Components Flashcards
Who can be a component auditor?
apart of the group engagement firm, a network-affiliated firm, and another unrelated firm
How does the component auditor determine materiality?
the group engagement team is resp for determining materiality levels
What is an emphasis of matter paragraph?
a matter that is of such importance that it is fundamental to users’ understanding of the FS
When does one put an EOM paragraph?
Doubts about going concern.
Inconsistency of acct principles.
When the FS are prepared in accordance with special purpose frameworks. uncertain litigation outcome. Major catastrophe. Sig tranx with related parties. Unusually important subsequent events
Other matter paragraph
refers to matters other than those presented or disclosed in the FS that is relevant to users understanding of the audit, the auditors resp or the report
Qualified opinion
expresses reservation but taken as a whole, the FSs are still fairly stated.
What do you add to the report for a qualified opinion?
A Basis for Qualified Opinion paragraph with heading before the opinion paragraph.
What should the opinion paragraph say for a qualified opinion.
Except for..
Does the auditor resp section change for a Qualified opinion?
Yes - last sentence. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
What type of opinion should be issued for a scope limitation?
Qualified or disclaimer
a Qualified opinion may be issued for…
a scope limitation or a GAAP departure (unjustified acct change)
When to issue an adverse opinion
when FS misstatements are both material and pervasive (FS are NOT fairly stated)
Disclaimer
Auditor did not obtain sufficient approp. audit evidence and the possible effects could be material and pervasive. (means - no conclusion is expressed)
What would a successor auditor ask a predecessor AFTER accepting the engagement?
matters that may facilitate the evaluation of financial reporting consistency between the current and prior years
Auditor can express an opinion on supplementary info if the FS received a ___ opinion
Qualified. But if it’s adverse or disclaimer, cannot express opinion on supplementary
What happens to the report when required supplementary information is presented?
an Other matter paragraph is added to the report (whether the info is properly presented or not)
What is the auditors requirements regarding required supplementary info?
Add an other matter paragraph to the report and apply limited procedures to the info. And report deficiencies in, or omissions of, such info
When required supplementary info is included, the auditor is required to perform the following procedures:
inwuire of mgmt regarding the methods of preparing the info and whether the methods have changed.
Significant assumptions
compare the info for consistency with mgmt’s responses, the FS, and other knowledge obtained during the audit.
Obtain additional representations in the MRL
what kind of opinion should an auditor give if mgmt declines to present the A with required supplementary info?
Unmodified with an other matter paragraph
Where is an alert mentioned?
A paragraph/sentence at the end of the auditors report - The purpose of this report is soley to ___. accordingly this report is not suitable for any other purpose.
When is an alert required?
The subject matter is based on criteria that are only suitable or available to a limited number of users
When the matters are presented in a by-product report that is not the primary objective of the engagement
What is the purpose of an alert?
to reduce the potential for misunderstanding if the auditors report is taken out of context for which the written communication is intended.
If mgmt refuses to revise other info containing material inconsistencies prior to the report release date, the auditor may…
include an other matter paragraph to address the material inconsistencies
If the AFS contain an adverse opinion or disclaimer
do not express an opinion on the summary FS
What are summary FS?
Historical Financial info that is derived from the FS but contains less detail than the FS while still providing a structured representation consistent with that provided by the FS
What should an auditors report on condensed FS indicate?
The A has audited and expressed an opinion on the complete FS.
The date of the report on such statements.
The type of opinion expressed.
Whether the info in the condensed FS is consistent in all material respects with the audited FS.
Interim FS
Financial info prepared and presented in accordance with an applicable financial reporting framework that comprises either a complete or condensed set of FS covering a period less than on full year or covering a 12m period ending on a date other than the entitys fiscal YE
Special purpose framework
a financial reporting framework other than GAAP that is one of the following bases of accounting: cash basis, tax basis, regulatory basis, contractual basis
Special purpose framework adds what to the report?
EOM paragraph.
REfers to the note describing the basis used.
Point out that the basis is other than GAAP.
When an auditor is engaged to audit a specific element of the FS, selected financial data, in conjunction with an engagement to audit the FS,
the report on the specific element should incldue the data of the audit report on the FS and the type of opinion expressed.
The service auditor may issue a report on either….
the adequacy of the design of internal control or the operating effectiveness of internal control
