Financial Statement Audits Flashcards
Auditing standards for government
GAGAS are issued by the GAO
Auditing Standards for private companies
AICPA created GAAS
Auditing Standards for public companies
auditing standards for the PCAOB
Auditing Standards for international companies
ISAs by the IASB
What auditing standards does PCAOB use
The 10 traditional GAAS
What auditing standards does AICPA use
Statements on Auditing Standards (7 Standards)
General Standards
(TID)
Training
Independence
Due Care
Field Work Standards
(PIE)
Planning and Supervision
Internal Control
Evidence
Reporting Standards
(GCDO) GAAP Consistency Disclosure Opinion
7 principles are organized around with 4 primary themes
(PRPR) 1-Purpose/premise 2-Responsibilities 3-Performance 4-Reporting
Management have responsibility for?
Purpose / Premise
1- Preparation and fair presentation of the fin state in accordance with the applicable financial reporting framework
2-Provide the auditor with all information, such as records, documentation, and other matters that are relevant to the preparation and fair presentation of the fin statements.
What does responsibilities take the place of?
General Standards of the 10 GAAS
What does performance = for 10 GAAS
Field Work Standards
What are the 4 principles in the new AICPA new GAAS
(PRPR) Purpose/premise Responsibilities Performance Reporting
What kind of evidence must an auditor obtain
Sufficient appropriate audit evidence
Various AICPA standards distinguish between what to types of professional requirements?
1-Unconditional Requirements: Must comply with the requirement without exceptions “MUST”
2-Presumptively mandatory requirements: may sometimes depart from a requirement but must document the justification. “SHOULD”
3- Explanatory Material: descriptive guidance within the body of the standards that does not impose a “requirement” “MAY” “MIGHT” “COULD”
SQCS
Quality Control Standards
How to SQCS differ from GAAS
GAAS is for single audit engagements. Where as SQCS is for the Firm’s whole practice
Focus of System of Quality Control
Nature and Scope
Inherent Limiations
6 elements of Quality Control System
1- Leadership Responsibilities for quality (tone at the top)
2- Relevant Ethical Requirements
3- Acceptance and continuance of client-relationships and engagements
4- Human Resources
5- Engagement Performance -
6- Monitoring
Overview of Audit Process
1- Engagement Planning
2- Internal Control Considerations
3- Substantive Analytical Procedures
a- Tests of detail
b- Tests of transactions
Analytical Procedures
4-ReportingWhat are the 4 sections of the new Auditor’s Report
1- Identifies the nature of the engagement and the entity’s financial statements involved (1 sentence)
2- “Management Responsibility for the financial statements” (1 sentence)
3= “Auditor’s Responsibilities” (3 separate paragraphs)
4- “Opinion”
Different Types of Engagements?
AICPA’s Statements on Standards for Accounting and Review Services (SSARSs) - Applicable when the CPA is associated with the financial statements of a private company, but that association is something less than a full-scope audit engagement
Statements on Standards for Attestation Engagements (SSAEs)-These are applicable when the CPA provides assurance about written representations or subject matter other than historical financial statements (e.g., management may make representations about its superior product performance that may be made more reliable by the CPA’s independent verification and report)
What is a compilation?
Compilation
This occurs when the CPA is engaged simply to assemble into financial statement format the financial records of a private company, without expressing any degree of assurance on the reliability of those financial statements.
What is a review
Review
This occurs when the CPA is engaged to provide a lower level of assurance (relative to that of an audit) on financial statements of a private company by performing limited procedures, including reading the financial statements, performing analytical procedures, and making appropriate inquiries of client personnel.
Levels of Assurance?
Audit = High Review = Moderate Compilation = No assurance
