Financial Statement Audits Flashcards
What is meant by “generally accepted auditing standards”?
The Statements on Auditing Standards issued by the Auditing Standards board.
If a company is NOT SEC regulated, may an auditor draft an entity’s financial statements based on information from management’s accounting system?
Yes, auditors are prohibited from drafting and auditing financials for SEC regulated companies.
According to GAAS, which term identifies a requirement for audit evidence? Appropriate, Adequate, Reasonable, Disconfirming
Appropriate
What must an independent auditor have to meet the requirements of a professional?
Technical training that is adequate to meet the requirements of a professional
The GAAS requires that due care to be exercised in the performance of an audit is ordinarily…
Critical review of the judgement exercised at every level of supervision.
To exercise due professional care in an audit an auditor must:
Critically review the judgement exercised by those assisting in the audit.
Which of these categories were included in the historical GAAS? Stds of review, Stds of planning, Stds of field work, Stds of evidence
Standards of field work
The exercise of due professional care requires than an auditor must always:
Critically review the judgement exercised at every level of suspicion.
Interpretive publications include all of the following, except for:
Appendices to Stmts on Auditing Stds
Articles in the AICPA’s Journal of Accountancy
AICPA Audit & Accounting Guides
Auditing Interpretations of the Stmts on Auditing Stds
Articles in the AICPA’s Journal of Accountancy
Has no authoritative status.
“Professional requirements” refers to:
Unconditional requirements and presumptively mandatory requirements
In AICPA professional stds, the word “should” indicates:
Presumptively mandatory requirement
AICPA’s quality control standards’ 3 focal points:
- Integrity and reputation of management 2. whether the CPA has the competence and resources to perform the engagement 3. whether CPA can comply with applicable legal and ethical requirements
A CPA firm meets basic objective “providing professional services that conform with professional standards” by:
A system of quality control
After field work audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap-up working paper review. This second review usually focuses on:
The fair presentation of the financial statements in conformity with GAAP
What should a CPA firm do to comply with the AICPA’s quality control standards?
Establish policies to ensure that the audit work meets applicable professional standards.
The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is:
Minimize the likelihood of association with clients who’s management lacks integrity.
The nature and extent of a CPA firm’s quality control policies and procedures depend on 3 things:
- CPA firm’s size
- Nature of CPA firm’s practice
- Cost-benefit considerations
A CPA firm would best provide itself reasonable assurance of meeting it’s responsibility to offer professional services that conform with professional standards by:
Maintaining a comprehensive system of quality control that is suitably designed in relation to its organizational structure.
What are 2 factors ordinarily considered in planning an audit engagement’s personnel?
- On the job training opportunities
2. Continuity and periodic rotation of personnel
When a CPA firm evaluates its personnel advancement experience to ascertain whether individuals meeting stated criteria are assigned increased degrees of responsibility, this would be evidence of the firm’s adherence to which standard?
Quality control
Would this sentence normally appear in an engagement letter?:
“After performing our preliminary analytical procedures we will discuss with you the other procedures we consider necessary to complete the engagement.”
No. Selection and performance of auditing procedures are a matter of auditor judgement and not subject to the disclosure to the client.
Substantive evidential matter required may be obtained, in part, by
Analytical procedures performed as substantive tests can be used to provide substantive evidential matter.
The audit work performed by the assistant should be reviewed to determine whether it was adequately performed and to evaluate whether the:
results are consistent with the conclusions to be presented in the auditor’s report.
The auditor makes explicit reference to “auditing stds generally accepted in the US of A” in which paragraph of the standard unmodified audit report?
The Auditor’s Responsibility
The auditor’s standard report on financial statements should refer to generally accepted auditing standards and generally accepted accounting principles in what way?
Explicitly
GAAS require the auditor’s report to contain either an expression of opinion regarding the financial statements or an assertion to the effect that an opinion cannot be expressed. This is to prevent:
Misinterpretations regarding the degree of responsibility the auditor is assuming.
An auditor’s responsibility to express an opinion on the financial statements is represented where?
Explicitly represented in the responsibility paragraphs of the auditor’s standard report.
How does an auditor make the following representations when issuing the standard auditor’s report on comparative financial statements?
- Examination of evidence
- Consistent application of accounting principles
- Explicitly
- Implicitly
This is part of the report, and these things are assumed unless otherwise reported.
An attestation engagement is one in which a cpa is engaged to do what?
Issue a written communication expressing a conclusion about the reliability of a written assertion that is the responsibility of another party.
An entity engaged a CPA to determine whether the client’s websites meet defined criteria for standard business practices and controls over transaction integrity and information protection. The CPA should comply with
Statements on Standards for Attestation Engagements
