Audit Standards & Engagement Planning Flashcards
How does an auditor obtain reasonable assurance?
Plans the work
Properly supervises assistants
Determine and apply appropriate materiality levels
Identify and assess risks of material misstatement
Obtain sufficient appropriate audit evidence
Which companies adhere to the clarity standards?
Non-issuer and non-public companies
What are the sections in the clarity standards report?
Introduction Objectives Definitions Requirements Application and Other Explanatory Material
What are the requirements of the clarity standards report?
Evaluate acceptability of applicable financial reporting framework: the needs of the users, applicable framework meets those needs, most appropriate framework under the circumstances, 2 major responsibilities added to audit report, auditor required to apply quality control procedures at engagement level
What does GAAS measure?
The quality of the auditor’s work
What makes up GAAS?
Training & proficiency Independence Professional Care Planning and supervision Internal controls Corroborative audit evidence Accounting principles in conformity to GAAP No new accounting principles applied Omitted informative disclosure - None Expression of an opinion
What are the responsibilities of an auditor?
Competence and capabilities
Complying with ethical requirements (Independence)
Maintaining professional skepticism and professional judgment
Proper education in accounting
Practical experience
CPE
Which attestation engagement requires an auditor to remain independent?
Examinations (audits)
Reviews
Agreed-upon procedure engagement leading to findings
Special Reports
Which engagement does not require independence?
Compilations (but must indicate lack)
Taxes
Consultations
How does an auditor exercise due professional care?
Critical review of judgment used at every level Skill and care of prudent CPA Preparing complete workpapers Due diligence Professional Skepticism Competency and Diligence
What are the steps in the audit process?
Qualification of auditor and quality of work Competency and capabilities Ethical requirements (independence & due prof care) Skepticism and professional judgment Integrity of Management (evaluate) Predecessor auditor interview Audit committee communication Engagement letter
What are the two key considerations for an auditor to accept an engagement?
Acceptability of financial reporting framework being used
Management’s Integrity and their understanding/acceptance of certain responsibilities
What are the responsibilities of management?
Preparation and fair presentation of financial statements in accordance with the applicable framework
Design, implementation, and maintenance of internal control
Not limiting the scope of the audit
What should the successor auditor determine when interviewing a predecessor?
Reasons for the change in auditor
Integrity of management
Disagreements arising during predecessor’s audit
Communication with audit committee
What are the certain matters an auditor should communicate with those charged with governance?
Disagreements with management Noncompliance with applicable laws and regs Significant accounting policies Adjustments Prior discussions with management Problems Responsibilities Other information Views of other accountants Estimates
