procedures selected and risk assessment and (e) the auditor believes that the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is stated in the opinion paragraph?

A

States that the auditor’s opinion regarding fair presentation of the FS in accordance with the applicable fin reporting framework

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When is the other reporting responsibilities para used?

A

Only if the auditor addresses other reporting responsibilities in addition to GAAS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does the report date show?

A

The final date of the auditor responsibility. For comparative FS, the audit report date for the most recent audit should be used.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What does it mean when the auditor does not make reference to the component auditor?

A

If the group management partner decides to assume the responsibility of a component auditor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the qualified opinion due to a material GAAP departure? When should it be expressed?

A

The “except for” may be the result of inappropriate or misapplied accounting policies, inappropriate FS presentation, inadequate disclosure, or an unreasonable accounting estimate.

A qualified opinion should be expressed when the auditor concludes that misstatements, individually or in the aggregate, are material but not pervasive to the FS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the qualified opinion due to a material GAAS departure? When should it be expressed?

A

The “except for” may be used if the auditor is unable to obtain sufficient appropriate audit evidence to support management’s assertions about the nature of a matter involving an uncertainty or the auditor is unable to fully complete an audit due to a scope limitation.

A qualified opinion should be expressed when the auditor concludes that the possible effects of any undetected misstatements could be material but not pervasive

20
Q

What is an adverse opinion and when should it be expressed?

A

FS are not fairly presented (materially misstated) bc mgt failed to follow GAAP. This opin may be the result of: inappropriate or missapplied acct policies, inappropriate FS presentation, inadequate disclosure, or an unreasonable acct. est.

An adverse opinion should be expressed when the auditor concludes that misstatements, individually or in aggregate, are both material and pervasive to the FS

21
Q

What is a Disclaimer of opinion and when should it be expressed?

A

No opin is expressed on the FS as a result of a material GAAS problem. This opinion may be the result of: a significant uncertainity, a scope limitation,, lack of independence, or auditor association with unaudited FS

A disclaimer should be expressed when the auditor is unable to obtain sufficient appropriate audit evidence on which to base an opin and the auditor concludes that the possible effects of any undetected misstatements could be both material and pervasive

22
Q

When is an EOM used?

A

When referring to a matter that is appropriately presented or disclosed in the FS and is of such importance that it is fundamental to the users’ understanding of the FS

  • After the opin para
  • Heading “EOM”
  • Describe the matter
  • Indicate that the auditor’s opin is not modified
23
Q

When is it required to use EOM para?

A
  • substantial doubt of going concern
  • justified change in accounting prin
  • change in audit opin
  • special purpose framework
24
Q

When may the EOM be used?

A
  • uncertainity
  • major catastrophe
  • related party transactions
  • subsequent events
25
Q

What does OM para represent?

A

Refer to matters other than those disclosed or presented in the FS that are relevant to the user’s understanding

  • After the opin para and EOM
  • Heading “OM”
  • Describe the matter being emphasized and the location
26
Q

When is the OM required?

A
  • Restricts the use
  • Change in audit opin
  • Audited by a predecessor and not reissued
  • Change of audit, compliation, review
  • Material inconsistency in other info
  • Report on supplementary info
  • A report on compliance is included
27
Q

What are the procedures when the auditor considers the entity’s going concern?

A 
ADMITS
A-Analytical Procedures
D-Debt Compliance
M-Minutes
I-Inquiry of Client's legal counsel
T-Third Parties
S-Subsequent Events
28
Q

What are the conditions and events that may indicate substantial doubt for going concern?

A 
FINE
F-Financial difficulites
I-Internal Matters
N-Negative Trends
E-External Matters
29
Q

What are the mitigating factors to help the going concern?

A
  • Plans to borrow money or restructure debt
  • Plans to sell assets
  • Plans to delay or reduce expenditures
  • Plans to increase ownership equity
30
Q

What are the terms that EOM must include?

A
  • Substantial doubt

- Going concern

31
Q

What does consistency deal with?

A

Comparability of the FS from year to year

32
Q

What changes to the form and content of auditor’s report when the auditor expresses a qualified or adverse opinion due to material misstatement?

A

The Auditor’s Resp. Para is modified and the auditor’s report will include a “Basis for modification” para and a “Qualified Opinion” or “Adverse opinion para”

33
Q

What happens if during the current audit, the auditor becomes aware of evidence that affects the prior year’s FS and opinion that was expressed?

A

The auditor should update the prior opinion in the current year’s audit report. The reasons for the updated opinion should be disclosed in the EOM or OM Para

34
Q

What should the auditor do if the current period FS are audited and presented in comparative form with prior FS that were compiled and reviewd?

A

The auditor should include an OM para in the current audit report indicating the distinction. A statement in the OM para should also be included to indicate that these services are less in scope than an audit, and as such, do not provide a basis for expressing an opinion on the FS

35
Q

What happens if the successor auditor does not present the predecessor’s audit report?

A

The successor auditor should express an opinion of the current FS only. With info in the OM that the prior period were audited by a predecessor auditor and the type of opinion expressed by the predecessor auditor as well as the report date.

36
Q

What are subsequent events?

A

Represents events or transactions that occur after the BS date, but before the FS are issued. May require an adj to the FS or simply a footnote disclosure of the event

37
Q

What is a recognized (type 1) subsequent event?

A

Is a condition that exited on or before the BS date that usually requires an adj to the FS

38
Q

What is a nonrecognized (Type II) subsequent event?

A

May involve a significant business event (e.g. Sales of bonds) that occurred after the BS date - Usually do not require and adj to the FS but instd are disclosed in the footnotes

39
Q

What is the auditor’s responsibility for Subsequent events?

A

PRIME
P-Post BS transactions
R-Representation letter should be obtained from management
I-Inquiry
M-Minutes of stockholders, directors and other committee meetings should be read
E-Examine the latest available interim FS and compare

40
Q

What happens if the management does not provide reasonable justification for a change in accounting principle?

A

Would result in an adverse opin or qualified

41
Q

What happens when an accountant is associated with the FS of a public entity, but has not audited or reviewed such statements?

A

The accountant must issue a report disclaiming any opinion on the statements

42
Q

What is should be included in the opinion para when an auditor qualifies his opin because of scope limitation?

A

The wording in the opin should indicate that the qualification pertains to the possible effects on the FS and not to scope limitation itself

43
Q

What are some examples of scope limitations?

A
  • Timing of the work
  • Inability to obtain sufficient appropriate audit evidence
  • Inadequacy in the accounting records
44
Q

If the auditor concludes that there is substantial doubt about the entity’s ability to continue as a going concern and that the entity’s disclosures are adequate, then the audit report may be either:

A
  • Unmodified with EOM, or

- Disclaimed

45
Q

What should the predecessor auditor do before reissuing the prior year’s audit report on the FS of a former client?

A
  1. Read the FS of the current period
  2. Compare the prior period information that auditor reported on with the FS to be presented for comparative purposes
  3. Obtain letters of representation from management of the former client and from the successor auditor

Audit (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions