Code Provisions Flashcards

1
Q

IMPORTANT:

A

THIS SECTION IS IMPORTANT

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2
Q

What does the Nonaudit services: Code Provisions govern?

A

The code governs Nonaudit Services to non-public clients and to public non-attest clients

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3
Q

Communications about the following topics relate both audit and Non-audit services which do not impact independence:

A

These do not impair independence:

  • The client’s selection and application of accounting standards or policies and F/S disclosure requirements
  • Appropriateness of client’s method used in determining accounting and financial reporting
  • Adjusting journal entries that the member has prepared for client management consideration
  • The form or content of F/S
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4
Q

T/F: Audit firms shouldn’t assume MANAGEMENT RESPONSIBILITIES

A

TRUE. Your job is to give guidance, suggestions, alternatives.

Management responsibilities: Leading and directing an entity, including making significant decisions regarding the acquisition, deployment, and control of human, financial, physical, and intangible resources.

  • Setting policy
  • Authorizing transactions
  • Preparing source documents
  • Having custody of clients assets
  • Deciding which recommendations of the member or third party to implement
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5
Q

What are the “General Requirements” on when you can give NAS: (Three requirements)

A

1 ) The client should:

  • Management needs to assume all responsibilities
  • Client should oversee the service (senior management) to assess the work that you’re doing. The member should assess the situation to ensure that the senior member is up to task
  • The client should evaluate the adequacy and results of the services performed
  • Accept responsibility for the results of the service

2) MIPPS do not assume management responsibly and are satisfied with the clients management to:
- Meet criteria mentioned above
- Make an informed judgement on the results of the member’s NAS
- Accept responsibility for making significant judgements

3) Before performing NAS, MIPPS establish and document IN WRITING their understanding regarding:
- Objectives of the engagement
- Services to be performed
- The attest client’s acceptance of responsibilities
- The member’s responsibility
- Any limitations on the engagement

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6
Q

SOX limits NAS by saying that MIPPS may not provide certain advisory services to audit clients that are public companies:

Key MIPPS Should not:

A
  • Audit their own work
  • Advocate for attest clients
  • Serve as client’s managers
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7
Q

MIPPS cannot provide the following to clients who are public companies:

A
  • Bookkeeping or other services related to the accounting records or financial statements
  • Financial information systems design and implementation
  • appraisal or valuation services, fairness options
  • internal audit outsourcing services
  • management functions or Human Resources
  • broker or dealer
  • legal services
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8
Q

The PCAOB says that independence is impaired in the ta area if:

A
  • The firm entered into a contingent fee arrangement with an audit client
  • Firm provides marketing planning, or opinion services in favor of tax treatment of a confidential transactions
  • Firm provides tax services to management or family that oversees financial information
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9
Q

What is the SOX process for picking a audit firm?

A

Independent audit committee selects, evaluates, and compensates auditors

Audit committees must pre-approve any permitted NAS (such as tax services) purchased by a company from its auditor

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