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AUD > Audit 8 - Other Services and Reports > Flashcards

Audit 8 - Other Services and Reports Flashcards

1
Q

<p>Limited Procedures / GASB -</p>

A

<p>Limited Procedures / GASB - When an auditor is associated with financial statemetns that are accompanied by required supplementary information, the auditor applies limited procedures since omission of the informatiion would be considered a depature from the requirements of AFRF and result in a modification to the report.</p>

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2
Q

<p>Limited Procedures / Inconsistent </p>

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<p>Limited Procedures / Inconsistent - In addition to making certain that the required information has been provided, the auditor is required to read the information to make certain that it does not contian information that is INCONSISTENT with the F/S.</p>

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3
Q

Limited Procedures / GASB -

A

Limited Procedures / GASB - As part of an auditor’s responsibility for supplementary information, such as disclosure of pension information, which is outside the basic financial statements but required by GASB, the auditor should apply certain limited procedures to the supplementary information and report deficiencies in, or omissions of, such information.

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4
Q

<p>Cash Basis - </p>

A

<p>Cash Basis - The Title "Statement of revenues collected and expenses paid" would be appropriate for a financial statement prepared under an OCBOA such as the cash basis.</p>

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5
Q

<p>Cash Basis -</p>

A

<p>Cash Basis - Titles like "Income Statement", "Statement of operations", and "Statement of cash flows" would be confused with statements prepared in conformity with GAAP.</p>

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6
Q

Audit Report Form -

A

Audit Report Form - If the prescribed Audit Report form of a government agency on behalf of a client differs significantly from GAAS, the auditor may reword the prescribed form and sign it, attach a seperate audit report to the form, or choose not to accept the audit engagement. The auditor may not replace the form.

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7
Q

<p>OCBOA / Statement of Income-Regulatory Basis </p>

A

<p>OCBOA / Statement of Income-Regulatory Basis - When financial statements are prepared under an applicable financial reporting framework other than GAAP, an OCBOA, the titles of the financial statements would indicate the basis by stat it, such as "Statement of income - regulatory basis" or by using titles that clearly describe whta would be included in the statement..</p>

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8
Q

<p>Compilation Forecast / Caveat -</p>

A

<p>Compilation Forecast / Caveat - An accountant's compilation report on a forecast will warn users that the forecast includes assumptions as to future events and circumstances that may not be accurate and that actual results often differ.</p>

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9
Q

Compilation Forecast

A

Compilation Forecast - The accountant provides no assurance such as indicating that the hypothetical assumptions are reasonable or limited assurance on the forecast and assumptions.

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10
Q

<p>Forecasts / Expect to Exist </p>

A

<p>Forecasts / Expect to Exist - Forecasts hinge upon hypothetical assumptions, but only hypothetical assumptions which management BELIEVES TO BE TRUE, whether externally or internally provided.</p>

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11
Q

Forecasts / Expect to Exist

A

Forecasts / Expect to Exist - If management believes a new product launch will occur on-time and meet revenue targets, management may prepare a forecast showing the expected financial results following from these assumptions.

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12
Q

<p>Forecasts vs Projections ></p>

A

<p>Forecasts vs Projections - Forecasts and projections are two froms of prospective financial statements. Projections are designed to indicate what management BELIEVES MIGHT OCCUR if certain decisons are made and are used as a basis for making those decisions.</p>

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13
Q

<p>Projection / Limited Use -</p>

A

<p>Projection / Limited Use - Since a financial projection provides the client's perception of results that would be anticipated if certain conditions exist or decisions are made, the report would be limited to those who understand the conditions or decison that are the subject of the projections.</p>

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14
Q

Projection / Limited Use -

A

Projection / Limited Use - A financial projection provides an indication of the results that might be obtained in teh case of the occurence, or nonoccurence, of a specific even or circumstance, such as obtaining a bank loan, the acquisition of an asset, entering into a contractual relationship, passage of a law, or some other event.

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15
Q

<p>Projection / Limited Use -</p>

A

<p>Projection / Limited Use - Due to the potentially confusing nature of a projection, an accountant would want to make certain that its distribution is limited to those who are likely to understand the assumptions made in its preparation, such as a bank with which the entity is negotiating for a loan.</p>

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16
Q

<p>Forecasts / Adverse Opinion - </p>

A

<p>Forecasts / Adverse Opinion - When a CPA engaged to examine a financial forecast believes that several signficant assumptions do not support the forecast, the CPA would issue an ADVERSE OPINION.</p>

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17
Q

Forecasts / Qualified Opinion -

A

Forecasts / Qualified Opinion - A qualified opinion would only be appropriate if the assumptions that did not support the forecasts resulted in a misstatement but did not affect the forecast as a whole and an unqualified opinion would only be appropriate if any known discrepancies are not material.

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18
Q

<p>Prospective FS / 3 Types of Attest Engage - </p>

A

<p>Prospective FS / 3 Types of Attest Engage - The three different types of attestation engagements that an accountant may understake in connection with prospective financial statements are agreed-upon procedures, examinations, and compilations. A review of prospective financial statements is not allowed.</p>

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19
Q

<p>Forecasts / General Use -</p>

A

<p>Forecasts / General Use - A financial forecast is appropriate for general use because it is basically management's estimatiion of what they expect to occur.</p>

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20
Q

<p>Projections / Limited Use </p>

A

<p>Projections / Limited Use - A financial projection, on the other hand, is based on what management believes will occur if certain events or circumstances occur, and therefore should be limited in distribution.</p>

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21
Q

<p>Compilation / Projection -</p>

A

<p>Compilation / Projection - It is not appropriate for the accountant to provide assurance in a compilation. An indication that the assumptions used are resonable is a form of assurance and should not be included.</p>

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22
Q

Compilation / Projection -

A

Compilation / Projection - The accountant will want to include a statement that actual results are likely to differ from forecasts; that the scope is limited; and that the accountant is not responsible for updating the report as events and circumstances occur or change.

23
Q

<p>Control Risk / MD&amp;A -</p>

A

<p>Control Risk / MD&amp;A - Control risk is the risk that internal controls will not prevent an error or fraud, or will not detect and corre3ct it on a timely manner</p>

24
Q

<p>Detection Risk - </p>

A

<p>Detection Risk - The risk that a material misstatement will not be uncovered relates to detection risk, not control risk</p>

25
Q

Detection Risk

A

Detection Risk - The risk of detecting misstatements, or not detecting them, is related to detection risk, not control risk.

26
Q

<p>Inherent Risk</p>

A

<p>Inherent Risk - The risk that an assertion will lead to a material misstatement is a form of inherent risk, not control risk.</p>

27
Q

<p>Forecast / Exam</p>

A

<p>Forecast / Exam - An engagement to report on an examination of a financial forecast is an attest engagement that is also an assurance engagement, requiring the auditor to be independent.</p>

28
Q

Compilation / Independence

A

Compilation / Independence - An accountant is generally required to be independent to perform an attest engagement but there is an exception that allows an accountant to perform a compilation despite a lack of independence as long as the lack of independence is clearly indicated.

29
Q

<p>Agreed Upon Procedures </p>

A

<p>Agreed Upon Procedures - To prevent users from making incorrect assumptions as to the signficance of a report resulting from an agreed upon procedures engagement, the auditor will indicate the procedures applied in the report. An agreed-upon engagment is not an audit and should not be described as such. A report may indicate when it is restricted but would not indicate that it is unrestricted in use.</p>

30
Q

<p>Underwriter / Comfort Letter - </p>

A

<p>Underwriter / Comfort Letter - Accountants may be asked to issue letters to underwriters referred to as comfort letters, with a range of subjects included in the letter - independence, opinion on compliance, negative info on unaudited interim financial and capsule info, and negative assurance about compliance with reg S-K. .</p>

31
Q

Underwriter / Comfort Letter

A

Underwriter / Comfort Letter - When financial information has not been subjected to audit procedures, the auditor may not provide either positive assurance or a limited opinion.

32
Q

<p>Underwriter / Comfort Letter </p>

A

<p>Underwriter / Comfort Letter - When an accountant issues to an underwriter a comfort letter containing comments on data that have not been audited, the underwriter most likely will receive...NEGATIVE ASSURANCE ON CAPSULE INFORMATION.</p>

33
Q

<p>Comfort Letter / Auditor </p>

A

<p>Comfort Letter / Auditor - Auditors are often asked to provie letters to underwriters, referred to as comfort letters, in connection with a public offering, and is signed by the auditor.</p>

34
Q

Comfort Letter / Auditor

A

Comfort Letter / Auditor - Comfort letters ordinarily are addressed to the client’s underwriter of securities and signed by the client’s independent auditor.

35
Q

<p>Agreed Upon Procedures / Report - </p>

A

<p>Agreed Upon Procedures / Report - The report resulting from an engagement to apply agreed upon procedures related to the financial statement will include: the accountant's findings, a disclaimer indicating the procedures applied may not be sufficient for the purpose intended; and a statement restricting the distribution of the report only to parties knowledgeable abou the agreed-upon procedures. No assurance is provided.</p>

36
Q

<p>Comfort Letter / Negative Assurance - </p>

A

<p>Comfort Letter / Negative Assurance - In comfort letters, the CPA may provide negative assurance relative to the information being in conformity with GAAP since the auditor is familiar with GAAP and is only indicating that they did not identify any discrepancies, not that there aren't any.</p>

37
Q

<p>Comfort Letter / Negative Assurance </p>

A

<p>Comfort Letter / Negative Assurance - The CPA does report as to compliance with requirements of the Securities Act of 1933, but only regarding form.</p>

38
Q

<p>Comfort Letter / Negative Assurance - </p>

A

<p>Comfort Letter / Negative Assurance - When issuing letters for underwriters, commonly referred to as comfort letters, an accountant may provide negative assurance concerning the conformity of the entity's unaudited condensed interim financial information with GAAP.</p>

39
Q

Comfort Letter / Negative Assurance -

A

Comfort Letter / Negative Assurance - The CPA would not provide assurancw about the absence of significant deficiencies as they may have been overlooked during the engagement.

