Principle underlying an audit conducted in Accordance w/GAAS

Question 1

What is the purpose of an audit?

Answer 1

It is to provide FS users with an opinion on whether the FS are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. An auditor’s opinion enhances the degree of confidence that intended users can place in the FS

Question 2

What is the premise of an audit?

Answer 2

An audit is conducted on the premise that management, and where appropriate, those charged with governance, have responsibility:

1. For the preparation and fair presentation of the FS in accordance with the applicable financial reporting framework; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of FS that are free from material misstatement, whether due to fraud or error AND
2. to provide the auditor with:
   a. all information, such as records, documentation and other matters that are relevant to the preparation and fair presentation of the FS
   b. any additional information that the auditor may request from management and where appropriate, those charged with governance and
   c. unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence.

Question 3

What are the personal responsibilities of the auditor?

Answer 3

They are responsible for having appropriate competence and capabilities to perform the audit; complying with relevant ethical requirements; and maintaining professional skepticism and exercising professional judgment, through the planning and performance of the audit.

Question 4

What are the auditor’s actions in performing the audit?

Answer 4

To express and opinion, the auditor obtains reasonable assurance about whether the FS as a whole are free from material misstatements, whether due to fraud or error.

Question 5

What must the auditor do to obtain reasonable assurance, which is high, but not absolute, level of assurance? 4 things

Answer 5

1. plan the work and properly supervise any assistants
2. determine and apply appropriate materiality level or levels throughout the audit
3. identifies and assesses risk of material misstatement, whether due to fraud or error, based on an understanding of the entity and its environment, including the entity’s internal control.
4. obtains sufficient appropriate audit evidence about whether material misstatements exist, through designing and implementing appropriate responses to the assessed risks.

Question 6

What is the role of an independent auditor?

Answer 6

An independent auditor plans, conducts and reports the results of an audit in accordance with GAAS.

Question 7

What are auditing procedures?

Answer 7

They are acts that the auditor performs during the course of an audit to comply with auditing standards.