Ch 12 Flashcards
Public entities are required to file certain financial info with the SEC within what period of time?
60 days of their fiscal year end
How do auditors’ reports serve as an important tool to communicate to third party users?
1 conformity of entity’s financial statements with GAAP
2 other important matters affecting entity
Information which includes audited financial statements, footnotes and other required disclosures is filed under what form?
10-K
When are audited financial statements necessary for Nonpublic entities? 3
1 3rd party users demand audited financial statements as condition
for certain lending or investing activities
2 monitoring entity’s activities
3 SEC requires audits for governments and certain Nonpublic
entities
What is the auditors opinion on whether the entity’s financial statements and related disclosures are based in accordance with GAAP based on? 2
1 test of controls
2 substantive procedures performed during audit
What 2 additional types of reports does accounting standards 5, AS 5,
Mandate under SOX?
1 report prepared by entity’s management on effectiveness of
Entity’s internal control over financial reporting
2 report prepared by auditors on effectiveness of entity’s internal
Control over financial reporting
3 mandatory reports required for public entity, who they are prepared by?
1 effectiveness of internal control over financial reporting prepared
By management
2 effectiveness of internal control over financial reporting prepared
By auditor
3 fairness if financial statements and related disclosures prepared
By auditors
Mandatory report for Nonpublic entities and who would it be prepared by?
Fairness of financial statements and related disclosures based on
User demand prepared by auditor
What 3 items does the independent auditors report on financial statements express an opinion on?
1 entity’s financial position
2 results of operations
3 cash flows in accordance with GAAP
Who is the independent auditors’ report addressed to?
2) who could also be addressed in the independent auditors report? 3
The client
2) board of directors, shareholders, creditors (may also be addressed)
What does ASB stand for?
Auditing standards board
Auditing Standards Board report
Report of Nonpublic entities
4 sections contained in standard unmodified reports for Nonpublic entity
1 introduction
2 management’s responsibility for financial statements
3 auditor’s responsibility
4 opinion
Standard report Nonpublic entity Unmodified opinion: Introduction (paragraph)
Identifies financial statements and years examined by audit team
Standard report Nonpublic entity unmodified opinion: Management’s responsibility for financial statements (paragraph), indicates management’s responsibility for 2 things?
1 fairness of financial statements
2 design, implementation and maintenance of internal control
Under which financials are prepared
Standard report Nonpublic entity Unmodified opinion: Auditors Responsibility, what are the 3 paragraphs included?
1 identify audit team’s responsibility to conduct audit under GAAS
2 provide brief description of an audit
3 indicate that the audit evidence provides basis for audit team’s
Opinion
Standard report Nonpublic entity unmodified opinion: Opinion (paragraph) expresses audit team’s opinion on whether financial statements Present the…
2) what is the report in accordance with?
financial condition, results of operations, cashflows
2) in accordance with auditing standards generally accepted in of
United States of America
Following the opinion paragraph, what should be included in the auditor’s report? 2
1 signed using firm’s name
2 date of auditors’ report
Date of auditors report
Date when auditors have obtained sufficient appropriate
Evidence to support opinion on auditors’ report
difference between standard report for public entity (according to
AS 5) vs. Standard report for a Nonpublic entity
Financial statements are audited in accordance with?
public: audited in accordance with standards of “Public
Company Accounting Oversight Board (United States)”
Nonpublic: “auditing standards generally accepted in the United
States of America”
difference between standard report for public entity (according to
AS 5) vs. Standard report for a Nonpublic entity
What report exists in the standard report for public entities that doesn’t exist in the standard report for Nonpublic entities?
Audit teams report and opinion in entity’s internal control over
Financial reporting
Who is the standard report for public entities addressed to?
Board of directors and shareholders
In the standard report for a public entity, when separate reports on internal control are provided, their report will reference…
Their report and opinion on financial statements
Integrated report
Single report issued by auditors expressing their opinion on
Fairness of the financial statements
And effectiveness of internal control over financial reporting