Chapter 1 Flashcards
What is an auditors main responsibility?
An auditor’s responsibility is to express an opinion on the financial statements based on an audit (their responsibilities for audited financial statements are confined to the expression of the auditors opinion)
Audit Evidence must be…
Sufficient and appropriate audit evidence to afford a reasonable basis for the opinion
What is the most authoritative auditing guidance for audits of nonusers?
General guidance provided by a statement of auditing standards (SAS)
What does the preparation and fair presentation of applicable financial framework require?
The preparation and fair presentation of the applicable financial reporting framework requires identification of the applicable financial reporting framework and inclusion of adequate description of the framework, as well as preparation and fair presentation in accordance with the framework
What are mitigating factors when considering managements plans to deal with adverse effects in the case of a going concern issue?
- plans to increase ownership equity
- plans to borrow money
- plans to restructure debt
- to sell assets
- to reduce or delay expenditures
When should the auditors report reference the country of origin in the audit report?
The auditors report should include reference to the US as the country of origin of both the accounting principles used to prepare the FS and the auditing standards the auditor followed in performing the audit
What report would an auditor most likely issue if there was an unjustified accounting change?
Qualified or adverse. Not unmodified w/ emphasis of matter paragraph, that is only for justified accounting changes
What happens when the auditors doubt about the entity’s ability to continue as a going concern is lifted in the following year?
The emphasis of Matter paragraph included in the year 4 auditors report should NOT be repeated. (No description of the reasons or plans for recovery need to be included)
What happens when a change in accounting principle has no material effect on the compatibility of the financial statements?
If there is no material effect, the auditor does not need to recognize the change in the current year audit report. (Not refer to consistency in the audit report).
If an auditor reissues the audit report but does not change any wording on it, what date should they use for the audit report reissued?
The auditor should use the original report date on the reissued report. Use of a subsequent event would imply that the auditor has done additional work
When is dual dating used?
When there is a subsequent event occurring after the original date of the auditor’s report, and the auditor wishes to extend responsibility only for the one event. (It is not used for comparative financial statements).
What is an auditor’s responsibility for supplementary information which is outside the basic financial statements but is required by FASB?
The auditor should apply certain limited procedures to the required supplementary information, and add an other-matters-paragraph to the financial statement audit report
If management (of a governmental body) declines to present information required by GASB, what type of report should an auditor issue?
An unmodified report with an other matters paragraph
What are generally accepted auditing standards?
They are measures of the quality of the auditors performance, and guide the auditor in the performance of a properly planned and executed audit.
What should an auditor do FIRST when they discover an omission of an audit procedure related to a previously issued report?
They should first assess the importance of the omitted procedure to the auditor’s ability to support the previously expressed opinion (REGARDLESS of whether or not there are persons currently relying on it)
