Audit 1 - Audit Reports

Question 1

Conditions that indicate possible fraud

Answer 1

Pressure
Opportunity
Rationalization

Question 2

Management’s Responsibility Paragraph

MR DIM

Answer 2

Management's
Responsibility
Design
Implementation
Maintenance

Question 3

Auditor’s Responsibility Paragraph

REPPORTS CRAME

Answer 3

Responsibility
Express an opinion
Plan & perform audit
Performing procedures
Obtain audit evidence
Risks of material misstatement
Test internal control
Statements (financial)

Control (effectiveness of IC)
Reasonableness of
Accounting estimates
Made by management &
Evaluating presentation of FS

Question 4

Qualified “Except For” Opinion (GAAP) - Material

Answer 4

1. Accounting Policy
2. Presentation
3. Disclosures
4. Estimates

Question 5

Adverse Opinion (GAAP) - Very Material (Pervasive)

Answer 5

1. Accounting Policy
2. Presentation
3. Disclosures
4. Estimates

Question 6

Qualified “Except For” Opinion (GAAS) - Material

Answer 6

1. Insufficient Evidence

Question 7

Disclaimer (GAAS) - Very Material (Pervasive/Significant)

Answer 7

1. Insufficient Evidence
2. Significant Going Concern Uncertainty
3. Lack of Independence

Question 8

Withdraw

Answer 8

1. False
2. Fraudulent
3. Deceptive
4. Misleading

Question 8

Emphasis of Matter Paragraph

Answer 8

Placed immediately after the opinion paragraph.

Required in these situations:

• Going concern
• Justified chg in acct principle
• Change in audit opinion
• Special purpose framework

Question 9

Other Matter Paragraph

Answer 9

After opinion & emphasis of matter paragraph

Required:

• Restricted use
• Change in audit opinion
• Audited by predecessor & report not reissued
• Current F/S presented in comparative form w/ compiled or reviewed statements for prior period or w/ prior period F/S not audited, reviewed or compiled.
• Material inconsistency in other info
• Auditor chooses to report on supplementary info in the audit report instead of a separate report
• To refer to required supplementary info
• To restrict use of audit report
• A report on compliance is included

Question 10

Going Concern Examination Procedures

ADMITS

Answer 10

Analytical procedures
Debt compliance
Minutes
Inquiry of client's legal council
Third parties
Subsequent events review

Question 11

Conditions and events indicative of substantial doubt

FINE

Answer 11

Financial difficulties
Internal matters
Negative trends
External matters

Question 12

Updating/changing opinions in an emphasis of matter or other mater paragraph - Format

DORCS

Answer 12

Date of auditor's previous report
Opinion type previously issued
Reason for the prior opinion
Changes that have occurred
Statement that the "opinion...is different"

Question 13

Auditor’s responsibility for subsequent events

PRIME

Answer 13

Post balance sheet transactions
Representation letter
Inquiry of management & those w/ governance
Minutes of stockholders, directors, other meetings
Examine latest available interim F/S

Question 14

Discovery of facts after report release - if client refuses to follow corrective procedures

DAR

Answer 14

Disassociate
Alert regulatory agencies &
Relying parties

“DARe them to fix it”

Question 15

Generally Accepted Auditing Standards (GAAS)

TIP PIE ACDO

Answer 15

General:
Training
Independence
Professional Care

Fieldwork:
Planning & Supervision
Internal Control, Entity, and Environment
Evidence

Reporting:
Accounting = GAAP
Consistency
Disclosure
Opinion (Express)

Question 16

Standard Report Contents - Intro & Scope Paragraph

RAPMEAM-RAPMEAM

Answer 16

Responsibility of  (financial statements)
Responsibility of auditor (express an opinion)

Audit conducted in
Accordance with U.S. GAAS

Planned &
Performed to obtain reasonable assurance

Material
Misstatement (free from)

Examining
Evidence (audit included)

Assessing
Accounting principles used

Made by
Management (significant estimates)

Question 17

Report of Predecessor Auditor Presented

Answer 17

Prior CPA should:

1. Read current statements
2. Compare audited statements w/ current statements
3. Obtain a rep letter from new auditor
4. Inquire of & obtain a rep letter from mgmt

Question 18

Report of Predecessor Auditor Not Reissued

Answer 18

Express an opinion on current statements only & indicate in other matter paragraph:

1. F/S of prior period were audited by predecessor auditor.
2. Type of opinion expressed by predecessor & reasons for modification, if applicable.
3. Nature of any emphasis of matter or other matter paragraph in predecessor report.
4. Date of predecessor report.

Question 19

Prior Period Statements Reviewed or Compiled

Answer 19

Indicate in other matter paragraph:

1. Service performed in prior period
2. Date of prior period report
3. Description of material modifications in prior report
4. Statement that service was less in scope than an audit

Question 20

Prior Period Statements Not Audited, Reviewed, or Compiled

Answer 20

Include other matter paragraph indicating auditor did not audit, review or compile prior statements & assumes no responsibility.