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Audit > Audit Report > Flashcards

Audit Report Flashcards

1
Q

What are the headings in the Audit Report for an Unmodified Opinion?

A

TIM-AA

Title
Introduction (Who, what, when)
Management Responsibility (Financial Statements/Framework, Internal Control)
Auditor Responsibility (GAAS, Reasonable Assurance, Audit Description)
Audit Opinion

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2
Q

In an Unmodified Opinion with Emphasis-of-Matter / Other-Matter sections, what is the order of the headings?

A

TIM-AA EMO

o Title
o Introduction
o Management’s Responsibility 
o Auditor’s Responsibility
o Audit Opinion
o Emphasis-of-Matter
o Other-Matter
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3
Q

What are the headings in the Audit Report for an Modified Opinion?

A

TIMA BA

o Title
o Introduction
o Management’s Responsibility 
o Auditor’s Responsibility
o Basis for (Modified) Opinion 
o Audit Opinion
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4
Q

If group engagement partner assumes responsibility for component auditor work?

A

o Perform additional audit procedures
o Be involved in Component Auditor’s work
o Perform Risk Assessment procedures
o Assess Risk of Material Misstatement

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5
Q

What are the requirements for referencing a Component Auditor in the Audit Report?

A

Component Financial Statements must be prepared using same Financial Reporting Framework as the Group Financial Statements;
Component Auditor must have performed audit in accordance with GAAS or PCAOB Standards.

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6
Q

What is a Compilation?

A

Accountant puts together financial statements with information PROVIDED BY MANAGEMENT.

No opinion is expressed and no assurances are given.

Independence is not required.

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7
Q

What are the required statements/disclaimer for a Compilation Report?

A

o Identify the Financial Statements
o Performed according to Standards o Limited in Scope
o No Opinion / No Assurance
o No Responsibility to update for Future events

Disclosures are not necessary but must state not included.
If no independence must state.

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8
Q

What procedures are required for Review engagements?

A

Analytical Procedures

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9
Q

Compilation VS Review VS Procedures

A

Compilation - No Assurance; No Independence
Review - Limited Assurance, Independence Required
Agreed Upon Procedures - Limited Use; Independence Required

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10
Q

What is a Forecast?

A

A prospective financial statement that uses normal circumstances. General and limited use allowed.

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11
Q

What is a Projection?

A

A prospective financial statement using hypothetical situations. Only limited use by the client is allowed.

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12
Q

How does an immaterial GAAP issue affect the audit opinion?

A

It doesn’t. Opinion is Unmodified.

If Going Concern Issues -> Unmodified Opinion + Emphasis-of-Matter

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13
Q

Estimates in Financial Statements

A

Must conform with GAAP

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14
Q

When is a single Single Audit Required?

A

Entities who take more than $750k in funding
from the U.S. Government must be audited

Major Programs (40% of funding spent)
Low-Risk Programs (20% of funding spent)
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15
Q

What is required under the Single Audit Act?

A

An audit performed under governmental auditing standards (GAS).
A report on internal control is required.
GAAS and GAS don’t require the I/C report.

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16
Q

What is the effect of a Qualified Opinion?

A

Financial Statements are materially misstated and inability to obtain appropriate audit evident but NOT pervasive

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17
Q

What would cause an Adverse Opinion?

A

Very material GAAP and Disclosure issues.

The explanatory paragraph goes after the Scope and Before the Opinion paragraphs and the Opinion paragraph refers to the issue as well

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18
Q

What is a Disclaimer Opinion?

A

If an auditor is unable to obtain sufficient appropriate audit evidence to form an opinion on the financial statements.

An opinion cannot be issued. Includes severe Scope limitation

19
Q

What is included in a Scope Paragraph?

RAPMEAM RAPMEAM

A 
Responsibility. Responsibility. 
Audit. Accordance. 
Planned. Performed. 
Material. Misstatement. 
Examining. Evidence. 
Accessing. Accounting prin. 
Made. Management.
20
Q

What are the requirements for an audit report?

