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Audit > Final Review I > Flashcards

Final Review I Flashcards

1
Q

What should the auditor consider in the firms acceptance and continuance policies?

A
  • Firms ability to meet reporting deadlines
  • Firms ability to staff the engagement
  • Independence
  • Integrity of client management
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2
Q

What preconditions should the auditor look for before accepting the audit?

A

Whether Financial Reporting Framework is acceptable
&
Management understands its Responsibilities

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3
Q

What are management responsibilities the auditor should look for before accepting an engagement?

A

Auditor should obtain an agreement from management that they are responsible for:

  • Prep and fair presentation of financials
  • Design Implementation and maintenance of internal controls
  • will provide auditor with information needed
  • unrestricted access to ppl in company
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4
Q

What should the current auditor ask predecessor auditor before starting the engagement?

A
  • Management integrity
  • Disagreements with predecessor auditor
  • Reason for change in auditors
  • Any fraud or non compliance
  • Fee payment problems
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5
Q

What should a auditor on a new engagement check before starting

A
  • If opening balances contain misstatements

- If accounting policies in opening balances have been consistently applied

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6
Q

Does the current year auditor look at the predecessor auditors auditor documentation?

A

Yes
Current year auditor asks mgmt to review PY auditor:
-Planning documentation
-Risk assessment procedures
-Further audit procedures
-Audit results
-Matters of continuing accounting and audit significance

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7
Q

What should the written engagement letter include?

A
  • Objective of the Audit
  • Managements responsibilities
  • Auditor responsibilities
  • limitations of engagement
  • Identification of applicable financial reporting framework
  • reference to expected form and content of any reports
  • Auditor should consider if terms of engagement should be revised
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8
Q

When is audit documentation required to be assembled by? public companies

A

assembled within 45 days

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9
Q

When is audit documentation required to be assembled by? nonpublic companies

A

assembled within 60 days

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10
Q

How long is audit documentation kept for a public company?

A

7 years

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11
Q

How long is audit documentation kept for non public company?

A

5 years

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12
Q

When can audit documentation be disclosed without the client permission?

A
  • Quality review program
  • Subpoena
  • Investigation conducted by AICPA
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13
Q

What are those charged with governance responsible for?

A

oversee the obligations and strategic direction of an entity including BoD and audit committee

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14
Q

Who are the members of an audit committee?

A
  • members of the board of directors
  • 3-5 outside directors that do not have a material financial interest in the company
  • NOT mgmt NOT employees
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15
Q

What do audit committee functions include?

A
  • Establishing the control environment
  • Selecting and appointing the independent auditor
  • Reviewing the quality of the auditors work
  • Reviewing the scope of the audit
  • Responding to any auditor recommendations
  • helping resolve disagreements
  • bridge b/w BoD and the auditor
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16
Q

What are the matters related to auditors responsibility that the auditor should communicate with those charged with governance?

A
  • Matters related to auditors responsibility
  • Planned scope and timing of the audit
  • Significant Audit findings
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17
Q

What are matters related to auditors responsibility?

A
  • auditor is responsible for expressing an opinion, following GAAS, communicating significant matters
  • Internal control is considered as part of planning the audit
  • an audit does not relieve management or those changed with governance of their responsibilities
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18
Q

What may the auditor communicate with those charged with governance about planned scope and timing of audit?

A

Auditor may communicate

  • significant risk of material missatements will be addressed, use of internal audit staff, factors affecting materiality
  • solicit information about entitys objectives, strategies, and risks that auditor should pay attention to
  • attitides, awareness, and actions of governance
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19
Q

What significant audit findings should auditor communicate?

A
  • difficulties encountered and disagreements with mgmt

- uncorrected and nontrivial misstatements

20
Q

What are some additional requirements for auditors to communicate with those charged with governance for issuers

A
  • Critical accounting policies
  • all material alternative GAAP accounting treatments
  • other material communications
  • discuss and provide draft of auditors report
21
Q

What is the auditor responsible for communication of internal control during a financial statement audit?

