Financial Statement Audits

Question 1

Private Company Audit Standards

Answer 1

GAAS - Generally Accepted Auditing Standards p managed by the AICPA - AICPA Audit Standards Board

Question 2

Public Company Audit Standards

Answer 2

PCAOB - Public Company Accounting Oversight Board

Question 3

Government Audit Standards

Answer 3

GAGAS - Government ?

Formed by the Government Accountability Office

Question 4

GAAS - what does it do?

Answer 4

Measure the quality of the auditor’s performance

Question 5

Standards of Fieldwork

TID

Answer 5

Training, Independence and Due Care

Question 6

Standards of Field Work

PIE

Answer 6

Planning & supervision, Internal Control and Evidence

Question 7

Standards of Reporting

GCDO

Answer 7

GAAP, Consistency, Disclosure and Opinion

Question 8

Opinion

Answer 8

Must be expressed in report, or identify why it cannot be expressed. Reasons must be in the report.

Question 9

Principals Underlying an audit per GAAS

Answer 9

PR/PR
Purpose/Premise
Responsibilities
Performance
Reporting

Question 10

10 PCAOB standards

Answer 10

TID-PIE-GDCO

Question 11

AICPA 7 principals for audit standard setting

Answer 11

Premise
Purpose
Responsibility
Reasonable assurance
Performance requirements
Inherent Limitations
Reporting

Question 12

GAAS - what does the AICPA mean by it?

Answer 12

SAS or Statements on Auditing Standards

Question 13

Professional Requirements

Answer 13

Unconditional - always

Presumptively mandatory - rare exceptions, “should” - must document why

Question 14

Professional Standards

Answer 14

Explanatory material

Interpretive publications

Question 15

Elements of Quality Control System

Answer 15

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

Question 16

Engagement QC Review

Answer 16

provide objective evaluation before report released

not required for all audits

Question 17

Audit process steps

Answer 17

1) Planning
2) Internal Control
3) Substantive procedures
4) Report

Question 18

Test of details

Answer 18

end balances & transactions

Question 19

Audit Report Paragraphs

Answer 19

Introductory
Scope
Opinion

Question 20

Introductory Paragraph Sentences

Answer 20

1) Identify entity financial statements
2) management responsibilities
3) auditor responsibilities

Question 21

Scope Paragraph Sentences

Answer 21

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

Question 22

Opinion Paragraph Sentence

Answer 22

Expresses opinion that financial statements are fairly stated in conformity with GAAP.

Question 23

ReformatteThd Audit Report sections

Answer 23

Identify nature of engagement
Mgmt responsibility for financial statement
Auditors responsibility
Opinion

Question 24

Reformatted audit report section 1

Answer 24

identify nature of engagement and entity’s financial statements involved

Question 25

Reformatted audit report section 2

Answer 25

Management responsibility for financial statements. Management is responsible for the fair presentation of the financial statements and the implementation of internal control.

Question 26

Reformatted audit report section 3 part 1

Answer 26

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

Question 27

Reformatted audit report section 3 part 2

Answer 27

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.

Question 28

Reformatted audit report section 3 part 3

Answer 28

Auditor’s responsibility - part 3

Expresses the auditor’s belief that the audit evidence is sufficient to provide a basis for an opinion

Question 29

Reformatted audit report section 4

Answer 29

Expresses opinion that financial statements are fairly stated in conformity with GAAP.

Question 30

Levels of Assurances for non-Audit engagements

Answer 30

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