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Audit Concepts > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Our firm agrees.

A

Assent

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2
Q

Our firm disagrees.

A

Dissent

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3
Q

Our firm will agree with certain changes.

A

Assent with Qualifications.

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4
Q

Designate: Au-C xxx.xx

A

Objectives

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5
Q

Designate: Au-C xxx.Axx

A

Application and other

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6
Q

Designate: Au-C 9xxx.xx

A

Staff Interpretations

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7
Q

What are the two categories of GAAS?

A
  1. Unconditional Requirements
  2. Presumptively Mandatory
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8
Q

Auditors must be independent in ____ and _____.

A
  1. Fact
  2. Appearance
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9
Q

(Framework) Accrual, GAAP, IFRS.

A

General Purpose Framework

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10
Q

(Framework) Cash basis, tax basis, regulatory.

A

Special Purpose Framework

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11
Q

Auditor must obtain _____ and _____ evidence to support audit opinion.

A
  1. Sufficient
  2. Appropriate
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12
Q

Timeliness of financial reporting is important for balancing ____ and ____.

A
  1. Benefit
  2. Cost
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13
Q

Scope restriction, which could be material and pervasive, and auditor lacks independence.

A

Disclaimer

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14
Q

After risk assessment procedures, design _____, _____, and ____ of further audit procedures.

A

Nature, timing, and extent.

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15
Q

Audits should be planned and performed with ______ ________, where looking for evidence, documentation, and fraud is important.

A

Professional Skepticism

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16
Q

Audit risks cannot be zero.

A

Inherent Limitations of an Audit

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17
Q

How many days do large accelerated filers have to file 10-K? (>$700m)

A

60 days of year end

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18
Q

How many days do accelerated filers have to file 10-K? ($75m-$700m)

A

75 days of year end

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19
Q

How many days do non-accelerated filers have to file 10-K? (<$75m)

A

90 days of year end

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20
Q

How many days do large accelerated and accelerated filers have to file a 10-Q?

A

40 days of period end

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21
Q

How many days do non-accelerated filers have to file a 10-Q?

A

45 days of period end

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22
Q

Within how many days should an auditor file with the SEC a change in records for a public company?

A

2-5 business days

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23
Q

Used to emphasis something in F.S., usually the footnotes.

A

Emphasis-of-Matter (EOM)

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24
Q

Used to emphasize something that is not found in the F.S. (footnotes).

A

Other-Matter (OM)

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25
Q

What are the two examples where an EOM is required?

A
  1. Going concern situation
  2. Changes in accounting principles
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26
Q

The more complicated matters that arose during an audit of F.S. requires auditor to make subjective decision or complex judgment.

A

Critical Audit Matters (CAM)

27
Q

What is required and not required for a CAM?

A

Required: Auditor tenure with client.
Not Required: Disclosing lead partner’s name (allowed)

28
Q

“Except for…” opinions. Misstatements and omissions (missing necessary footnote) are material, but not pervasive. Either scope or AFRF can cause. F.S. still fairly presented.

A

Qualified Opinion

29
Q

Opinion only for pervasive and material improper application of AFRF. DON’T say, “Except for…”. F.S. rendered meaningless.

A

Adverse Opinion

30
Q

An opinion when scope limitation is pervasive and material, or auditor lacks independence, but still required to report due to governing bodies.

A

Disclaimer of Opinion

31
Q

An opinion that is issued when F.S. provide a FULL and FAIR disclosure of all materials under AFRF and have NO scope restrictions.

A

Unqualified Opinion

32
Q

What are the 8 sections of an auditors report? (in order) excluding disclaimer

A

Addressee information
1. _____ Opinion
2. Basis for ____ Opinion
3. Key Audit Matters
4. Responsibilities of Management for F.S.
5. Auditors Responsibilities for Audit of F.S.
6. Other information/Report on other L & R Requirements

33
Q

What are the 3 lines needed for the auditor information section of an auditor’s report?

A
  1. Auditor’s signature
  2. Auditor city and state
  3. Date of auditor’s report
34
Q

What is AFRF?

A

Applicable Financial Reporting Formats

35
Q

When auditors turn in a report for an nonissuer (private company) that is clean.

A

An unmodified report.

36
Q

When auditors turn in a report for an issuer (public company) that is clean.

A

An unqualified report.

37
Q

Representations made by management to us either implicitly or explicitly in the F.S., transactions, or balances.

A

Assertions

38
Q

What are the 2 categories of management assertions?

A
  1. Transaction-Related Audit Objectives - Classes of transactions, events, and related disclosures for a period
  2. Balanced-Related Audit Objectives - Transactions, balances. and presentation and disclosure at year end
39
Q

What are the 4 phases of an audit engagement?

