Audit Section 2-1

Question 1

When a group engagement partner decides to make reference to a component auditor’s examination under US GAAP, the group engagement partner’s report should state “ We did not audit the F/S of X company…..” in which part of the audit report?

Answer 1

The auditor’s responsibility paragraph.

Question 2

If an accounting change has NO MATERIAL EFFCT on the F/S in current year, but the change is reasonable certain to have a material effect in later years, the change should be

Answer 2

DISCLOSED in the NOTES to the F/S for the CURRENT year, but NO modification of the auditor’s report is necessary.

Question 3

If an change in accounting principle has MATERIAL EFFCT on the F/S in current year

Answer 3

It would be treated as a consistency modification in the auditor’s report for the current year.

Question 4

A division of responsibility ONLY affect the auditor’s responsibility paragraph and the opinion paragraph,

Answer 4

but DOES NOT REQUIRE inclusion of a basis for opinion paragraph and not prevent the issuance of an UNMODIFIED opinion.

Question 5

Involvement of another auditor ( A auditor decides to take responsibility for the work of the other Auditor) DOES NOT

Answer 5

prevent the issuance of an UNMODIFIED opinion. and NOT affect the introductory paragraph, the auditor’s responsibility paragraph and the opinion paragraph.

Question 6

The introductory paragraph of disclaimer of opinion is MODIFIED.

Answer 6

“We were engaged to audit the accompanying F/S of xxx Company” ( Under Qualified or Adverse opinion is “We have audit the accompanying F/S of xxx Company”)

Question 7

POSITIVE assurance is provided in OCBOA reports, reports on specified EIA (element, items, accounts) and reports on special-purpose financial presentation to

Answer 7

comply with contractual agreement or regulatory provision.

Question 8

NEGATIVE assurance is provided in

Answer 8

Reports on compliance with aspects of contractual agreements or regulatory requirements related to audited F/S

Question 9

The auditor has NO ACTIVE RESPONSIBILITY to make any inquiries or to perform any further auditing procedures to discover subsequent events after

Answer 9

The original date of the auditor’s report.

Question 10

Subsequent discovery of facts AFTER the report release date, the auditor should

Answer 10

首先判断 是否有人现在依靠（依赖）这个报告里的F/S

如果有，

1. 建议客户修改F/S
   2.建议客户披露修改后的F/S
   3.做出NOTIFICATION（声明）F/S和auditor’s report不应该再依靠。
   如果客户拒绝以上三点
   1.通知客户的董事会中每个人
2. Dissociate auditor’s report with F/S
   3.通知管理当局
   4.通知与使用F/S相关的当事人.
   D A R TO FIX IT.

Question 11

Omitted audit procedures discovered AFTER submission of the audit report

Answer 11

1. 有无其他程序已经充分的补偿忽略的程序（已经起到同样的作用）。Whether other audit procedures were adequate to compensate for the omitted audit procedure. 有则妙，不用再管。
2. 忽略掉的程序损害（影响）审计者现在拥有的，对之前发表过的意见的支持。且有人依靠审计者的报告，审计者应该迅速的重新采用省略的程序。

Question 12

Adjustments or disclosures are made AFTER the original date of the auditor’s report, the auditor may

Answer 12

要么DUE DATE （only for the particular subsequent event), 要么 EXTEND the auditor’s responsibility for all subsequent events to this later date.

Question 13

Standard compilation report

Answer 13

We ( the accountant) have performed compilation engagement in accordance with SSARS (statements on standards for accounting and review services)

Question 14

Standard review report

Answer 14

stating that a review is substantially less in SCOPE than an audit.

Question 15

Review engagement requirement

Answer 15

ULIARCPA

Question 16

Change in engagement is during the course of an engagement, a client may ask the accountant to change an audit to a compilation or review, or a review to a compilation (从高到低）

Answer 16

If the accountant decides a change in engagement is JUSTIFIED, he must comply with the standard for a compilation or review, then issue an appropriate report. The report SHOULD NOT refer to the original engagement, any procedure performed as part of the engagement, or any scope limitation.

Question 17

Prepare engagement does not require CPA independence. Compilation engagement DOES NOT require CPA independence, but the lack of independence required to be specifically disclosed, however, the CPA has the option,but NOT required to disclose the REASON for the lack of independence, and not assurance and no opinion were provided.

Answer 17

Review engagement require CPA independence, limited assurance was provided.

Question 18

Compilation requirement

Answer 18

1. knowledge of industry accounting principles and practices.
2. understanding of client’s business
   S(staff qualification).T(transaction type&频率.A（accounting basis for prepare F/S).F(form of accounting records).F(F/S form and content)
3. reading the F/S

Question 19

When the client (management) does not (refuse) to provide representation letter to accountant, the review is

Answer 19

incomplete and accountant may not issue the review report and WITHDRAW from an engagement to review a nonissuer’s F/S. (note there are NOT adverse or qualified opinion anymore)

Question 20

Document in a compilation engagment

Answer 20

1. the engagement letter
2. any significant findings or issue
   a. results of compilation procedures indicating that the F/S could be materially misstated and the action taken to address these findings.
   b. the resolution of questions and concerns raised during the compilation procedure.
3. oral or written communication with management regarding fraud or noncompliance with laws and regulation that came to the CPA’s attention
4. a copy of F/S
5. a copy of accountant’s report.