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AUD > Audit Reports > Flashcards

Audit Reports Flashcards

1
Q

What should be included for the Auditor’s address?

A

The City and State where located

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2
Q

What is Management Responsible for in regards to the Financial Statements?

A

Preparation and Fair Presentation of Financial Statements in accordance with the Applicable Financial Reporting Framework

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3
Q

What is Management Responsible for in regards to Internal Control?

A

Internal Control Design, Implementation, Maintenance

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4
Q

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

A

(TIM-AA) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion

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5
Q

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

A

(TIMA-BA) Title; Introduction; Management Responsibility; Auditor Responsibility; Basis for (Modified) Opinion; Audit Opinion

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6
Q

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

A

(TIM-AA EMO) Title; Introduction; Management Responsibility; Auditor Responsibility; Audit Opinion; Emphasis-of-Matter; Other-Matter

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7
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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8
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

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9
Q

What standards govern compilation engagements?

A

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

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10
Q

Which clients can have compilation engagements?

A

Non-SEC (non-public) registrants only.

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11
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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12
Q

What disclosures are required for Compilation engagements?

A

Disclosures not necessary must state that they are not included

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13
Q

What standards govern Review engagements?

A

SSARS (Statements on Standards for Accounting and Review Services)

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14
Q

What type of assurance is given in a Review engagement?

A

Reviews give limited assurance.

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15
Q

What procedures are required for Review engagements?

A

Analytical procedures are required for reviews. Compare results to documented predictions.

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16
Q

What is a Review engagement?

A

Financial statements are presented with no opinion expressed- and limited assurances are given. Independence is required for a review engagement.

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17
Q

What is a Forecast?

A

A prospective financial statement that uses normal circumstances. A financial forecast reflects the expected financial results of a future period. It is based on expected conditions and expected courses of action. General and limited use allowed.

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18
Q

What is a Projection?

A

A prospective financial statement using hypothetical situations. A projection reflects the financial position and results of operations based on a “what if” type of scenerio. Only limited use by the client is allowed.

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19
Q

What are the requirements for Agreed Upon Procedures?

A

Independence is required; Only limited use by the client is allowed.

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20
Q

What disclosures are required for remote likelihood of losses?

A

No disclosure required.

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21
Q

What disclosure is required for a probable loss contingency?

A

Accrue if estimable. Emphasis-of-Matter paragraph if not estimable.

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22
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.

23
Q

How is a gain contingency reported?

A

Gain contingencies are not reported.

24
Q

How does an immaterial GAAP issue affect the audit opinion?

A

It doesn’t. Opinion is Unmodified.

25
Q

How does a very material GAAP issue affect the Audit Report?

A

Modified-Adverse Opinion is issued. Emphasis-of-Matter paragraph is added after Opinion paragraph.

26
Q

How do GAS standards compare to GAAS?

A

GAS is more strict than GAAS.

27
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.

28
Q

What is meant y the term generally accepted auditing standards?

A

Measure of the quality of the auditor’s performance

29
Q

What 2 sets of auditing standards may an auditor conduct an audit in accordance with? What modifications to the auditor’s report should be made?

A

Both GAAS and GAGAS. In this case, the auditor should add additional language to the Auditor’s Responsibility paragraph to state that the audit was conducted in accordance with both sets of auditing standards.

30
Q

What are subsequent events? (When do they occur)

A

Subsequent events are events or transactions that occur after the balance sheet date, but before the financial statements are issued.
A subsequent even may require adjustment to the FS or may require disclosure of an even without adjustment to the FS.

31
Q

What are the 2 types of subsequent events?

A

1.Recognized (Type I) Events- Conditions Existing On or Before the Balance Sheet Date– An adjustment is usually required.
Ex. A trade receivable existing at the date of the financial statements that is deemed uncollectible bc of bankruptcy of the customer requires a adjustment to the FSs.
2. Non-recognized (Type II) Events- Conditions Existing After the BS Date– May require footnote disclosure.
Ex. Significant business events, such as the purchase of a business of the sale of debenture bonds, occurring subsequent to the date of FSs, require no adjustment to the FS, but may require significant additional disclosure.

32
Q

What procedures should the auditor perform to identify subsequent events?

A
  1. Review post BS transactions for proper cutoff and to better evaluate year end balances
  2. Representation letter should be obtained from management regarding whether any events occurred during the subsequent period that would affect the FSs
  3. Inquiry of management and those charged with governance about whether any subsequent events have occurred that could effect the FSs
  4. Minutes of stockholders, directors should be read.
    Examine latest available interim FSs and compare them with the FSs under audit.
33
Q

If an auditor suspects illegal bribes but cannot determine whether they were material to the FSs or whether senior management was involved, what type of opinion should the auditor express?

