Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Audit & Assurance > Chapter 12 - Reports on Audited F/S > Flashcards

Chapter 12 - Reports on Audited F/S Flashcards

1
Q

for nonpublic entities, what does the auditor report on?

A

fairness of financial statements and related disclosures

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

for public entities, what does the auditor report on?

A

fairness of F/s and related disclosures

effectiveness of internal controls over financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

for public entities, what does management report on?

A

effectiveness of internal control over financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

for public companies, what does both the auditors and management report on?

A

effectiveness of internal control over financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

a control is…

A

any process to prevent or detect something

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

not every public entity needs a…

A

public control audit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what kind of public entity would not have a public control audit?

A

a very small company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what are the required reports for issuers?

A

financial statements, internal control over financial reporting (ICFR)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what are the two reporting options?

A

combined F/S and ICFR or separate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

if separate reports, each report will…

A

reference the opinion and the date of the other report

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

the standard (unqualified) report means a “__” report

A

clean

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

three sections of auditors’ reports on F/S

A

opinion on F/S, basis for opinion, critical audit matters

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is in the “opinion of the F/S section”?

A

F/S and years examined, auditors’ opinion on the F/S, reference to report and opinion on ICFR (ONLY IF SEPARATE OPINIONS)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is in the “basic for opinion” section?

A

management is responsible for F/S, auditors responsible for expressing an opinion on F/S, firm is registered with PCAOB and required to be independent, audit conducted in accordance to PCAOB stands, audit provides basis for opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what is in the “critical audit matters” section?

A

identifies any matters communicated or required to be communicated to audit committees, identifies audit procedures performed to address CAMS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

any CAMs that are required to be communicated to the audit committee are…

A

material accounts or disclosures, involve challenging, subjective, or complex judgements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

CAMs have higher levels of…

A

risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

CAMs have significant audit team and management…

A

judgement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

CAMs are significant…

A

transactions and events

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

if engaged to communicate key audit matters, add CAM section following…

A

basis for opinion section

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

CAM section says why _______ and how __________

A

matter was considered a key audit matter, and how the matter was address in the audit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

common CAMs include…

A

intangible assets, revenue, restructuring, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what asset can never be a CAM?

A

cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

why can’t cash be a CAM?

A

because it is so low risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what is the title to the standard report?

A

Reporting of Independent Registered Public Accounting Firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

who is the standard report addressed to?

A

the client (shareholders and board)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

the standard report includes the date when…

A

auditors have obtained sufficient and appropriate evidence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

the date of the auditors’ report is the day that…

A

auditors have obtained sufficient evidence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

date of the auditors report is typically the same as…

A

the filling date with the SEC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

who hires auditors?

A

the board

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

the standard report is signed by…

A

the accounting firm and the identification of office of firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

in the standard report, you indicate the…

A

tenure of accounting firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

who does not sign the standard report?

A

partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

four types of opinions

A

unqualified (standard), qualified, adverse, disclaimer of opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

if it is a unqualified opinion…

A

F/S is in accordance with GAAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

standard report may be modified to disclose…

A

additional matters

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

if it is a qualified opinion…

A

“except for” some matter, F/S are in accordance with GAAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

if it is an adverse opinion…

A

F/S are not in accordance with GAAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

three reasons for departing from standard report

A

departures from GAAP, scope limitations, audit of group financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

examples of departures from GAAP

A

cash basis instead of accruals, expensing assets immedately (not capitalizing machinery), recording revenue before its “earned”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

in a departure from GAAP, we give a standard report if…

A

it is not material

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

in a departure from GAAP, we give a qualified opinion if…

A

it is material but not pervasive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

in a departure from GAAP, we give an adverse opinion if…

A

it is material and pervasive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

for a departure from GAAP, it is material if…

A

amount would change an investment decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

in a departure from GAAP, there can be a missed statement as long as…

A

it is not material

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

pervasive means…

A

it reaches further

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

in a departure from GAAP, how would we modify the report if it is a qualified opinion?

A

add paragraph explaining departure and detailing $$ acts involved; indicate that “in our opinion, except for the effects of [XXX] as discussed in the following paragraph,…”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

in a departure from GAAP, what is the statement needed for a qualified opinion?

A

in our opinion, except for the effects of [XXX] as discussed in the following paragraph, ….

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

in a departure from GAAP, how would we modify the report if it is an adverse opinion?

A

in the “opinion on the financial statements” section…
- indicate “in our opinion, because of the matters discussed in the following paragraph, the financial statements do not present fairly…”
- omit reference to “all material respects”
- add paragraph explaining departure and detailing $$ amts involved

OMIT CAM SECTION

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

in a departure from GAAP, for an adverse opinion, we omit…

A

CAM section

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

in a departure from GAAP, what is the statement needed for an adverse opinion?

A

in our opinion, because of the matters discussed in the following paragraph, the F/S do not present fairly…

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

in a departure from GAAP, what is omitted in the “opinion on the F/S section” for an adverse opinion?

A

reference to “all material respects”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

scope limitation refers to the…

A

actual audit work

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

in a scope limitation, we give a standard report if…

A

if the limitation is not material or it is material AND there is alternative procedures available

55
Q

in a scope limitation, we give a qualified report if…

A

the limitation is material, there are no alternative procedures, and the limitation is not pervasive

56
Q

in a scope limitation, we give a disclaimer of opinion if…

A

it is material, there are no alternative procedures, and it is pervasive

57
Q

for scope limitation, we decide if it is pervasive based on if it is _____ or ______

A

circumstance imposed or client imposed

58
Q

for scope limitation, materiality applies to ____ as well

A

inventory

59
Q

examples of limitations

A

unable to send confirmations, unable to perform inventory investigation

60
Q

a circumstance imposted scope limitation is a situation in which…

A

matters beyond auditors’ and client’s control limit procedures performed by auditors

61
Q

circumstance imposed scope limitation example

A

inability to observe year-end inventory because of late appointment

62
Q

client imposed scope limitations are generally…

A

PERVASIVE

63
Q

a client imposed scope limitation is a situation in which…

A

client specifically limits auditors’ procedures

64
Q

client imposed limitation example

A

when client doesn’t allow auditor to come

65
Q

client imposed limitation should be viewed as…

A

a significant restriction and a disclaimer is normal issued

66
Q

what is normally issued for a client imposed limitation?

A

a disclaimer

67
Q

for a scope limitation, how would we modify the report if it is a qualified opinion?

A

in opinion section…
- indicate “in our opinion, except for the effects of the XXX, as described below..”
- add a paragraph explaining scope limitation and detailing $$$ involved

in basis section…
- reference scope limitation when indicating audit conducted in accordance with PCAOB standards

68
Q

for a scope limitation, what would we indicate “OPINION ON F/S SECTION” if it is a qualified opinion?

A

indicate “in our opinion, except for the effects of the XXX as described below…”

69
Q

for a scope limitation, in the “BASIS OF OPINION” if it is a qualified opinion, we should reference ____ when indicating audit being conducted with PCAOB standards

A

reference scope limitations

70
Q

pervasive scope limitation is usually…

A

client imposed

71
Q

for a scope limitation disclaimer of opinion, we change the title of “opinion on f/s section” to..

A

“disclaimer of opinion on…”

72
Q

for a scope limitation disclaimer of opinion, we modify the first sentence of opinion section to…

A

“we were engaged to audit”

73
Q

for a scope limitation disclaimer of opinion, we modify opinion to…

A

“we do not express an opinion”

74
Q

for a scope limitation disclaimer of opinion, how do we modify the report?

A

In “opinion on f/s” section…
- change title
- modify first sentence
- modify opinion
- add paragraph

in “basis for opinion” section…
- change title
- delete sentence indicating auditor’s responsibility
- delete audit conducted under pcaob paragraph

OMIT CAM SECTION

75
Q

for a scope limitation disclaimer of opinion, we omit what section?

A

CAM

76
Q

for a scope limitation disclaimer of opinion, we change the title of the “basis of opinion” section to…

A

“basis for DISCLAIMER of opinion”

77
Q

for a scope limitation disclaimer of opinion, we delete which parts of the “basis of opinion” section>

A

sentence indicating auditors responsibility, paragraph indicating audit conducted under PCAOB standards

78
Q

group financial statements are…

A

f/s comprised of more than one division/subsidiary/segment/component

79
Q

principle auditors conduct…

A

adult of material portion of the entity

80
Q

other auditors may be…

A

engaged by principle auditors to audit divisions, subsidiaries, or components

81
Q

other auditors are not specifically named if…

A

they performed less than 5%

82
Q

what form shows firms involved in an audit?

A

form AP on PCAOB website

83
Q

firm AP has been required since..

A

2017

84
Q

more people in an audit can cause…

A

a higher risk for error

85
Q

for a group f/s audit, we issue a standard report if…

A

auditor takes responsibility for component auditors’ work

86
Q

for a group f/s audit, we obtain and present component auditors’ report if…

A

principle does not take responsibility and refers to component auditors by name

87
Q

for a group f/s audit, if the principle does not take responsibility and refers to component auditors by name, we…

A

obtain and present component auditors’ report

88
Q

for a group f/s audit, we indicate division of responsibility in unqualified opinion if…

A

not take responsibility for component work and does not refer to them by name

89
Q

principle auditors need to verify…

A

other auditors reputation and independence

90
Q

principle auditors need to ____ and __ with other auditors

A

communicate and coordinate

91
Q

what are the 4 options available to principle auditors for the report

A
  1. take responsibility for work (standard report)
  2. name other auditors
  3. refer to other auditors in “opinion on the f/s section)
  4. refer to other auditors in “basis of opinion” section
92
Q

principle can only present the report of other auditors if…

A

they give permission

93
Q

if principle is referring to other auditors in “opinion on the f/s” section, they have to…

A

note that opinion is based in part by other auditors, identify components examined by other auditors, still express unqualified opinion (if appropriate)

94
Q

if principle is referring to other auditors in “basis for opinion section”, they have to…

A

note that the report of other auditors provides a basis for the opinion

95
Q

assumption between adverse and disclaimer

A

adverse is worse

96
Q

what is the general approach for other matters?