40
Q

<p>Agreed Upon Procedures / Assurance </p>

A

<p>Agreed Upon Procedures / Assurance - The accountant does not provided any form of assurance, limited or otherwise, in an agreed upon procedures engagement.</p>

41
Q

<p>Agreed Upon Procedures / Assurance -</p>

A

<p>Agreed Upon Procedures / Assurance - In a report resulting from an agreed-upon procedures engagement will include a restriction that it be used only by specified parties; will indicate that the subject matter is the responsibility of the responsible party; and that procedures performed were those agreed upon with the specified parties.</p>

42
Q

<p>Agreed Upon Procedures / Attest Stds </p>

A

<p>Agreed Upon Procedures / Attest Stds - An agreed upon procedures engagement is an attest engagement subject to the attestation standards, including in the report the procedures performed that were agreed upon between auditor and client.</p>

43
Q

Agreed Upon Procedures -

A

Agreed Upon Procedures - Although the auditor may apply agreed-upon procedures to internal control, the auditor would not express an opinion as to its effectiveness.

44
Q

<p>GAGAS / Presumptively Mandatory Requirement </p>

A

<p>GAGAS / Presumptively Mandatory Requirement - A presumptively mandatory requirement is one that is expected to be complied with in all cicumstances to which it applies, and an auditor may depart from it if the required procedure would be ineffective, in which case the auditor is required to document how an alternate procedure was able to achieve the objective of the presumptively mandatory requirement.</p>

45
Q

<p>GAGAS / Presumptively Mandatory Requirement -</p>

A

<p>GAGAS / Presumptively Mandatory Requirement - Generally accepted government audit standards use presumptively mandatory requirement to describe a professional requirement to comply with a standard or provide a special explanation for not doing so.</p>

46
Q

<p>Audit Requirements for Expend for Fed Awards - </p>

A

<p>Audit Requirements for Expend for Fed Awards - Regarding audit requirements for audits of non-federal entities expending federal awards, FREE RENT alone is not considered a federal award expended, but free rents received as part of an award to carry out a federal program ARE considered federal funds expended.</p>

47
Q

GAO / Auditor Report -

A

GAO / Auditor Report - Under GAO Standards, the auditor’s report will indicate the scope of testing of compliance with laws and regulations and of internal controls.

48
Q

<p>Audit Requirements for Major Fed Fin Assist Program -</p>

A

<p>Audit Requirements for Major Fed Fin Assist Program - When engaged to audit an entity's compliance with requirements governing a major federal financial assitance program, identification of incidents of noncompliance are comparable to identification of departures from GAAP in an audit of an entity.</p>

49
Q

<p>Audit Requirements for Major Fed Fin Assist Program -</p>

A

<p>Audit Requirements for Major Fed Fin Assist Program - Depending on the severity of the noncompliance, the auditor will issue either a qualified opinion, if material not not necessarily pervasive, or an adverse opinion if material AND pervasive as well.</p>

50
Q

<p>GAS / Compliance -</p>

A

<p>GAS / Compliance - Compliance with laws and regulations is the responsibility of management and the auditor's report so indicates.</p>

51
Q

GAS / Compliance

A

GAS / Compliance - In performing a financial statement audit in accordance with GAS, an auditor is required to report on the entity’s compliance with laws and regulations, and the report should state that comliance is management’s responsibility.

52
Q

<p>GAGAS / Documentation </p>

A

<p>GAGAS / Documentation - Under GAGAS, the inability of a client to provide documentation to support a significant transaction would be an indication of a heightened risk of fraud.</p>

53
Q

<p>GAS / I/C </p>

A

<p>GAS / I/C - The auditor is not necessarily qualified to evaluate the accomplishments of a government program and would not report on them. In a report resulting from a Yellow Book audit, the auditor is required to indicate the scope of testing of internal controls.</p>

54
Q

<p>GAS / Auditor Report -</p>

A

<p>GAS / Auditor Report - The report on internal controls and compliance with laws and regulations associated with a Yellow Book audit would include a description of the scope of testing of internal controls but would not describe uncorrected misstatements that are deemed to be immaterial.</p>

AUD (8 decks)

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