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AUD > Other Auditing Standards > Flashcards

Other Auditing Standards Flashcards

1
Q

What are GAGAS?

A

Generally Accepted Government Auditing Standards

Also called Government Auditing Standards (GAS)

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2
Q

What is another name for GAGAS?

A

The Yellow Book

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3
Q

What is a main factor of consideration in determining materiality levels for governmental compliance audits?

A

Grantors’ needs – other users’ needs are secondary

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4
Q

What is The Compliance Supplement?

A

Includes compliance requirements for many federal government programs

Issued by the Office of Management and Budget (OMB)

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5
Q

What are the ethical principles underlying GAGAS?

A

(1) public interest
(2) integrity
(3) objectivity
(4) use of gov’t info and resources
(5) professional behavior

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6
Q

What is generally incorporated into GAGAS?

A

AICPA fieldwork and reporting standards (with related SASs) unless specific exceptions are made in GAGAS

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7
Q

What is covered by OMB Circular A-133?

A

Audits of states, local governments, and nonprofit organizations

These audits are in accord with OMB Circular A-133 and the “Single Audit Act”

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8
Q

What is the threshold in OMB Circular A-133 requiring an audit for state or local governments?

A

Only states and local governments who expend (not merely receive) over $500,000 of federal rewards meet the threshold

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9
Q

How many different compliance requirements are contained under OMB Circular A-133?

A

14

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10
Q

What are the first five compliance requirements of A-133?

A

(1) which goods/services can be purchased with federal funds
(2) which costs can be federally reimbursed
(3) requirements on time between cash receipt and disbursement
(4) Davis-Bacon act (requires prevailing regional wage for construction projects)
(5) eligibility of recipients of financial aid

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11
Q

What are the second five compliance requirements of A-133?

A

(6) equipment & real property management
(7) how much entities should contribute their own funds
(8) period of federal funds’ availability
(9) procurement, suspension, & debarment
(10) the program’s income

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12
Q

What are the last four compliance requirements of A-133?

A

(11) requirements on how real property can be acquired and prior residents relocated
(12) specific reports to be filed
(13) monitoring of sub-recipients
(14) special tests & provisions

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13
Q

How does the auditor’s concern for materiality differ in A-133 than in ordinary GAAS?

A

He considers materiality in relation to each individual program, not just to the entity as a whole

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14
Q

What is the PCAOB?

A

Public Company Accounting Oversight Board

Established by Sarbanes-Oxley Act of 2002 (SOX)

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15
Q

What is the role of the PCAOB?

A

(1) Registering public accounting firms
(2) Setting standards for public company audits
(3) Performing inspections for public accounting firms
(4) Enforcing compliance with SOX

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16
Q

Who approves the auditing standards which the PCAOB adopts?

A

SEC

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17
Q

What does SOX forbid for audits?

A

It forbids public accounting firms from providing a number of nonaudit services to clients whom they are auditing
-e.g. bookkeeping services for accounting records, valuation, actuarial services, management or HR, etc.

18
Q

What does SOX require for audits?

A

Rotation of the lead audit partner (for a particular firm being audited) at least every five years

19
Q

Which other conflicts of interest does SOX forbid?

A

If one of the client’s officers was employed with the audit firm and participated in the audit in the previous fiscal year, then that client cannot be audited

20
Q

What are the responsibilities of the audit committee, as determined by SOX?

A

They appoint and oversee the external auditor

-includes handling disagreements between management and the external auditor and permitting nonaudit services

21
Q

When does the PCAOB require the auditor to complete his final audit file?

A

Within 45 days of the report release date

22
Q

How long does the PCAOB require workpapers to be retained?

A

7 years from the report release date

23
Q

What is an engagement completion document?

A

A document required by the PCAOB to include all significant findings or issues in an external audit of a public firm

24
Q

What is ICFR?

A

Internal Control over Financial Reporting

25
Q

What is the auditor’s objective in an audit of ICFR?

A

To express an opinion on ICFR’s effectiveness for a given point in time and taken as a whole

26
Q

In what way is an audit of ICFR more extensive than an ordinary audit for financial statements?

A

ICFR can have a material weakness even if financial statements are not materially misstated

This is because testing ICFR involves testing the effectiveness of controls over ALL relevant assertions

27
Q

How do integrated audits of ICFR and financial statements reduce the auditor’s work?

A

Tests of controls can be reduced somewhat by fulfilling two purposes at once, but substantive tests generally cannot

28
Q

What should be an auditor’s general strategy for conducting an audit of ICFR?

A

A top-down approach: first assessing financial statement-level controls, then entity-level controls, etc.

29
Q

By what standard should an auditor evaluate the severity of a control deficiency?

A

By a “prudent official” standard: whether the detail and degree of assurance provided by the controls would satisfy a prudent official

30
Q

What three things are accounting changes?

A

Changes in:

  • accounting principle
  • accounting estimates
  • the reporting entity

Correction of errors in old financials is not an “accounting change”

31
Q

What qualifies as a change in accounting principle?

A

A change between generally accepted accounting principles
-May be because old principle is no longer generally accepted (or not)

Change in method of applying a principle

32
Q

What does not count as a change in accounting principle?

A

Adoption of principle to record transactions for first time

Adoption of principle to record effects of transactions that were previously immaterial

33
Q

What is the only justification for changing accounting principles?

A

Required by new pronouncements

Entity can justify it by proving it is preferable

34
Q

How are changes from unacceptable to generally accepted accounting principles reported?

A

As a correction of previous errors

NOT as change in accounting principle

35
Q

How should an auditor treat a change in estimate caused by a change in principle?

A

As a change in principle

36
Q

How should an auditor treat a change in reporting entity?

A

As a change in principle, except when it results from a particular event (e.g. purchasing a subsidiary), in which case it doesn’t even need to be included in the audit report

37
Q

What is the distinction between a review and an audit?

A

A review is usually for interim purposes and does not gather a sufficient basis to express an opinion on material errors

38
Q

What are required audit procedures in interim reviews?

A

(1) disaggregated revenue comparison (e.g. revenue reported by month or by business segment)
(2) Reconciliation (between accounting records and financial statements)
(3) Fraud inquiry

39
Q

What should be included in a report for an interim review?

A

(1) statement that review complied with relevant standards
(2) statement of info reviewed
(3) description of procedures
(4) statement that scope is significantly less than ordinary audit; therefore no opinion
(5) whether the auditor is aware of any necessary material changes to effect conformity with GAAP

40
Q

What should each page of interim financial information be marked with?

A

The word “unaudited”

41
Q

What else should the auditor review, if it is presented along with financial statements?

A

Quarterly information

If an auditor audits financial statements but cannot review the corresponding quarterly information, his report should say so

42
Q

What is the role of the engagement quality reviewer?

A

To discuss with the engagement team about the engagement, and to review their documentation

AUD (20 decks)

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