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Introduction To The Attest Function (1) Flashcards

0
Q

The purpose of the attest function is…

A

To add credibility to the financial statements

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1
Q

The attest function is an…

A

Independent audit function

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2
Q

4 reasons financial statements may lack credibility

A

1 management bias
2 stupidity
3 errors
4 fraud

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3
Q

An attest engagement is defined as one in which…

A

A practitioner is engaged to issue or does issue a written
Communication that expresses a conclusion about the

reliability of a written assertion that is the responsibility of
Another party

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4
Q

An attest examination is made of…

A

The company’s financial statements

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5
Q

The auditor carries out the audit examination by…2

A

1 following the 10 generally accepted auditing standards (GAAS)
And
2 all official pronouncements that explain and interpret GAAS
and Attestation standards whenever they apply

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6
Q

An auditor holds himself or herself as…3

A

1 independent
2 an expert regarding accounting GAAP
3 an expert auditing (GAAS) + particular business/industry being
Audited

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7
Q

The auditor must report his or her finding based on…

A

Evidence examined

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8
Q

The primary assertion is…

A

Whether or not statements are “presented fairly” in accordance
With GAAP

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9
Q

The AICPA defines fairly presented as…

A

The financial statements reflect underlying transactions of the
Company

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10
Q

SAS 69 states that the opinion regarding fair presentation is based on the auditors judgement as to whether…5

A

1 accounting principles have general acceptance
2 principles are appropriate in the circumstance
3 statements informative of matters that effect use
4 information is classified and summarized reasonably
5 statements reflect transactions and events within range of
Reasonable limits

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11
Q

The auditor examines the financial statements of the company and renders…

A

A report attesting to the fair presentation of those statements

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12
Q

Statements are the property and responsibility of…

A

Management

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13
Q

The auditor has no right to alter financial statements without…

A

Management approval

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14
Q

Ten generally accepted auditing standards, what is the nature of these standards?

These standards are…

A

Qualitative in nature and set a minimum requirement of the

Profession

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15
Q

3 subsets of the ten generally accepted auditing standards

A

1 general standards

2 standards of fieldwork

3 standards of reporting

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16
Q

3 general standards

A

1 technical training and proficiency

2 independence

3 due professional care

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17
Q

General standard: The audit must be performed by a person or persons having adequate technical training and proficiency as an auditor.

What does this mean? 3

A

1 Auditor must have education in accounting

2 practical experience in auditing

3 knowledge of particular industry being audited

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18
Q

General standard: The auditor must maintain independence in mental attitude in all matters relating to the assignment. This standard is often called the…

A

Cornerstone of the profession since it adds credibility to what
Auditors do

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19
Q

Independence must be both in…

A

Fact and appearance

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20
Q

Independence in fact

A

In the mind of the CPA

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21
Q

Independence in appearance

A

To the public

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22
Q

General standard: the auditor must exercise due professional care in the performance of the examination and the preparation of the report.

What is this often called? Why?

A

Often called the average auditor concept

You should use due diligence in you work and do what every
Other auditor would do and never less

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23
Q

Standards of fieldwork 3

A

1 plan work and supervise assistants

2 sufficient understanding of entity/environment

3 obtain sufficient appropriate evidence

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24
Q

Standard of fieldwork. Auditor must obtain sufficient understanding of entity and its environment including…3

A

1 internal control

2 risk of material misstatements on FS due to fraud or error

3 design the nature, timing and extent of further audit procedures

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25
Q

Standard of fieldwork: auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford…

A

Reasonable basis for opinion regarding the financial statements
Under audit

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26
Q

4 standards of reporting

A

1 state whether financial statements in accordance with GAAP
2 must identify in report principles that haven’t been consistently
Observed
3 must report when informative disclosures aren’t adequate
4 express opinion on financial statements as a whole

27
Q

Standards of reporting: when the auditor determines that informative disclosures aren’t reasonably adequate, the auditor must state in he auditors report. This is a…

