PCAOB Risk Assessment Audit Standards

Question 1

Audit Risk defined by the PCAOB is defined as?

Answer 1

Assess the risk of material misstatement level at two levels:

1) Financial statement level
2) At the assertion level

Question 2

What is the auditors objective for planning under PCAOB standards?

Answer 2

Establish audit strategy and audit plan

Partner should oversee the performance and planning the audit engagement

Question 3

What is the PCAOB standard on supervision of the audit engagement?

Answer 3

Supervision varies with engagement circumstances but should be consistent with risk of material misstatement

Question 4

What is the PCAOB standard on materiality?

Answer 4

Auditor should is to apply materiality in planning and performing the audit

Materiality consideration should be used both in the financial statement audit and internal controls

Question 5

What is the PCAOB standard on identifying and assessing risk of material misstatement?

Answer 5

OBJECTIVE: Identify / access areas of material risk and develop responses to that risk

Perform risk assessment procedures that are sufficient

Top-Down approach- begin at F/S level and work down to assertion level

Question 6

What is the auditors objective for evaluating audit results?

Answer 6

Evaluate the results and audit evidence is efficient to support the opinion

Plan and perform audit and obtain evidence for both IC and F/S audits

Question 7

What are the 5 assertions for the PCAOB?

Answer 7

1) Existence
2) Completness
3) Right and obligations
4) Valuation or allocation
5) Presentation and disclosure

Traditional financial statement assertions