A

auditor is not required to search for deficiencies that are less severe than a material weakness or to express an opinion on internal control

22
Q

What deficiencies should an auditor communicate when doing a financial statement audit

A
  • significant deficiencies and material weaknesses must be communicated in writing to mgmt and those charged with governance within 60 days of the report release date
  • previously communicated significant deficiencies and material weaknesses that have not been corrected should be communicated again
  • communicate to mgmt only, in writing or orally other deficiencies identified during the audit
  • auditor may not report the absence of sig deficiencies but may report on the absence of material weaknesses
23
Q

When is independence required?

A

Audit and attestations

NOT required for compilations, consulting services, and tax work

24
Q

When is independence impaired for a CPA?

A
  • Cpa has financial interest regardless of materality
  • audit fees remain unpaid for more than 1 year prior to the issuance of the current audit report
  • CPA has mgmt position with a client or is employee, spouse cannot hold a mgmt position
  • CPA makes hiring decision for a client
  • Litigation if material
25
Q

When is independence not impaired?

A
  • bank client by a checking account that is fully insured

- fully collateralized loan

26
Q

What is the objectivity rule?

A
  • all engagements must be performed with objectivity and integrity
  • free of conflict of interest
27
Q

What is due professional care?

A

CPA must exercise the same skill a reasonably prudent accountant would. CPA must critically review the work done by others

28
Q

What is the contingent fees rule?

A

not allowed to perform work based on a specific result

29
Q

What is the Acts Discreditable rule

A
  • retaining client records after the client has demanded the records be returned
  • discrimination
  • failure to follow standards
  • negligently making false JE’s
  • failure to timely file tax returns
  • soliciting or disclosing CPA exam questions
  • false claims about members professional services
  • disclosure of confidential information
30
Q

What are the threats to compliance?

A
  • Adverse interest
  • Advocacy
  • Familiarity threat
  • Mgmt participation
  • self interest
  • self review
  • undue influence
31
Q

What is adverse threat

A

members interest are opposed to the interest of the client or employing organization

32
Q

what is advocacy threat

A

will promote the interest of the client or employing organization to the point that CPA’s objectivity or independence as applicable is compromised

33
Q

what is familiarity threat

A

long or close relationship with the client will make the member too accepting or sympathetic

34
Q

what is mgmt participation threat

A

take on the role of client mgmt or otherwise assume mgmt responsibilities

35
Q

what is self interest threat

A

member could benefit financially from relationship with a client

36
Q

what is self review threat

A

member will not appropiately evaluate the results of the previous judgement made or service performed or supervised

37
Q

what is undue influence threat

A

member will subordinate his or her judgement to an individual associated with a client due to that individuals reputation

38
Q

how often must the partner rotate off the audit

A

every five years

39
Q

What must the auditor report to the audit committees of audited corporations?

A
  • critical acct policies used
  • alternative accounting treatments
  • material written communications between auditor and mgmt
40
Q

What independent requirements does the department of labor have for CPA’s?

A

must be independent when auditing and rendering an opinion on ERISA information

41
Q

What impairs independence with regard to employee benefit plans?

A
  • financial interest (regardless of materiality)
  • connection to the plan or plan sponsor
  • accountant or member or accounting firm maintains financial records for ee benefit plan
42
Q

What are the independence requirements for GAGAS

A
  • ID necessary threats to independence
  • Eval the significance of threats identified both individually and in the aggregate
  • apply safeguards to eliminate the threats
43
Q

What are the GAGAS threats to independence?

A
  • self interest
  • self review
  • bias
  • familiarity
  • undue influence
  • mgmt participation
  • structural
44
Q

What are safeguards ?

A

-controls designed to elim or reduce an acceptable level threat to independence

45
Q

How should auditor evaluate non audit services?

A

consider whether they pose a threat to independence?

46
Q

What are the components of a quality control system?

HELP ME

A 
HR
Engagement/Client Acceptance 
Leadership 
Engagement Performance 
Monitoring 
Ethical Req.

Audit (6 decks)

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