II. Financial Statement Audits - Accounting vs Auditing

Question 1

What is the primary responsibilities of an auditor:

Answer 1

Provide regulators, creditors, and investors with an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

Note: The auditor’s primary role is to provide an impartial (independent) report on the reliability of management’s financial statements.

• These financial statements are distributed to interested parties outside of the reporting entity itself, such as actual or potential shareholders and creditors, major customers and suppliers, employees, regulators, and others for their decision-making (resource allocation) needs.
  
  • Management prepares the financial statements and represents that they are in fact fairly presented while the auditor is auditing such representations.

They do not give management their opinion

Question 2

“generally accepted accounting principles” is an accounting term that

Answer 2

Encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

Note:

• Financial Accounting Standards Board is more directly involved with accounting principles than is the AICPA.
• Include details practices and procedures
• Not included simply to indicate that the audit has been conducted in accordance with generally accepted auditing standards.
• Auditor’s judgment concerning the fairness of financial statements should be applied within the framework of generally accepted accounting principles.

Question 3

GAAS - Generally Accepted Accounting Principles is

Answer 3

relate to the conduct of audit engagements rather than the framework within which the fairness of financial statement presentation is measured (GAAP).