A

issue unqualified opinion but add explaining paragraph to report to discuss the matter

97
Q

other matter situations include…

A

consistency, going-concern, other info, required supplementary info, emphasis of a matter

98
Q

consistency relates to..

A

change in accounting principles, adjustments to correct misstatements in previously issued f/s

99
Q

how does changes in accounting principles cause inconsistency?

A

years will have different basis

100
Q

types of changes in accounting principles:

A

accounting principles GAAP to GAAP, form of reporting entity, accounting principles (non-GAAP to GAAP), accounting principle inseparable from changes in estimates

101
Q

how to show the effect of consistency on a report

A

add explanitory paragraph following the “opinion on the f/s section”

102
Q

for consistency, you may issue a qualified opinion (GAAP departure) if ..

A

change in not justified or accounted for in accordance with GAAP

103
Q

for GC uncertainties, auditors are responsible to evaluate…

A

whether substantial doubt exists about ability of entity to continue in existence for one year beyond date of f/s

104
Q

options for GC uncertainties

A

add emphasis of matter paragraph following opinion paragraph (still unmodified), if serious uncertainty, may issue disclaimer of opinion

105
Q

for GC uncertainties, you may issue a _____ if serious uncertainty

A

disclaimer of opinion

106
Q

for other info accompanying f/s, auditors required to..

A

ensure info consistent with f/s

107
Q

for other info accompanying f/s, reporting is responsible if…

A

inconsistencies are noted

108
Q

supplementary information is reported…

A

only if engaged to do so

109
Q

supplementary info will indicate if…

A

info is fairly stated in relation to f/s

110
Q

for required sup. information, auditors are required to…

A

perform limited procedures and expand report on f/s to address exceptions noted

111
Q

for required sup. information, add an…

A

explanatory paragraph to identify information, describe procedures performed, and identify any issues

112
Q

emphasis of a matter is…

A

anything that helps auditors understand

113
Q

emphasis of the matter call..

A

user attention to important matter (ex GC)

114
Q

for continuing auditors, reports should address _____ in _____ form

A

all years presented, comparative

115
Q

continuing auditors should update opinion by…

A

considering if previously issued opinions still appropriate

116
Q

if previously issued opinions are not appropriate…

A

revise option IN CURRENT REPORT (explanatory paragraph)

117
Q

with permission, auditors may present ____ from predecessor on prior years…

A

reissued report; f/s along with successor’s report on current F/S

118
Q

auditor would add an explanatory paragraph if predecessors’ report…

A

not repented,

119
Q

in explanatory paragraph for predecessor, successor auditors’ report must…

A

reference predecessors’ report and opinion on prior years’ f/s

120
Q

condensed f/s are derived from..

A

full set of f/s

121
Q

auditor can only examine and report condensed if…

A

audited full financial statements

122
Q

condensed report refers to the…

A

auditors report on full f/s

123
Q

condensed report indicates…

A

whether info in condensed f/s is consistent in relation to the full statements

124
Q

EBITA is not…

A

GAAP

125
Q

association with unedited f/s means…

A

helping a company put together f/s for an audit but not doing the audit

126
Q

in association with unedited f/s, auditors permit…

A

use of name in communication including f/s

127
Q

for association with unedited f/s, what is issued?

A

disclaimer of opinion

128
Q

in disclaimer of opinion for association with unedited f/s, you must…

A

not mention auditing procedures performed, must identify any known departures from GAAP in the report, cover all unedited prior yrs f/s

129
Q

external auditor must be…

A

independent

130
Q

if auditors begin engagement but independence is subsequently compromised…

A

report a single paraphrase that indicates auditors are not independent but does not indicate why independence is lacking

131
Q

three scenarios to may issue disclaimer…

A

lack of independence, associated with unaudited f/s, material and pervasive gc uncertainty

132
Q

for gc assessment, you issue an unqualified opinion when…

A

there is no substantial doubt or there is substantial doubt but there is mitigation factors

133
Q

for gc assessment, when there is substantial doubt but no mitigating factors, you issue a…

A

unqualified opinion with gc explanatory paragraph

134
Q

example of mitigating factor

A

CEO is fired

Audit & Assurance (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions