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Auditing (ACCT 4334) > Chapter 1 (Auditing and Assurance Services) > Flashcards

Chapter 1 (Auditing and Assurance Services) Flashcards

1
Q

AICPA created….

A

FASB

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2
Q

Who is the general umbrella to standards board?

A

GAAP

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3
Q

ASB

A

auditing standards board

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4
Q

Sarbanes Oxley created….

A

PCAOB (public company auditing oversight board)

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5
Q

If there is so much, where do CPAs start?

A

identifying the business risk is where the audit starts

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6
Q

Forces creating demand-users demand for reliable information, users demand for…

A

reliable
relevant
timely information

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7
Q

4 environmental conditions that increase user demand

A

complexity
remoteness
time sensitivity
consequences

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8
Q

the risk (probability) that the information (mainly financial) disseminated by a company will be materially false or misleading

A

information risk

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9
Q

When users want someone to lend credibility to the information, when we provide this credibility it is called….

A

assurance

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10
Q

When assurance is for specific assertions made by management.

A

attestation

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11
Q

When the assertions are embodied in a companies financial statements.

A

auditing

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12
Q

a systematic process of objectively obtaining and evaluating evidence regarding assertions (financial statements) about economic acctions and events to ascertain the degree of correspondence between the assertions and established critic (GAAP) and communicating the results (auditor’s report) to interested users (creditors, investors).

A

auditing

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13
Q

In the auditing definition, objectively is used because…

A

we as CPA’s are independent

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14
Q

We judge our client’s accountant records against…

A

GAAP

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15
Q

Process, purposeful, planned, based on logical structure.

A

systematic

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16
Q

What is the purpose of obtaining and evaluating?

A

to obtain the degree of correspondence between the assertions and the established criteria

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17
Q

What is the overview of the financial statement auditing?

A

we start with the objective outsider which is the independent auditor, then we obtain and evaluate evidence which is the knowledge of client’s business, then branches out to the assertions about economic actions and events which are the financial statements which are all under GAAP (FASB, APB, ARB, GASB, AICPA, AcSEC, EITF, SEC), then those two join together to produce the audit reports and other communication

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18
Q

auditing deals with…

A

financial statements

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19
Q

attestation services deals with…

A

primary financial information

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20
Q

assurance services deals with…

A

an information

21
Q

Very specific definition
As a CPA you are fully certified to the SCC financial statements
Giving reliability for data
Actually have standards
Requires a written report
Things that are required by GAAP (B/S, I/S, C/F, Footnotes)

A

auditing

22
Q

We have standards
Requires a written report
Given reliability for data
This is were we do some sort of assurance that is not audit

A

attestation services

23
Q 
intended for a very large audience
Very specific
Like consulting work
We do not have standards
No written report is required
Not providing reliability
A

Assurance services

24
Q

There critical components of assurance series…

A

Information or a process on which the assurance service is provided

A user or group of users who derive value from the assurance services provided

An assurance service provider

25
Q

Independent professional services that improve the quality of information, or its context, for decision makers.

Can be provided to management or external users/

A

assurance services

26
Q

The breakdown of Professional

A

professional judgment

  • experience
  • education
  • license
27
Q

One in which a practitioner is engaged to issue or does issue a report on subject matter or an assertion about the subject matter that is the responsibility of another party

A

attestation engagement (subset of assurance and always involves a report that goes to a third party

28
Q

Agreed upon procedures

Pro forma financial information

Financial forecasts and projections

A

financial attestation engagement

29
Q

Compliance with contractual requirements

Effectiveness of internal control systems

Inventory quantities and locations

A

non-financial attestation engagements

30
Q

What is the basic assurance process?

A

First we are going to gather evidence about assertions, then evaluate the evidence agains an objective criteria. After that we are going to communicate the results to interested parties

31
Q

What do auditors do?

A

they provide reasonable assurance

An auditor provides reasonable assurance that the financial statements are free of material error and fraud

The expectation GAAP

32
Q

The Balance sheet goes with the…

A

existence assertion

33
Q

The income statement goes with the…

A

occurrence

34
Q

Footnotes have to be just right (How do we know that? that’s just professional judgment)

A

Presentation and disclosure

35
Q

Applies to the balance sheet

A

existences (assets)

36
Q

Applies to the income statement

A

Occurrence (transactions)

37
Q

Remember this by owning/owing

A

rights and obligations

38
Q

Is everything recorded that should have been and based on cutoff. Income manipulation.

Everything is in its proper period

Is the account complete

A

Completeness/Cutoff

39
Q

Is inventory valued properly (i.e.: lower of cost or market based on FIFO etc., obsolete, damaged goods not included

Did the accountant valuate the statements according to GAAP?

Methodology of depreciation: SL, Sum of all year, double declining, MACR

A

valuation or allocation

40
Q

What procedures can you use to verify the answer?

A

PERCV (the 5 management assertions)

41
Q

An auditor’s tendency not to believe management’s assertions without sufficient corroboration.

A

professional skepticism

42
Q

Have to listen to people and take their word but, I am going to verify.

A

skepticism

43
Q

When do you stop auditing?

A

that is based on your professional judgment

44
Q

What are the three public accounting profession services?

A

assurance

tax consulting

consulting

45
Q

Types of audits and auditors.

A

financial (external auditors/CPAs)

operational (internal auditors/CIA)

Compliance (governmental auditors)

Forensic (Fraud auditors/CFEs)

46
Q

Ensure that financial statements are accurate.

A

financial (external auditors/CPAs)

47
Q

Improve operational economy

Improve operational efficiency

A

operational (internal auditors/CIAs)

48
Q

Ensure compliance with company and/or governmental rules and regulations

A

compliance (governmental auditors)

49
Q

Most audits are combinations of financial, operational, and compliance audits.

A

forensic (fraud audits/CFE’s)

Auditing (ACCT 4334) (4 decks)

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