Financial Statement Audits Flashcards
Private Company Audit Standards
GAAS - Generally Accepted Auditing Standards p managed by the AICPA - AICPA Audit Standards Board
Public Company Audit Standards
PCAOB - Public Company Accounting Oversight Board
Government Audit Standards
GAGAS - Government ?
Formed by the Government Accountability Office
GAAS - what does it do?
Measure the quality of the auditor’s performance
Standards of Fieldwork
TID
Training, Independence and Due Care
Standards of Field Work
PIE
Planning & supervision, Internal Control and Evidence
Standards of Reporting
GCDO
GAAP, Consistency, Disclosure and Opinion
Opinion
Must be expressed in report, or identify why it cannot be expressed. Reasons must be in the report.
Principals Underlying an audit per GAAS
PR/PR Purpose/Premise Responsibilities Performance Reporting
10 PCAOB standards
TID-PIE-GDCO
AICPA 7 principals for audit standard setting
Premise Purpose Responsibility Reasonable assurance Performance requirements Inherent Limitations Reporting
GAAS - what does the AICPA mean by it?
SAS or Statements on Auditing Standards
Professional Requirements
Unconditional - always
Presumptively mandatory - rare exceptions, “should” - must document why
Professional Standards
Explanatory material
Interpretive publications
Elements of Quality Control System
1) Leadership - tone at the top
2) Relevant ethical requirements - independence
annual attestations
3) Acceptance and continuance of clients & engagements
4) Human Resources
5) Performance
6) Monitoring
Engagement QC Review
provide objective evaluation before report released
not required for all audits
Audit process steps
1) Planning
2) Internal Control
3) Substantive procedures
4) Report
Test of details
end balances & transactions
Audit Report Paragraphs
Introductory
Scope
Opinion
Introductory Paragraph Sentences
1) Identify entity financial statements
2) management responsibilities
3) auditor responsibilities
Scope Paragraph Sentences
1) Audit conducted in accordance to GAAS
2) “ provides reasonable assurance
3) “ examines evidence on a test basis
4) “ includes assessing accounting principals used and significant estimates made
5) “ reasonable basis for opinion
Opinion Paragraph Sentence
Expresses opinion that financial statements are fairly stated in conformity with GAAP.
ReformatteThd Audit Report sections
Identify nature of engagement
Mgmt responsibility for financial statement
Auditors responsibility
Opinion
Reformatted audit report section 1
identify nature of engagement and entity’s financial statements involved
Reformatted audit report section 2
Management responsibility for financial statements. Management is responsible for the fair presentation of the financial statements and the implementation of internal control.
Reformatted audit report section 3 part 1
Auditor’s responsibility - part 1
1) express an opinion
2) conduct audit in accordance to GAAS
3) Plan and preform audit to provide reasonable assurance
Reformatted audit report section 3 part 2
Auditor’s responsibility - part 2
1) Perform procedures to obtain audit evidence about the amounts and disclosures.
2) Procedures depend on auditor’s judgement, including assessments of risk of material misstatements, whether due to fraud or error
3) In making those assessments, the auditor considers internal control.
4) The auditor expresses no such opinion (on internal control, when not engaged to report on internal control in an “integrated audit”)
5) An audit includes evaluating the appropriateness of accounting policies used and reasonableness of significant accounting estimates.
Reformatted audit report section 3 part 3
Auditor’s responsibility - part 3
Expresses the auditor’s belief that the audit evidence is sufficient to provide a basis for an opinion
Reformatted audit report section 4
Expresses opinion that financial statements are fairly stated in conformity with GAAP.
Levels of Assurances for non-Audit engagements
Positive - highest level - audit or examination under attestation standards
Negative - moderate level - review of F/S or other subject matter
Procedures/finding - agreed upon procedures engagement under attestation standards
No assurance - compilation engagement