A
  1. Planning and designing an audit approach
  2. Testing controls and transactions at interim
  3. Testing details of balances and analytical procedures(substantive procedures $$)
  4. Issuing an audit report
40
Q

What are the 3 sub-actions of the 1st phase of an audit engagement?

A
  1. Preliminary engagement activities
  2. Develop an overall audit strategy
  3. Create an audit plan
41
Q

What are the 4 parts of developing an audit strategy?

A
  1. Determine reporting basis
  2. Determine objectives
  3. Develop audit strategy aids
  4. Document significant revisions
42
Q

What are the 3 parts of preliminary engagement activities?

A
  1. Establish understanding between auditor and client
  2. Establish auditor independence
  3. Establish management integrity (make sure no issues)
43
Q

What are the 3 things you need for an audit plan?

A
  1. Documentation of procedures, planning, and performance
  2. Nature, timing, and extent of risk assessment procedures
  3. Nature, timing, and extent of further audit procedures (find an assertation level)
44
Q

What are the 3 parts of understanding I.C.s and testing controls and transactions? (Stage 2 of audit plan)

A
  1. Test control risk, at interim
  2. Understand internal controls
  3. Make preliminary assessment based on segmented inquiries
45
Q

What are the 2 important parts of testing details of balances and analytical procedures? (Stage 3 of audit plan)

A
  1. No matter how high or low control risk level is, you must do tests of details
  2. If control is weak (high risk), must do year-end substantive procedures of F.S.
46
Q

What are the 3 areas which constitute inherent limitations of an audit such that audit risk can never be zero?

A
  1. Nature of financial reporting
  2. Nature of audit procedures
  3. Timeliness of financial reporting and balancing cost and benefit
47
Q

All the accounts involved, balance sheet and statement of earnings, generating operating cash INFLOWS.

A

Sales and Collection Cycle

48
Q

All the accounts involved with generating operating cash OUTFLOWS.

A

Acquisition and Payments Cycle

49
Q

All accounts that deal with salaries/wages outflows and the taxes involved.

A

Payroll and Personnel Cycle

50
Q

Inventory and COGS accounts.

A

Inventory and Warehouse

51
Q

Accounts that deal with cash inflows AND outflows involving financial activities, including equity accounts. Any payable financial accounts longer than A.P. (30 days).

A

Capital Acquisition and Repayment

52
Q

What are the 3 SOX provisions concerning issuers ?

A
  1. Loans to officers/directors prohibited
  2. Cannot hire CEO, CFO, CAO, Controller from CPA firm 1 year prior to planned audit
  3. Issuers must appropriately fund audit commission so they can hire experts
53
Q

SOX established ________, which is appointed and overseen by the SEC. Authority to set and enforce audit, quality control, ethics and independence standards for public companies.

A

Public Company Accounting Oversight Board (PCAOB)

54
Q

How many board members on PCAOB?

55
Q

How long do PCAOB members serve, and how many CPAs can be on the board?

A
  1. 5 year terms
  2. no more than 2 CPAs
56
Q

What is the difference been an CPA firm that works for more than 100 issuers compared to an firm that doesn’t?

A

The >100 firm must have annual inspection where the <100 firm has an inspection every 3 years.

57
Q

How many years must a CPA firm retain audit documentation?

58
Q

Auditors report to ______.
A. Managers
B. Audit Committees

A

Audit Committees

59
Q

True or False

CPA firms do not have to register with the PCAOB.

60
Q

CEOs and CFOs are require to _____ their 10-K and 10-Q’s.

61
Q

What are the 6 manager assertions for classes of transactions and events and related disclosures for the period under audit?

A
  1. Completeness
  2. Classification
  3. Cutoff
  4. Accuracy
  5. Presentation
  6. Occurance
62
Q

What are the 6 manager assertions for account balances and related disclosures at period end?

A
  1. Presentation
  2. Existence
  3. Rights and Obligations
  4. Completeness
  5. Accuracy, Valuation, and Allocation
  6. Classification
63
Q

What is the one general balance-related audit objective for manager assertions about account balances and related disclosures that isn’t the same?

A

For the accuracy, valuation, and allocation assertion the general objectives are:
1. Accuracy
2. Cutoff
3. Tie-in
4. Realizable Value

64
Q

What are the two general transaction-related audit objectives for manager assertions about classes of transactions and events and related disclosures that isn’t the same?

A

For cutoff the general objective is:
1. Timing

For accuracy the general objectives are:
1. Accuracy
2. Posting and Summarization

Audit Concepts (3 decks)

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