A

Second silent standard

28
Q

The standards of reporting: the auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed…

A

In the current period in relation to the preceding period

29
Q

The standards of reporting: the auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period. This is the…

A

First silent standard (auditor says nothing in report unless there’s
A material change in GAAP)

30
Q

When the auditor can’t express an overall opinion the auditor should…

A

State reasons in the auditor’s report

31
Q

In all cases where an auditor’s name is associated with financial statements, the auditor should…2

A

1 clearly indicate character of auditor’s work, if any
And
2degree of responsibility auditor is taking in auditor’s report

32
Q

An accountant is associate with financial statements when he or she…2

A

1 consents to use of his/her name on report, document or
Written communication containing statements
Or
2 submits financial statements to client that accountant prepared
Or assisted preparing even if name not attached

33
Q

Attestation standards broadly covers…

A

Any Attestation engagement, not just audits

34
Q

Attestation standards consists of 3 subsets

A

1 general standards

2 standards of fieldwork

3 standards of reporting

35
Q

Attestation standards are…

A

Similar to 10 standards of GAAS

36
Q

GAAP has been developed through tradition and certain authoritative bodies such as…3

A

1 AICPA Accounting Research Bulletins
2 Accounting Principles Board (APB)

3 currently FASB and their interpretations

37
Q

GAAP defined, it includes the…

A

Conventions, rules and procedures necessary to define accepted
Accounting practice at a particular time

38
Q

GAAP is the framework for…

A

Judging presentation of financial statements

39
Q

GAAP recognizes the importance of reporting transactions or events in…

A

Accordance with their substance rather than form

40
Q

For governmental agencies there is the…

A

Governmental Accounting Standards Board (GASB)

41
Q

SEC also regulates…

A

Publicly traded companies

42
Q

Accounting Series Releases (ASR)

A

Deal with SEC ruling on specialized accounting treatments

Issued by SEC

43
Q

GAAS has been developed through…

A

Tradition and promulgation

44
Q

Auditing Standards Board (ASB)

A

Responsible for pronouncements on auditing matters as
Interpretation of GAAS

ASB established by AICPA

45
Q

The ASB publishes pronouncements as…

A

Statements of Auditing Standards (SAS)

46
Q

Statements of Auditing Standards (SAS) are considered…

A

Quantitative as they establish specific rules

47
Q

Statements of Auditing Standards (SAS) are not required but…

A

Departure by an auditor must be justified

48
Q

Accounting and Review Services Committee (ARSC)

A

Regulates standards for privately held companies not seeking
audited statements

Established by AICPA

49
Q

Accounting and Review Services Committee (ARSC), what does this committee issue?

A

Statements on Standards for Accounting and Review Services

SSARS

50
Q

General Accounting Office (GAO)

A

Nonpartisan audit agency for Congress

Issues Governmental Auditing Standards (GAS)

51
Q

Governmental Auditing Standards (GAS)

A

For governmental and program type audits

And they establish Generally Accepted Governmental Audit
Standards (GAGAS)

52
Q

Financial statement users include 6

A 
1 stockholders 
2 potential investors
3 creditors
4 bankers
5 management
6 SEC and IRS
53
Q

Financial statements are fairly presented, what does this mean?

A

Financial statements have good reflection of underlying transactions
Of company

54
Q

GAAP is the…

A

Yardstick for fair presentation

55
Q

Auditor’s attest to what management…

A

Has asserted

56
Q

Main objective

A

Big picture (reason, why)

57
Q

Should

A

Ought to do it unless (some options)

58
Q

Must

A

Have to do it

59
Q

Proficient

A

Supervised work experience

60
Q

Explicit

A

In writing

61
Q

Implicit

A

Not written (implied)

62
Q

When an auditor is associated with the financial statements they must…

A

Tell responsibility for the work they did

63
Q

SOX established…

64
Q

An auditor is associated with…

A

The statements they audit

Lambers AUD (7 decks)

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