M1- Professional Standards Flashcards
M1- Which standards provide the most authoritative US Auditing guidance for non-issuers and issuers, and who issues those standards?
Nonissuers: Statements of auditing standards (SASs), issued by the AICPA auditing standards board
Issuers: Auditing standards (ASs), issued by the PCAOB
M2- Audit Engagements
State the primary purpose of an audit
to provide financial statement users with an opinion on whether the financial statements are fairly presented, in all material respects, in accordance with the applicable financial reporting framework
M2- Audit engagements
What are the five general GAAS requirements related to the conduct of an audit?
S- professional skepticism E- Ethical Requirements J- Professional Judgement E- Sufficient and Appropriate Audit Evidence C- Compliance with GAAS
M2- Audit Engagements
Identify three inherent limitations of an audit
- The nature of financial reporting
- The nature of audit procedures
- Timeliness of financial reporting and the balance between benefit and cost
M3- Forming and Audit Opinion
When should an auditor’s opinion be modified?
A modification to the auditor’s report is necessary when:
- The auditor determines that the financial statements as a whole are materially misstated (GAAP issue) or
- The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement (GAAS issue)
M4- Unmodified (Unqualified) Opinion
List in order, the primary sections of an unmodified audit opinion (nonissuer)
Title: Independent Auditor’s Report
Addressee: Based on the circumstances of the engagement
Introduction: We have audited the accompanying financial statements of …
Management’s responsibility for the financial statements: Management is responsible for the preparation and fair presentation of the financial statements
Auditor’s responsibility: Our responsibility is to express an opinion on these financial statements based on our audit above present fairly, in all material respects, the financial position…
Report on other legal and regulatory requirements: if applicable
M4- Unmodified (Unqualified) Opinion
What should be included in the introductory paragraph of the unmodified audit opinion (nonissuer)
The intro paragraph should include:
- the entity whose financial statements have been audited
- A statement that the financial statements were audited
- The title of each financial statement audited
- Dates or periods covered by each financial statement
M4- Unmodified (Unqualified) Opinion
What should be included in the management’s responsibility paragraph of the unmodified audit opinion (nonissuer)
- An explanation that management is responsible for the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework
- A statement that this responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error
M4- Unmodified (Unqualified) Opinion
What should be included in the auditor’s responsibility paragraph of the unmodified audit opinion (nonissuer)?
- a statement that it is the auditor’s responsibility to express an opinion on the financial statements based on the audit
- A statement that the audit was conducted in accordance with auditing standards generally accepted in the united states of america
- a statement that stnadards require that the auditor plan and perform the audit to obtian reasonable assurance about whether the financial statements are free of material misstatement
- A description of the audit
- A statement of whether the auditor beleives the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion
M4- Unmodified (Unqualified) Opinion
What should be included in the opinion paragraph of the unmodified audit opinion (nonissuer)
- a statement that the financial statements present fairly, in all material respects, the financial position of the entity as of the balance sheet date and the results of operations and its cash flows for the period then ended, in accordance with the applicable financial framework.
- identification of the applicable financial reporting framework and its origin
M4- Unmodified (Unqualified) Opinion
Where in the standard unmodified opinion (nonissuer) does the auditor refer to (1) the applicable financial reporting framework (i.e., GAAP or IFRS) and 2( generally accepted auditing standards?
- the applicable reporting framework is referred to in the management’s responsibility paragraph and opinion paragraph
- GAAS is referred to in the auditor’s responsibility paragraph
M4- Unmodified (Unqualified) Opinion
List in order the primary sections of an unqualified audit opinion (issuer)
- title
- addressee
- opinion section
- basis of opinion section
- signature, tenure, location
- report date
M4- Unmodified (Unqualified) Opinion
What should be included in the opinion section of the unqualified audit opinion (issuer)
The first section of the auditor’s report must include the section title “opinion on the financial statements” and the following elements:
- the name of the company whose financial statements have been audited
- A statement identifying each financial statement and any related schedule that has been audited
- Dates of periods covered by each financial statement and related schedules
- a statement indicating that the financial statements were audited
- an opinion that the financial statements present fairly, in all material respects, the financial position of the company as of the balance sheet date and the results of its operations and its cash flows for the period then ending in conformity with the applicable financial reporting framework
