General Auditing

Question 1

What is the difference between assurance, audit, and attestation?

Answer 1

Assurance - highest category, both audit and attestation are forms of assurance

Attestation - providing an opinion on anything other than historical financial statements (prospective financials, MD&A) Audit - type of attestation based on historical financial statements.

Question 2

What applies to SSAE or SAS?

Answer 2

• Statement on Standards for Attestation Engagements - SSAE - issuance of a report on subject matter or assertion about a subject matter that is responsibility of another party
• Statement on Auditing Standards - financial statements of non issuers

Question 3

For which services are independence required?

Answer 3

• Review - independence
• Audit - independence
• Agreed upon procedures - independence
• Preparation - not required
• Compilation - not required
• Tax return - not required
• Personal financials - not required

Question 4

What are Pervasive effects on the financial statements?

Answer 4

in the auditor’s professional judgment:

(1) are not confined to specific ele­ments, accounts, or items of the financial statements;
(2) if so confined, represent or could represent a substan­tial proportion of the financial statements; or
(3) with regard to disclosures, are fundamental to users’ under­standing of the financial statements.

Question 5

What services fall under SSAE - Attest?

Answer 5

• Agreed upon procedures
• Financial forecasts and projections
• Proforma FS
• Compliance
• MD&A
• Control Reporting

Question 6

What services fall under SSARs?

Answer 6

Preparations, Compilations, and reviews of historical financial statements

Question 7

What should an auditor do first if audit is being included in annual report, and auditor discovers material inconsistency or misstatement of fact in report?

Answer 7

• Auditor should request the client revise the annual report to eliminate both the material inconsistency and material misstatment of fact.
• Next, could add other matter paragraph to audit repoort or request management to remove Audit report from annual report.

Question 8

What are the different standards and standard setting bodies ?

Answer 8

Audits:

• Statement on Auditing Standards (SAS) / AICPA standards board
• Public Company Oversight Board Auditing Standards / PCAOB
• Generally Accepted Government Auditing Standards(GAGAS) / Governmental Accountability Office

Nonissuer/Unaudited F/S:

• SSARS / Accounting and Review Services Committee (ARSC)

Other Engagements:

• SSAE / AICPA

Question 9

When can confidential audit documents be disclosed without client permission?

Answer 9

• Quality review process
• Legal subpoena
• Investigation conducted by the AICPA, state CPA society, or under state statute

Question 10

Once the auditor determines that a deficiency, or a combination of deficiencies, in internal control is not a material weakness, the auditor should consider whether

Answer 10

prudent officials, having knowledge of the same facts and circumstances, would likely reach the same conclusion.

Question 11

What is the Authoritive Literature Hierarchy?

Answer 11

• Statements on Auditing Standards (SAS)
• Auditing Interpretations, AICPA Guides & SOPs
• Industry Articles (no authority)

Question 12

What is an arms length transaction?

Answer 12

is a transaction conducted on such terms and conditions between a willing buyer and a willing seller who are unrelated and are acting independently of each other and pursuing their own best interests.

Question 13

In planning the audit, the auditor should consider materiality for the financial statements as a whole in terms of:

Answer 13

The smallest aggregate levle of misstatement that could be considered material to any one of the financial statements.