Missed/Other Concepts Flashcards
When is Independence Impaired?
When NOT Impaired?
Impaired in the Following Cases:
- CPA has direct financial interest/material indirect (REGARDLESS of materiality level)
- More than 10,000 in credit card balance
- Audit fees unpaid OVER 1 year
- Spouse CANNOT hold MGMT position (employee OK)
- Current Litigation with client (NOT if immaterial dollar amount)
Not Impaired
- Checking account with client is fully insured (FDIC 250,000)
- Fully Collateralized auto loan
Agreed Upon Procedures
- Must be independent
- No opinion provided or any form of assurance
Are non-GAAP FS allowed? Special purpose framework like cash accounting?
Yes
What kind of question would you want to ask a predecessor auditor before accepting a new client?
- Reasons why they changed auditors
- Communications to management AND governance regarding significant deficiencies (and material weaknesses) in internal control.
Are Analytical Procedures required to be used? If so, when?
Planning and Final Review
What are subsequent event auditing procedures?
“PRIME”
Post BS transaction - Reviewing them after YE Representative Letter Inquiry Minutes of board meeting Examine Interim FS (if they have them)
SSARS
What are they for? Who are the reports for? What is the first thing they need?
Review Engagement
What are the main requirements? What are the 2 main points of the review?
Compilation and Review
Main requirements? For review, what needs to be disclosed?
SSARS
- For nonissuers
- Provide guidance on Preparations, Compilations, and Reviews
- EVERY ENGAGEMENT needs a form of WRITTEN understanding including the 3 above
- Audit/Review require REP LETTER
Review - Independence required - Negative assurance required (not aware of...) - Representative Letter required - Issue report Primary Points of Review: - Applying Analytical procedures and - Making Inquires
Compilation
- No independence (lack of must be disclosed)
- No Assurance
- Obtain knowledge of industry/business (same review)
- Read FS to ensure obvious error (same as review)
Preparation - No assurance - Just prepares FS for client Disclosures on each page: - No assurance provided
Integrated Audit
What is an auditors responsibility regarding Internal Controls?
What happens if Deficiencies are found? Communication?
What is the only thing that can be communicated ORALLY or in writing?
What else is necessary in Integrated Audit?
- Auditor is NOT REQUIRED to search for control deficiencies/significant deficiencies in an audit BUT if identified it should be communicated
Deficiencies
- Communicate to mgmt in writing
- Significant/material weakness in writing to AUDIT committee
- Its RESTRICTED use
Issuer
- Communicate material to mgmt and committee BEFORE issuance of audit report
Nonissuer
- Material/Significant BY release date in WRITING
- Control WITHIN 60 days in WRITING
Orally/Writting
- An overview of planned scope and timing of audit with management
OPINION
- Must express opinion on IC over Financial Reporting
1) EITHER combined with the report on Financial Statements OR
2) presented separated
** NO QUALIFIED OPINION on IC. EIther its working or it isnt!!** (unmodified/adverse)
Attestation Engagements
What is it? and what are the 3 reports?
Useful for clients that don’t need an audit. So you can use 3 levels of reports:
1) Examination (highest assurance w/ positive opinion)
2) Review (negative assurance w/ conclusion)
3) Agreed-upon Procedures
For these report types agreed upon procedures, prospective FS, Pro Formas, compliance and MD&A
Main Difference between financial forecast and financial projection?
Forecast
- Expected conditions and course of action
- Available for General Use OR Limited Use
Projection
- Hypothetical “what if” assumption
- Restricted use only
Government
For Compliance, Internal Control and Schedule of findings and questioned costs - what are the opinions for unders GAAS, GAGAS, and Single Audit Act?
GAAS
- Opinion on all financial statement
GAGAS
- Compliance (no opinion)
- Internal Control over financial reporting (no opinion)
Single Audit Act
- Compliance (Opinion) (STEP UP)
- Internal Control Over Compliance to each major program (no opinion) (still no opinion)
- Schedule of findings and questioned costs
Letters of Underwriters
What is a “Comfort Letter”?
What is required when it is issued?
- Send them to a broker-dealer/investment bank BEFORE the clients securities are registered
Required:
- Perform review of interim financial information
- Include restricted use
