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AUD > Kaplan AUD engagement > Flashcards

Kaplan AUD engagement Flashcards

1
Q

What are the 5 management F/S assertions about classes of transactions and events?

A 
Occurrence
Accuracy
Cutoff
Completeness
Classification
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2
Q

What are the 4 management F/S assertions about account balances?

A

Completeness
Existence
Rights and Obligations
Valuation and allocation

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3
Q

What are the 4 management F/S assertions about presentation and disclosure?

A 
Completeness
Rights and Obligations 
Occurrence
Accuracy and Valuation
Classification
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4
Q

What are the basic rules that establish at least the appearance of auditor independence?

A

Covered Member = any individual who participates in an attest function for a particular client and/or anyone who can influence the attest function

Covered members + Spouse + Immediate Family

No Direct Financial Interest

No material indirect Financial Interest

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5
Q

What is the standard for evaluating due professional care?

A

Must observe field work and reporting standards

Must exercise reasonable care to ensure that the audit is performed as well as the average auditor.

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6
Q

What is the overall goal of an Audit of client F/S?

A

The auditor seeks to gain sufficient appropriate evidence that no material misstatements in the F/S so that reasonable assurance can be given that the F/S presentation is presented fairly US GAAP.

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7
Q

What is meant by the word MATERIAL?

A

The presence of an item of a dollar magnitude or type that would influence the judgement of a reasonable party relying on those F/S?

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8
Q

What are the 3 General Standards?

A
  1. Adequate Technical Training
  2. Independence
  3. Due professional care
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9
Q

Describe the education and experience that should be possessed by an auditor in a particular audit engagement.

A

Formal education in auditing or accounting.

Adequate practical experience for the work being performed.

CPE.

Understanding of Industry and specific company.

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10
Q

At what point does the auditor need to acquire technical training and experience per GAAS for audit engagements?

A

No later than the date the audit engagement is accepted.

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11
Q

How does an auditor document that an audit has been adequately supervised?

A

Supervisor sign offs on assistant prepared working papers

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12
Q

What is the independent auditor’s responsibility in connection with management assertions about the F/S information?

A

obtain sufficient appropriate evidence to substantiate that no material misstatements exist in any of the relevant assertions

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13
Q

An account is overstated due to extra transactions that have been discovered by the auditor. What assertions should be tested?

A

Existence, Cut-off

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14
Q

Several transactions have been omitted from an account balance. What assertions should be tested?

A

Completeness

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15
Q

Who should hire an entity’s independent auditor?

A

The audit committee made up of independent members of the BOD. If a non-public company w/o audit committee then the BOD.

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16
Q

What are the principal standards that currently provide practitioner guidance for attestation engagements other than an audit?

A

Statements on Standards for Attestation Engagements (SSAE)

17
Q

What is meant by the term MATERIAL MISSTATEMENT?

A

An omission or misstatement of accounting information that makes it probable that the judgement of a reasonable party relying on the info would be changed.

3 types
Error - unintentional

Fraud - intentional

Direct-effect illegal act - immediate impact on F/S

18
Q

What are the 2 types of illegal acts that an auditor might encounter in an audit engagement?

A

Direct- effect illegal act - actual amounts able to be discerned

indirect-effect illegal act - creates a contingency on F/S should be disclosed if known and material

19
Q

A company has evaded paying income taxes and also has polluted a river. are these direct-effect or indirect-effect illegal acts?

A

Income tax evasion - direct-effect

polluting a river - indirect-effect

20
Q

How does the auditor know which accounting principles should apply?

A

Accounting Standards Codification (ASC) is the sole source of US GAAP.

21
Q

To avoid an independence issue unpaid audit fees must be paid by a client when?

A

Must be paid by the issuance of opinion for following year.

22
Q

What are 2 distinct types of fraud?

A

Fraudulent Financial Reporting - Managment

Misappropriation of assets - employee

23
Q

What is the auditor’s responsibility in connection with misstatements on a client F/S?

A

gain sufficient appropriate evidence to provide reasonable assurance no material misstatement.

material misstatements include errors, fraud and the impact of direct-effect illegal acts

24
Q

What is the auditor’s responsibility regarding indirect-effect illegal acts?

A

No responsibility to search for them.

If discovered, auditor must investigate and disclosure may be required.

25
Q

Who is responsible to produce a client’s F/S?

A

Company Management

26
Q

Does an auditor always have to follow SAS as a requirement for rending an unqualified opinion?

A

No, though justification of a departure from auditing standard rests with the auditor.

27
Q

What is an attestation?

A

CPA reports on reliability of info or on at least one assertion being made by another party.

28
Q

What are the principal standards that currently comprise GAAS for non-issuers?

A

10 basic standards (general, field work, reporting)

SAS

29
Q

Two errors one fraud and one an error both the same dollar magnitude. Are these both seen as having the same material impact on the F/S in the auditor’s judgement?

A

Fraud is intentional and therefore more significant than an error of the same magnitude.

30
Q

What are the 3 standards of fieldwork?

A
  1. Planning and Supervision
  2. understanding the entity and its environment
  3. Sufficient appropriate evidence
31
Q

What are the 4 standards of reporting?

A
  1. State F/S in accordance w/ GAAP
  2. Identify lack of consistency with GAAP
  3. Identify lack of disclosure
  4. Express an opinion on the F/S taken as a whole
32
Q

How does the auditor document that an audit has been adequately planned?

A

Develop and overall audit strategy and an audit plan, which documents and details the nature, timing and extent of audit procedures to be performed

33
Q

What are the 6 elements of a Quality Control system for a CPA firm?

A
  1. Leadership responsibilities for quality within the firm (tone at the top) - quality is essential to performing engagements
  2. Relevant ethical requirements - reasonable assurance of compliance
  3. Acceptance of client relationships and specific engagements - competence, comply legally, integrity of client
  4. Human resources - personnel with competence, capabilities and commitment
  5. Engagement performance - engagements are performed in accordance with professional standards
  6. Monitoring - relevancy, adequate, operationally effective
34
Q

When does an auditor establish the quantitative component of materiality?

A

early stages of planning however this is continually reassessed as evidence is gathered

35
Q

Which reporting standards are explicit and which implicit?

A

Consistency - Implicit
Disclosure - Implicit
Opinion - Explicit
GAAP - Explicit

36
Q

What is a peer review?

A

A review of a CPA firm’s compliance with its quality control system by another CPA firm.

AUD (20 decks)

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