Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Auditing > Section 1: Audit Standards & Engagement Planning > Flashcards

Section 1: Audit Standards & Engagement Planning Flashcards

1
Q

Basic Types of Audits

A

compliance audits

operational audits

financial statement audits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Applicable Financial Reporting Framwork

A

a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in financial statements example: GAAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

General Purpose Framework

A

designed to meet the common financial information objectives of a wide range of users. includes GAAP, IFRS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Special Purpose Framework

A

frameworks including: cash basis, tax basis, regulatory agency basis, contractual basis, other basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Professional Skepticism

A

an attitude that includes a questioning mind and a critical assessment of audit evidence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Reasonable Assurance

A

a high level of assurance, NOT absolute assurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The Steps in an Audit

A

1) Prepare for audit
2) Obtain understanding of client, its environment & internal control
3) Assess RMM, determine nature/timing/extent of further procedures
4) Perform tests of controls
5) Perform substantive procedures
6) Formulate an opinion
7) Issue audit report

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Clarity Standards

A
  • make GAAS easier to understand/apply
  • apply to audits of non-issuers (non-public)
  • issued by ASB of AICPA
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Unconditional Requirement

A
  • must be complied with in order for auditor to complete an engagement in accordance with GAAS
  • will always include the phrase “must” or “is required to”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Presumptively Mandatory Requirement

A
  • auditor is expected to comply with
  • auditor may depart from if it would not be effective, but must state reason for doing so
  • will always include the word “should”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Clarity Standards Format

A
  • Introduction
  • Objectives
  • Definitions
  • Requirements
  • Application & Other Explanatory Material
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Significant Finding

A

the inability to achieve an objective

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

10 Generally Accepted Auditing Standards

TIPPICANOE

A

General:
Training & proficiency
Independence
Professional care

Fieldwork:
Planning & supervision
Internal controls
Corroborative audit evidence

Reporting:
Accounting principles in accordance w/GAAP
No new accounting principles applied
Omitted informative disclosures-none
Expression of an opinion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

GAAS Standards:

General

Framework

Reporting

A

General: apply to all aspects of the engagement, from acceptance to completion

Framework: apply to the portion of the engagement devoted to gathering evidence

Reporting: apply to the manner in which the report is to be written

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The auditor must maintain independence for attestation engagements:

CARES/ERAS

A

Compilations (unless lack of independence indicated)

Agreed-upon procedure engagements

Reviews

Examinations (audits)

Special reports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Auditors need not be independent for?

A

Compilations (when lack of independence indicated)

Taxes

Consultations

Other non-attest services, ie bookkeeping & payroll

17
Q

What can impair an auditor’s independence?

A
  • any direct financial interest (material or immaterial)
  • material indirect financial interest
18
Q

Due Professional Care

A

-critical review of judgement used at every level

-skill & care of a prudent CPA:
workpapers
due diligence
professional skepticism
competency & diligence

19
Q

Auditing Standards vs. Auditing Procedures

A

procedures: relate to acts
standards: measures of quality of the auditor’s performance of those acts

20
Q

Assurance Services

A
  • independent professional services that improve the quality of information, or its context, for decision makers
  • include all attestation (including audit/review)
  • does not include tax, compilations, consulting
21
Q

Preconditions for an Audit

A
  • the acceptance of the financial reporting framework being applied
  • management’s agreement that it understands and accepts certain responsibilities:
  • prepare/present financial statements in accordance w/AFRF
  • DIM of internal control free from material misstatements
  • providing auditor with access to all relevant information
22
Q

RID-C

(get rid of and c-ya later)

A

Successor will make inquiries of predecessor with regard to several key issues:

Reasons for change

Integrity of management

Disagreements during audit

Communication with management or those charged with governance regarding noncompliance and weaknesses in internal control

23
Q

Certain matters should be communicated to those charged with governance:

DISAPPROVE

(audit committees would disapprove of an auditor who failed to inform them of these)

A

Disagreements with management

Illegal acts/noncompliance

Significant accounting policies

Adjustments - AJE & RJE

Prior discussions with management

Problems that arise obtaining evidence/cooperation

Responsibilities of auditor under GAAS

Other information regarding responsibilities

Views of other accountants contact by management

Estimates in the accounting records

24
Q

The elements of the engagement letter:

FACSIMILIE

A

Fees

Auditor’s responsibility (GAAS)

Confirmation of the engagement

Scope & objective of the engagement

Internal control (communicate sig. def. & weaknesses)

Management’s responsibility

Irregularities - fraud

iLLegal acts - noncompliance

Errors

25
Q

Materiality

A
  • material if individually or in aggregate would influence the decision of financial statement user
  • measured using the smallest aggregate level
26
Q

IR + CR = RMM

A

risk of material misstatement - likelihood that the financial statements are materially misstated

IR: inherent risk of material misstatement due to nature of an element of the financial statements

CR: control risk that material misstatement will not be detected and corrected on a timely basis due to a lack of effective internal control

27
Q

The steps in planning an audit:

BRAINSTOPS

(auditor’s brain stops if they don’t plan out the audit carefully)

A

Basic discussions with client

Review of audit documents from previous audits

Ask about recent developments

Interim F/S (analytical procedures-mandatory)

Non-audit personnel

Staffing

Timing of various audit procedures

Outside assistance

Pronouncements

Scheduling with the client

28
Q

Audit Risk

A

-the risk that the auditor may unknowingly fail to modify the option on financial statements that are materially misstated (due to errors/fraud, they are misstated)

AR = IR x CR x DR

-relevant assertions in financial statements are material misstatements (RMM) and that the auditor will not detect such material misstatements (DR)

29
Q

Inherent Risk (IR)

A

the risk that a material misstatement of an assertion will take place in the absence of internal control

30
Q

Control Risk (CR)

A

the risk that a client’s internal control structure will fail to prevent or detect and correct a material misstatement on a timely basis

31
Q

Detection Risk (DR)

A

the risk that audit procedures will incorrectly lead to a conclusion that a material misstatement does not exist in an account balance when in fact such a misstatement does exist

  • TD: test of details risk
  • AP: substantive analytical procedures risk
32
Q

Errors

A
  • unintentional mistakes, misjudgments or omissions of amounts or disclosures
  • may be due to human error or incompetency of employees
33
Q

Fraud (2 types)

A

intentional act resulting in a material misstatement of financial statements

  • fraudulent financial reporting (misrepresentation of facts)
  • misappropriation of assets (defalcation schemes-embezzlement, theft)
34
Q

Fraud Triangle

A
  • reason or motivation (incentive/pressure)
  • opportunity
  • rationalization
35
Q

6 Elements of Quality Control:

HEAL-ME

A

Human resources (personnel management)

Ethical requirements (independence)

Acceptance/continuance of client relationships

Leadership responsibilities - “tone at the top”

Monitoring

Engagement performance

Auditing (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions