reporting on internal control in a integrated audit

Question 1

Understand the auditor’s responsibilities when reporting on internal control over financial reporting in an integrated audit of a non-issuer’s financial statements in accordance with AICPA Professional Standards.
2. Familiarize yourself with the structure of the report on internal control over financial reporting for an engagement, whether the report is issued separately or combined with the audit report on the entity’s financial statements.

Answer 1

f

Question 2

integrated audit

Answer 2

expressing two opinions
one on internal control
one on f/s

this is something required under public companies (pcaob standards) but not for private companies

Question 3

basic responsibilities of auditor

Answer 3

to detect material weaknesses (not anything less such as significant deficiencies)

achieve objectives of both engagements simultaneously

auditor should use same criteria used by management to assess IC

Question 4

preconditions management must meet in order for auditor to accept engagement

Answer 4

management accepts responsibility for ICFR

management makes acceptance of ICFR

supports assessment with documentation

provides written assessment in a report (must contain auditors report for internal control over Financial reporting

Question 5

planning the engagement under aicpa standards

Answer 5

use the same risk assessment process for both engagements

scaling the audit (less testing for smaller companies)

fraud risk

using the work of others

use the same concept of materiality for both audits

top down approach (f/s level to assertion level in selecting control for testing)

direct relationship for evidence and riskiness of control being tested

evaluate design effectiveness of controls

evaluating operating effectiveness-controls working as intended

Question 6

severity of a deficiency depends on

Answer 6

magnitude of potential misstatement

likelihood of failure

Question 7

concluding procedures

Answer 7

review reports of others

obtain written representaiton of management

Question 8

material weakness and significant deficiencies must be reported

Answer 8

by the release date (nongovernmental entities)

60 days for governmental entities

for lesser deficiencies - within 60 days of the report release date

Question 9

in a integrated audit a auditor may issue

Answer 9

a combined report or a separate report (one on f/s one on ic)

Question 10

if auditor issues separate reports in a integrated audit the auditor will need to add

Answer 10

a separate paragraph to each report cross referencing the other report and reporting the character and date of the other report. if issuing separate reports those two reports should have the same date

Question 11

5 reasons the auditor may modify the report on ICFR (internal control over financial reporting)

Answer 11

adverse opinion issued (one or more material weakness)

elements of managements report is incomplete or improperly presented (a matter paragraph would need to be added)

scope limitation (withdraw from engagement or issue a disclaimer of opinion)

reference made to a component auditor who is responsible for a portion of combined or group audit

management’s report includes additional information