Financial Statement Audits

Question 1

Auditing standards for government

Answer 1

GAGAS are issued by the GAO

Question 2

Auditing Standards for private companies

Answer 2

AICPA created GAAS

Question 3

Auditing Standards for public companies

Answer 3

auditing standards for the PCAOB

Question 4

Auditing Standards for international companies

Answer 4

ISAs by the IASB

Question 5

What auditing standards does PCAOB use

Answer 5

The 10 traditional GAAS

Question 6

What auditing standards does AICPA use

Answer 6

Statements on Auditing Standards (7 Standards)

Question 7

General Standards

Answer 7

(TID)
Training
Independence
Due Care

Question 8

Field Work Standards

Answer 8

(PIE)
Planning and Supervision
Internal Control
Evidence

Question 9

Reporting Standards

Answer 9

(GCDO)
GAAP
Consistency
Disclosure
Opinion

Question 10

7 principles are organized around with 4 primary themes

Answer 10

(PRPR)
1-Purpose/premise
2-Responsibilities
3-Performance
4-Reporting

Question 11

Management have responsibility for?

Purpose / Premise

Answer 11

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.

Question 12

What does responsibilities take the place of?

Answer 12

General Standards of the 10 GAAS

Question 13

What does performance = for 10 GAAS

Answer 13

Field Work Standards

Question 14

What are the 4 principles in the new AICPA new GAAS

Answer 14

(PRPR)
Purpose/premise
Responsibilities
Performance 
Reporting

Question 15

What kind of evidence must an auditor obtain

Answer 15

Sufficient appropriate audit evidence

Question 16

Various AICPA standards distinguish between what to types of professional requirements?

Answer 16

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”

Question 17

SQCS

Answer 17

Quality Control Standards

Question 18

How to SQCS differ from GAAS

Answer 18

GAAS is for single audit engagements. Where as SQCS is for the Firm’s whole practice

Question 19

Focus of System of Quality Control

Answer 19

Nature and Scope

Inherent Limiations

Question 20

6 elements of Quality Control System

Answer 20

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

Question 21

Overview of Audit Process

Answer 21

1- Engagement Planning
2- Internal Control Considerations
3- Substantive Analytical Procedures
      a- Tests of detail
      b- Tests of transactions
    Analytical Procedures
4-Reporting

Question 22

What are the 4 sections of the new Auditor’s Report

Answer 22

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”

Question 23

Different Types of Engagements?

Answer 23

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)

Question 24

What is a compilation?

Answer 24

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.

Question 25

What is a review

Answer 25

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.

Question 26

Levels of Assurance?

Answer 26

Audit = High
Review = Moderate
Compilation = No assurance