Auditing Standards and Engagement Planning Flashcards
What are some item(s) that a successor auditor ordinarily should request to review of the predecessor’s working papers?
Contingencies and Internal Controls
What should you as the auditor do if new information becomes available that could require a reevaluation of the quantitative level of materiality applied during an audit?
Raise or lower the materiality level as appropriate to the situation.
i.e. An initial determination of the materiality level could have been either too high or too low.
What are some factors a CPA would ordinarily consider in the planning of an audit engagement?
(A) Financial statement accounts likely to contain a misstatement
(B) Conditions that require extension of audit tests
True or False.
Detection Risk is independent of the Financial Statement Audit.
FALSE.
Detection Risk is affected by the audit, and can be changed at the auditor’s discretion. It is not independent of it.
What should the auditor do if they propose adjusting entries to the client, but they refuse to correct the errors?
Document the errors and the conclusion that the financial statements are free from material mistatement
What understanding is required to be established by the auditor regarding the services to be performed for each engagement with a client?
The auditor’s responsibility for ensuring that the audit committee is aware of any significant deficiencies or material weaknesses in internal control that come to the auditor’s attention.
What would be a step considered in an auditor’s decision to assess control risk below the maximum level?
Identifying specific internal control policies and procedures that are likely to detect or prevent material mistatements.
Why? - Because this shows that the auditor could reduce the amount of substantive testing and so improve the efficiency of the audit.
What is meant by the phrase “generally accepted accounting principles?”
It encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
Fill in the blank.
Tests of details are ___A___ that are performed after evaluating ___B___.
A. substantive tests
B. internal control
What type of situation would heighten an auditor’s concern about the risk of material misstatement arising from fraudulent financial reporting?
Management having frequent disputes with the auditor on accounting matters.
What are some ways (or experiences) an audit committee financial expert of an issuer generally must have acquired the attributes of a financial expert?
A. Assessing the performance of public accountants with respect to preparation, auditing, or evaluation of financial statements
B. Actively supervising a principal financial officer or principal accounting officer
C. As a principal financial officer, principal accounting officer, controller, public accountant, or auditor
WHAT is the difference between Assurance and Consulting Services?
Assurance (and Advisory for that matter) focus on improving information whereas Consulting Services focuses on providing advice
Also, consulting services provide advice in two-party arrangements whereas assurance services generally apply when one party wants to monitor another
WHAT is one purpose of establishing quality control policies and procedures for deciding whether to accept new clients?
To provide reasonable assurance that the firm has the adequate resources to undertake new engagements.
What are the Statements on Auditing Standards (SASs)?
They are generally accepted auditing standards.
i.e. SASs are intended to establish auditing standards rather than auditing procedures.
What is one item that should be included in the documentation of an engagement quality review?
The date on which the engagement quality reviewer provided concurring approval of issuance
NOTE: The Quality Reviewer does NOT provide an assessment of Fraud but rather an assessment of the engagement team’s assessment of Fraud
