Engagement Planning Flashcards
What assurance does the auditor provide the users of financial statements?
Reasonable Assurance that the financial statements as a whole are free from Material misstatement due to fraud or error
What does the auditor express on the financial statement?
An opinion that it was prepared in accordance with the applicable framework in all material respects
What is the auditor not responsible for?
Not responsible for detecting theft or fraud
When is it best to hire an auditor and why?
Earlier hired prior to the balance sheet date the better for audit planning and efficiency
When can audit procedures carried out at interim dates?
Control Risk is low/Detection Risk is high
How can the auditor accept an engagement if the year closed?
If they can overcome the limitations of the engagement
An auditor uses ___________ to plan the ________ and _________ of the audit
Professional Skepticism
scope
objectives
When planning an audit, what should the external auditor do regarding the client’s _________?
Role and involvement of the internal auditor
What type of procedure should be done during planning stage?
Analytical - Comparing actual vs forecasted data (prior vs current)
If the current auditor would like to speak to the previous auditor, what should the current auditor do first?
Ask permission from the client to speak to the previous auditor
What should the auditor do with the audit procedures carried out by assistants?
Review the working papers
Adequately performed
Results consistent with the audit report
Audit strategy should be _______ ________
Mapped out
________ and ______- are foundations of GAAS
Materiality and Audit Risk
GAAS: Measure auditor’s __________________ and ___________
Professional qualifications and Judgment
What are the three general standards of GAAS? (TIP)
Training and Proficiency
Independence
Professional Care
What are the 3 standards of fieldwork of GAAS? (PIE)
Planning and supervision
Internal Control - Auditor must understand IC of entity
Evidence - Must obtain sufficient and appropriate audit evidence
What are the 4 standards of Reporting of GAAS (CDOG)?
Consistency - Implied, only referred if accounting principles arent applied correctly
Disclosures - Adequacy is implied, only referred if not adequately presented
Opinion - Based on F/S as a whole
GAAP - Audit report must state that the F/S were prepared in accordance with US GAAP
What are the 3 things that auditor should do prior to accepting audit engagement?
Review Client’s F/S - Appropriate framework
Speak to 3rd parties
Contact prior auditor
What if the client doesn’t give permission to current auditor to speak to the previous auditor?
No permission = no engagement
Audit Engagement agreement oral or written?
Must be written
Audit Engagement agreement covers __________ and __________ of engagement. Responsibilities of _________ and ________
Objectives and limitations of engagement
Responsibilities: Auditor and management
Management responsibilities (6)
Written assertions financial framework Establishing and maintaining IC Allow auditor access to records Prepare F/S Compliance with Laws
Responsibilities of Auditor (2)
Limited error/fraud responsibility
Document and remind the management annually the terms of the engagement still apply (oral or written)
What does group engagement team do? (3)
Develop audit strategy
Communicate with component auditors
Evaluate audit conclusions
