Flashcards 1
What opinion should practitioner issue if the assumptions did not provide a reasonable basis for the prospective financial statements?
Adverse Opinion
Reporting a non-issuers internal control over financial reporting, an auditor should include a paragraph that describes…
Inherent limitations of any internal control
Likely candidates for “Test Data” test of controls…
- Missing employee numbers
- Time tickets with invalid job numbers
- Agreement of hours per clock card with hours on time
tickets
Entity prepares its financial on tax basis. Description on how that differs from GAAP should be included in:
Notes to the financials statements
AICPA members who perform compilations/ reviews are governed by who?
- AICPA Code of Conduct
- SQCS Statements of Quality Control Standards
- SSARS - Statements on standards for accounting and review services
Authoritative Literature Hierarchy
- Statements of Auditing Standards (SAS)
- Auditing Interpretations, AICPA Guides (SOPS)
- Industry Articles (No Authority)
Detection Risk and evidence have a(n)…
Inverse Relationship
With respect to Audit Standards and Ethics and Independence Rules, the PCAOB has…
Has adopted its own rules.
Some from the AICPA and ASB (Auditing Standards Board) but also its own rules
Practitioner may perform an agreed- upon procedures attest engagement on prospective financials if the following are met:
- Agree upon procedures to be performed
- Take responsibility for procedures
- Financials include summary of significant assumptions
- Criteria used in the determination of findings
Situations that impair independence
- Threatened (and likely) lawsuit
- Credit Balance in excess of $10,000
- Overdue audit fees that are over a year overdue.
Words like “may”, “might”, or “could” describe…
judgement calls by the auditor
“Should” =
Following term used to indicate in a presumptively mandatory requirement
Auditor’s responsibilities for audited financials are confined to…
the expressions of auditor’s opinion
Term identifies a requirement for audit evidence…
Appropriate
Reasonable Assurance definition:
A high, not absolute level of assurance to allow an auditor to detect material misstatement
Which paragraphs in non-issuers audit report reference GAAS and GAAP
GAAS - Auditor’s Responsibilities
GAAP - Opinion (Financial Statements)
Lower Control Risk reduces
(reduces) Total risk of material misstatement
Materiality is defined
as the amount of error or omission that would affect the judgement of a reasonable person.
Which is least likely to affect an auditor’s judgement about materiality?
The client’s evaluation of materiality.
Auditor assigned to both cash and fixed assets. Cash had many transactions during the year but fixed assets had only a few. What strategy would be best for the audit?
Focus on the ending balance for cash, and focus on the transactions that happened during the year for fixed assets.
