PCAOB Risk Assessment Standards Flashcards
When a PCAOB auditing standard indicates that an auditor “could” perform a specific procedure, how should the auditor decide whether and how to perform the procedure?
By comparing the PCAOB standard with related AICPA auditing standards.
By exercising professional judgment in the circumstances.
By soliciting input from the issuer’s audit committee.
By evaluating whether the audit is likely to be subject to inspection by the PCAOB.
By exercising professional judgment in the circumstances.
The word “could” does not indicate a professional requirement. Instead, it indicates an audit consideration that is based on the auditor’s professional judgment.
In PCAOB AS Section 2110, “Identifying and Assessing Risks of Material Misstatement,” the PCAOB states that the auditor should perform all of the following as risk assessment procedures except for
Incorporating a degree of unpredictability in planned audit procedures.
Obtaining an understanding of the company and its environment.
Performing analytical procedures.
Inquiring of the audit committee, management, and others within the company about the risks of material misstatement.
Incorporating a degree of unpredictability in planned audit procedures.
The auditor should incorporate a degree of unpredictability in planning audit procedures, but this is considered an “overall response” to the risks of material misstatement, not a “risk assessment procedure.”
The PCAOB identifies each of the following as a financial statement assertion to be addressed by the auditor except for
Existence or occurrence.
Completeness.
Cutoff.
Presentation and disclosure.
Cutoff.
“Cutoff” was not identified as one of five financial assertions discussed by the PCAOB. The AICPA’s risk assessment standards identify 13 assertions across three categories of assertions. And one of those is “cutoff,” which is included among the assertions associated with “transactions or events during the period.”
