Audit - The Basics

Question 1

Purpose of Audit

Answer 1

To provide financial statement users with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Question 2

Audit of Financial Statement

Answer 2

The financial statements are the product and property of the company; the independent auditor merely audits and expresses an opinion on them.

Question 3

Management Responsibilities

Answer 3

• preparation and fair presentation of the financial statements
• the design, implementation, and maintenance of internal control
• providing the auditor with access to information and persons within the entity

Question 4

Auditor Responsibilities

Answer 4

• expressing an opinion on the financial statements based on the audit
• having appropriate competence and capabilities to perform the audit, complying with relevant ethical requirements, maintaining professional skepticism, and exercising professional judgment during the planning and performance of the audit.

Question 5

To express an opinion

Answer 5

Auditor obtains reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud.

Question 6

Reasonable Assurance

Answer 6

In order to obtain reasonable assurance, auditor must,

• plan the work and supervise assistant
• determine and apply appropriate materiality levels
• identify and assess risks of material misstatement
• obtain sufficient appropriate evidence.

Question 7

Conduct of the Audit

Answer 7

Requires:

• Professional Skepticism
• Ethical Requirements
• Professional Judgment
• Sufficient Appropriate Audit Evidence and Audit Risk
• Compliance with GAAS

Question 8

Auditor’s Report

Answer 8

• Should be in writing
• Should Include:
  
  • Title
  • Addressee

Question 9

GAAS

Answer 9

compliance with GAAS is mandatory for all audit engagements

a planned and executed audit must be performed in accordance with GAAS