Financial Statement Audits Flashcards
What is meant by Generally Accepted Auditing Standards (GAAS) under the clarified auditing standards?
The Statement on Auditing Standards (SAS) issued by the AICPA’s Auditing Standards Board
List some benefits of an audit to a private company (also known as a nonissuer)
- More favorable cost of capital;
- Insights into adequacy of internal controls;
- Benchmark an entity’s performance with other similar entities.
In the U.S.A, who issues auditing standards applicable to audits of private companies and other entities known as nonissuers?
AICPA’s Auditing Standards Board
Identify the topics associated with the three general standards formerly known as Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards.
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- Training
- Independence
- due Professional care.
Identify the topics associated with the four reporting standards for Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards.
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Accounting Principles in conformity w/ GAAP (or AFRF)- must state explicity
No new accounting principles applied- consistency implied unless otherwise stated
Omitted informative disclosures - none omitted unless otherwise stated
Expression of opinion
Identify the topics associated with the three field work standards formerly known as Generally Accepted Auditing Standards (GAAS), which are still applicable to the PCAOB’s auditing standards
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- Planning and supervision
- Internal control (when reliance is high= good IC, so less substantive testing required)
- Corroborative audit evidence (substantive testing)
What type of professional requirement is indicated by the word should in AICPA professional standards?
Presumptively mandatory requirement
What type of professional requirement is indicated by the word must in AICPA professional standards?
Unconditional requirement
Services for which a CPA firm is required to have a sytem of quality control.
Audits, attestation, compilation and review services. (Not applicable to tax or consulting services.)
What are some considerations that must be given by the auditor during the planning phase of the audit?
Determine whether to accept or continue the audit engagement
Assess the risk of material misstatement
Evaluate requirements for staffing and supervision
Prepare the required written audit program (also called the “audit plan”).
What considerations should be given by the auditor regarding internal controls prior to beginning an audit or performing substantive audit procedures?
- Obtain the required understanding of the design of internal control for planning purposes.
- Perform tests of controls to evaluate operating effectiveness of internal control if contemplating reliance on specific controls.
List the two types of substantive audit procedures.
Analytical Procedures
Tests of details.
List the two types of test of details
Tests of ending balances
Tests of transactions
List the reason(s) for which an entity may receive a disclaimer of opinion.
Scope limitation (material and pervasive effect)
How is an auditor’s unmodified audit report structured under the clarified auditing standards?
An unmodified auditor’s report is presented in 4 sections:
- An introduction (1 sentence).
- Management’s responsibility section (1 sentence).
- Auditor’s responsibility section (3 paragraphs, consisting of 9 sentences).
- Opinion (1 sentence).