A

Auditor should disclaim an opinion on the FSs.

34
Q

If an accounting change has no material effect on the FS in the current year, but the change is reasonably certain to have a material effect in later years, the change should be…

A

Disclosed in the notes to the FS of the current year.

35
Q

What are the 2 general purpose frameworks of accounting? What are the 5 Special Frameworks?

A 
General:
1. GAAP
2. IFRS
Special:
1. Cash and modified cash basis
2. Tax basis
3. Regulatory basis
4. Contractual basis
5. Other basis
36
Q

What standards must an auditor of a nonissue conduct an audit in accordance with?

A

ASB standards. (accounting standards board)

37
Q

Who/what established the PCAOB and what does the PCAOB establish?

A

SOX Act of 2002 established the PCAOB and the PCAOB establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for issuers.

38
Q

What engagements do SSAE apply to?

A

Engagements in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or on an assertion about the subject matter, which is the responsibility to of another party.

39
Q

What is the most authoritative level of guidance for audits of non issuers?

A

General guidance provided by a Statement on Auditing Standards.

40
Q

What standards must an auditor of a non-issuer conduct the audit in accordance with?

A

ASB standards (Accounting Standards Board)

41
Q

What does a quality control system consist of?

A

Policies and procedures designed, implemented, and maintained to ensure that the firm complies with professional standards and appropriate legal regulatory requirements, and that any reports issued are appropriate in the circumstances.

42
Q

What should the auditor’s report on summary financial statements derived from audited statements indicate?

A
  1. That the CPA audited and expressed an opinion on the complete FSs
  2. The date of the auditor’s report on the complete FSs.
  3. The type of opinion expressed
  4. Whether, in the auditor’s opinion, the information set forth in the summary FSs is consistent, in all material respects, with the audited FSs from which it was derived.
43
Q

What type of opinion is required for financial statements prepared in accordance with an OCBOA that are not suitably titled?

A

A qualified opinion with a Basis for Modification paragraph.

44
Q

What procedures are included in a review of a non-issuer?

A

Inquiry and analytical procedures. (including inquiry about related party transactions

45
Q

An accountant’s compilation report on a financial forecast should include a statement stating…

A

That there will usually be differences between the forecasted and actual results.

46
Q

What is a comfort letter? What dates does it cover?

A

A letter from the CPA to the named underwriter and/or certain other requesting parties just before the registration of the client’s securities.
It covers the date of the last auditor’s report to the effective date of the registration.

47
Q

What are pro forma financial statements?

A

They show what past financial results of an expired period would have been if something had been different.

48
Q

What 3 ways can a practitioner be associated with prospective financial statements?

A
  1. Compilation- No assurance
  2. Examination (the report is generally to be used by a 3rd party)- Opinion
  3. Agreed-upon procedures- Disclaimer
49
Q

What is the purpose of a Compilation of Prospective Financial Statements?

A

The purpose of a compilation of prospecve FSs is the proper assembling of the financial data based on the responsible party’s assumptions.

50
Q

What are the responsibilities of the accountant regarding the compilation of prospective FSs?

A

The accountant should read the prospective FSs with the summaries of significant assumptions and accounting policies and consider whether they appear to be presented in conformity with AICPA presentation.
The accountant is not required to gather supporting evidence.

51
Q

Statements on Standards for Attestation Engagements, established by the AICPA, provide information relating to what major attestation services?

A
  1. Agreed Upon Procedures
  2. Financial Forecasts and projections
  3. Pro forma Financial Statements
  4. Internal Control over Financial Reporting
  5. Compliance
  6. MD & A
52
Q

In an attest engagement, when should the use of the accountant’s report not be restricted?

A

When reporting on an assertion about the subject matter instead of reporting directly on the subject matter.

53
Q

What is a WebTrust engagement?

A

An attestation engagement designed to measure transaction integrity, information protection, and disclosure of business practices. When an unmodified report is issued, the client may add the CPA WebTrust Seal to its Web site, indicating that its site is a reasonably safe and private place for e-commerce.

54
Q

What does an examination of a financial forecast involve?

A
  1. Evaluating the preparation of the prospective FSs
  2. Evaluating the support underlying the assumptions
  3. Evaluating the presentation of the prospective FSs in conformity with AICPA guidelines
  4. Issuing an examination report.

AUD (12 decks)

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