Audit Profession Flashcards
Operational audits focus on
the efficiency and effectiveness of management’s operating procedures, not on recorded dollar amounts or reported dollar amounts.
USUALLY performed by the internal auditor
What does not impair independence
covered member receives an unsolicited financial interest, such as the inheritance, no independence problem exists if the covered member disposes of the stock within 30 days.
Operating leases and claims against clients for immaterial amounts and related to non-audit matters also do not impair auditor independence.
A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client would most likely include
Inquiry of third parties, such as the prospective client’s bankers and attorneys, about information regarding the prospective client and its management
Fraud is an intentional act designed to
(1) ensure that financial statements do not conform with US GAAP or
(2) cover the theft of assets
Statements that use the word “should” are considered
“presumptively mandatory.”
Auditing Statements of Position issued by the AICPA
are considered interpretive publications and not auditing standards
The Sarbanes-Oxley Act was set up so that
the PCAOB would not be a government agency but would be self-funded from charges to the companies being regulated.
SEC Forms S-1 through S-11 are the
“registration statements” for companies planning to issue securities to the public.
Department of Labor (DOL) guidelines are stricter than those of the AICPA. All of the parties that are considered “members” under the DOL guidelines
are prohibited from having any direct or indirect financial interest in the audited plan.
According to the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 7,
the reviewing partner must possess the same level of knowledge and competence that would qualify him or her to serve as the audit partner on the engagement under review.
What are considered the minimum standards of performance, in exercising due professional care by the auditor, that must be achieved on each audit engagement.
Generally Accepted Auditing Standards (GAAS) and Statements on Auditing Standards (SAS)
when you fail to make payments on his loan,
it no longer qualifies as a “grandfathered” loan under the AICPA guidelines.
Your independence is impaired
Statements on auditing standards state that an early appointment of auditors is advantageous as it
allows for proper planning of the audit so that the work may be performed efficiently and effectively.
When should a company file an 8-K?
acquisition or sale of a subsidiary,
a change in officers or directors,
an additional product line,
or a change in auditors.