A

Must conform to GAAP
Consistency with prior period reporting is implied (must state if inconsistent)
Adequacy of disclosure is implied (must state if disclosures are lacking)
Opinion is provided - provides assurance
Must be signed by the auditor and dated.

21
Q

When is consistency not violated with respect to changes in reporting between years?

A

Accounting Errors Reclassifications Prospective treatment of a new principle Accounting Estimate Change

22
Q

How is the audit report changed if there is Scope Limitation?

A

Qualified opinion is issued.
Scope paragraph modified
Explanatory paragraph between Scope and Opinion paragraphs
Opinion paragraph points out scope limitation

23
Q

How is the audit report modified for major inconsistencies found during the audit?

A

Qualified opinion is issued.
Scope paragraph remains unchanged
Explanatory paragraph between Scope and Opinion paragraphs
Opinion paragraph points out inconsistency

24
Q

What must the Group Engagement Partner do if they assume responsibility for the Component Auditor’s work?

A

Perform additional audit procedures;
Be involved in Component Auditors work;
Perform Risk Assessment procedures;
Assess Risk of Material Misstatement

25
Q

What standards govern SSARS engagements?

A

Compilations are governed by SSARS (Statements on Standards for Accounting and Review Services

26
Q

Which clients can have compilation engagements?

A

Non-SEC (non-public) registrants only.

27
Q

What disclosures are required for Compilation engagements?

A

Disclosures not necessary must state that they are not included

28
Q

What standards govern Review engagements?

A

SSARS (Statements on Standards for Accounting and Review Services)

29
Q

What type of assurance is given in a Review engagement?

A

Reviews give limited assurance.

30
Q

What is a Review engagement?

A

No opinion expressed
Limited assurances are given.
Independence is required for a review engagement.

31
Q

What are the requirements for Agreed Upon Procedures?

A

Independence is required;

Only limited use by the client is allowed.

32
Q

What disclosures are required for remote likelihood of losses?

A

No disclosure required

33
Q

What disclosure is required for a probable loss contingency?

A

Accrue if estimable.

Emphasis-of-Matter paragraph if not estimable.

34
Q

What disclosure is made if a loss contingency is reasonably possible?

A

Auditor assesses need for Emphasis-of-Matter paragraph based on loss likelihood.

35
Q

How is a gain contingency reported?

A

Gain contingencies are not reported.

36
Q

How do GAS standards compare to GAAS?

A

GAS is more strict than GAAS.

37
Q

When is an Other Matter paragraph used?

A

When an auditor wants to draw attention to a matter not presented or disclosed in the financial statements, such as a change of opinion, that is relevant to users’ understanding of (a) the audit, (b) the auditor’s responsibilities, or (c) the auditor’s report.

38
Q

When emphasis-of-matter paragraph used?

A

When auditors want to draw attention to a matter presented or disclosed in the financial statements.

39
Q

What is a performance audit?

A

It assesses program effectiveness and results, economy efficiency, internal control, and compliance

40
Q

What are attestation engagements?

A

Examine, reviewing, or agreed-upon procedures about a subject matter and reporting on results

include internal control over financial reporting and compliance

41
Q

What is a compliance audit?

A

A program specific or organizationwide audit and compliance requirements.

Appropriate evidence to form an opinion and report at a level specified by GAR

42
Q

Is Independence required for a Preparation engagement?

A

No. A preparation engagement is a nonattest service that does not require the accountant to determine whether they are independent.

The accountant need not (1) verify the accuracy or completeness of management’s information, (2) obtain evidence to express an opinion or a conclusion, or (3) report on the financial statements.

43
Q

What should an accountant do if performing a review finds a material departure from GAAP?

A

Request management to correct the departure.

If the client fails to do so, the departure, including its effects, should be disclosed in a separate paragraph of the review report.

The conclusion paragraph should use the phrase “except for.”

Audit (8 decks)

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