Ch. 2 Fundamental Concepts Flashcards
What is CSQC in the handbook?
Canadian Standards on Quality Controls tells you firm’s responsibilities for its system of quality control for audits and review of financial statements, and other assurance engagements.
Tells you:
- Elements of a System of Quality Control
- Leadership Responsibilities for Quality within the Firm
- Relevant Ethical Requirements
- Ethical Requirements
- Acceptance and Continuance of Client Relationships and Specific Engagements
- Human Resources
- Engagement Performance
- Monitoring
- Documentation of the Systems of Quality Control
What is CAS?
Canadian Auditing Standards provide guidance over uadits of financial statements and other historical financial information
What is Other Canadian Standards (OCS)?
They apply to assurance engagements other than the audit of financial statements and include the following:
- General Assurance and Auditing
- Specialized Areas
- Review Engagements
- Related Services
What is General Assurance and Auditing
Provides information and details to general attestation engagements, direct engagements, reporting on controls at a service organization, and association.
What does the Canadian Public Accountability Board do?
They’re an audit regulator that regulates audit work - they only oversee reporting issuers ( a company that must file finanical statements with one or more provincial securities commissions)
In Canada, provinces and terriotires are responsible for securities regulations.
How often they review depends on how many clients they have and can range fro mannually to every two years, and every 3 years
They review:
- policies and procedures
- independence and ethics
- human resources and professional development
- quality monitoring
- audit file documentation
What happens if issues are found in a CPAB inspection?
A written response must be provided to the inespection findsings. They will also require the firm to perform more audit work in the current year to ensure that the financial statements are not materiality misstated.
Any CPAB recommendations must also be implemented by the audit form. They can impose three types (each one increasing in severity):
- requirement - disciplinary action remains private
- restriction - firm must notify the Canadian securities regulator of their discipline
- saction - they must notify all of its reporting issuer’s audit committee of the action
What is a statutory audit?
Audits required by law - required by the securities commissions
What is a voluntary audit
Those not required by law
What is agency risk?
Risk that managers are not acting in the best interest of shareholders
shareholders can help mitigate the agency risk surronding finanical statements by employing an external auditor
What is agency cost?
Costs of techniques used to reduce agency risk due to the potentially conflicting interests of shareholders and management
Includes the cost of the audit and the costs incurred in aligning the manager’s and sharheolders’ interest such as bonsues based on share price, pay structures, etc.
What is information risk and cost?
the risk that the finanical information presented is not reliable and that decisions based on this information will not tield the results as expected.
What is expectations gap?
Misunderstanding of the scope of an auditor’s work.
